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Introduction The federal government administers various programs to assist individuals and communities in responding to, recovering from, and preparing for disasters. For example, after a disaster, some level of federal assistance may be available to rebuild damaged bridges or roads, demolish and dispose of damaged buildings, rebuild schools or hospitals, or rebuild damaged levees. Such projects often have at least some impact on the env ironment, and hence may be required to comply with any of a number of local, tribal, state, or federal environmental laws—including requirements of the National Environmental Policy Act of 1969 (NEPA, 42 U.S.C. §4321 et seq.). Among other provisions, NEPA requires federal agencies to assess the potential environmental impacts of a proposed action before proceeding. Exempted from NEPA's requirements are emergency response actions under provisions of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act, 42 U.S.C. §§5121-5206). These exempted activities include providing essential relief to victims and implementing protective measures necessary to reduce immediate threats to life, property, and public health and safety. NEPA's environmental review requirements may, however, be applicable to long-term recovery projects, such as the modification, mitigation, or expansion of existing structures or the relocation of certain structures located in a floodplain. Most agencies have implemented NEPA as an "umbrella" statute. As such, it forms a framework for the coordination or demonstration of compliance with any study, review, or consultation required by any other environmental law. The use of NEPA in this capacity has led to some confusion. The need to comply with a separate environmental law such as the Clean Water Act (CWA), Endangered Species Act (ESA), or National Historic Preservation Act (NHPA) may be identified within the framework of the NEPA process, but NEPA itself is not the source of the obligation. If, theoretically, the requirement to comply with NEPA were removed, compliance with each applicable law would still be required. In the past, there has been congressional interest in the NEPA implementation process for disaster-related projects. This interest has been driven, in part, by federal grant applicants who have been confused about both their role in the NEPA process and what the law requires. To address these issues, this report discusses the NEPA process as it applies to projects for which federal funding to recover from or prepare for a disaster may be requested by local, tribal, or state grant applicants. Specifically, the report provides an overview of the NEPA process as it applies to such projects, identifies the types of projects (categorized by the federal funding source) likely to require environmental review, and delineates both the types of projects for which no or minimal environmental review is required (those for which statutory or categorical exclusions apply) and those that likely require more in-depth review. This report focuses on the NEPA process as it applies to projects that require grant applicants (i.e., state or local agencies) to provide certain information for their grant requests to be considered eligible for potential approval. It does not address the NEPA process as it applies to disaster-related projects that would likely involve collection of the necessary environmental review documentation by the federal agency responsible for the project (e.g., water resources projects undertaken by the Army Corps of Engineers). Two agencies that provide a significant proportion of applicant-requested funding for disaster-related projects are the Department of Homeland Security's Federal Emergency Management Agency (FEMA) and the Department of Housing and Urban Development (HUD). Therefore, this report primarily discusses the NEPA process as it applies to recovery and rebuilding projects funded under those agency programs. Overview of the NEPA Process NEPA is a procedural statute with twin aims that require agencies to consider the environmental impacts of their proposed actions and inform the public that environmental concerns have been accounted for in the decision-making process. The NEPA process involves the steps an agency must take to demonstrate that it has met these aims. Environmental Review NEPA requires all federal agencies to consider the environmental impacts of proposed federal actions before proceeding. Regulations that specify how agencies must implement NEPA's requirements were promulgated by the Council on Environmental Quality (CEQ). CEQ regulations direct federal agencies to adopt and enforce their own regulations and procedures implementing NEPA's environmental review requirements in a manner specific to typical classes of actions undertaken by each agency. Two agencies that provide a significant proportion of funding for disaster-related projects are FEMA and HUD. Their NEPA regulations can be found at 44 C.F.R. Part 10 (FEMA) and 24 C.F.R. Part 58 (HUD). NEPA regulations specify environmental review requirements that must be met to demonstrate that potential environmental impacts have, in fact, been considered. Generally, the term "environmental review" refers to a requirement to show evidence of formal consideration, evaluation, or analysis of the impacts of a proposed federal action. Most often, the use of the term is in reference to the process of complying with NEPA requirements. However, depending upon the project under consideration, an environmental review may refer to the process of identifying any environmental compliance requirements or exemptions, as applicable to a certain project. As it has been interpreted, NEPA is a procedural statute that does not require agencies to elevate environmental concerns above others. Instead, NEPA requires only that an agency assess the potential environmental consequences of an action and its alternatives before proceeding. If adverse environmental effects of a proposed action are adequately identified and evaluated, the agency is not constrained by NEPA from deciding whether other benefits outweigh the environmental costs and moving forward with the action. NEPA as an Umbrella Statute Any given disaster-related project may be subject to various legal requirements enforceable by one or more state or federal agencies. For example, the environmental impacts of a given project may trigger compliance with elements of the Clean Air Act, Endangered Species Act of 1973, National Historic Preservation Act, or Clean Water Act. Most individual agency NEPA procedures suggest that, for a given project, compliance with all applicable environmental laws, executive orders, and other legal requirements should be documented within the appropriate NEPA documentation. This concept is referred to as the "NEPA umbrella." As such, as previously noted, NEPA forms a framework for the coordination and demonstration of compliance with any study, review, or consultation required by other environmental laws. For example, the need to comply with another environmental law, such as the Clean Water Act, may be identified within the framework of the NEPA process, but NEPA itself is not the source of the obligation. If, theoretically, the requirement to comply with NEPA were removed, compliance with each applicable law would still be required. An example of the use of NEPA as an umbrella statute can be seen in FEMA's environmental review process. Because of the types of projects the agency is likely to fund, and the high probability that historic properties may be affected in many projects, FEMA's NEPA process is actually a Unified Federal Environmental and Historic Preservation Review (or EHP review). In its description of the EHP requirements, FEMA states: When an Applicant applies for Federal assistance or requires Federal permits for a proposed disaster recovery project, the project must be reviewed for compliance with EHP laws, regulations, and Executive Orders, referred to collectively as EHP requirements. These requirements are intended to protect water, air, coastal, wildlife, land, agricultural, historic, and cultural resources as well as to minimize disproportionately adverse effects to low-income and minority populations. There are more than twenty Federal EHP requirements that may be applicable to disaster recovery projects... EHP reviews are the processes used by Federal Agencies to ensure that Federal actions comply with EHP requirements. Following a disaster, you may apply for Federal assistance and permits to support a variety of disaster recovery needs. When Federal Agencies review your application, they must comply with EHP requirements before they can approve or issue your Federal assistance or permit. Another example of the use of NEPA as an umbrella statute can be seen in the HUD Office of Community Planning and Development environmental review requirements applicable to Community Development Block Grants (CDBG). Before a CDBG applicant can commit or expend funds for a given project, an environmental review of the project must be conducted. The environmental review record must, among other requirements, document compliance with applicable statutes and authorities. To meet this requirement, HUD regulations require the grantee to certify that it has considered compliance criteria applicable to historic preservation, floodplain management and wetland protection, coastal zone management, sole-source aquifers, endangered species, wild and scenic rivers, air quality, farmland protection, HUD environmental standards, and environmental justice. That does not mean that all of these compliance factors will apply to a given project. The environmental review process is intended simply to identify the compliance requirements that do apply and ensure that the applicant will be compliant, as appropriate. After Hurricane Katrina, some stakeholders cited NEPA as a significant challenge to state efforts to disperse CDBG funds. The requirement to evaluate the various compliance criteria listed above was cited specifically as the problem. However, as stated previously, NEPA is not the source of these compliance requirements. The NEPA process simply forms the framework within which compliance with any applicable environmental law is identified . Still, this situation illustrates the difficulty some stakeholders have in distinguishing between what is required under NEPA and what may be required under other relevant environmental laws. It illustrates the challenges that applicants face when trying to comply with the range of requirements applicable to projects for which funding is sought. Also, the comprehensive reviews, documentation, and analysis sometimes required by agencies such as the U.S. Army Corps of Engineers (the Corps), the U.S. Fish and Wildlife Service, the Coast Guard, and the Environmental Protection Agency (EPA), as well as various state regulatory and review agencies (such as the office of a State Historic Preservation Officer), may add to the perception that project delays are related to the NEPA process. What may be perceived by the applicant as a NEPA-related delay may actually stem from an agency's need to complete a permit process, consultation, or analyses required under separate statutory authority (e.g., the Clean Water Act or Endangered Species Act), over which the agency preparing the NEPA documentation has no authority. NEPA Issues Relevant to Disaster-Related Projects When a community is devastated by a disaster, it may be overwhelmed by the number of projects that need to be undertaken. Under normal conditions unrelated to a disaster, when a local, tribal, or state agency participates in the NEPA process for projects, projects proposed to receive federal funding have generally been planned or, at least to some degree, anticipated. In the wake of a disaster, however, when entire neighborhoods, towns, or regions may be substantially damaged and in need of repair or reconstruction, agencies can quickly become overburdened by the task of navigating applicable compliance requirements. Coupled with the potential difficulty of determining the various federal funding sources available to recover from damages, local agencies responding to a disaster may become confused about their environmental compliance obligations. If those obligations are not met, funding will be slowed. From the federal agency perspective, the commitment to assist in rebuilding structures and facilities and restoring land must be done in a way that will result in greater protection from future disasters. That is, federal agencies do not want to spend money that may have to be spent again when another disaster strikes. Elements of the NEPA process, such as the requirement to demonstrate flood-plain management considerations, help federal agencies meet this goal. To understand what is required of applicants, it is helpful to understand the types of disaster-related projects associated with various funding sources and the levels of environmental review that may be required for proposed projects. Disaster-Related Projects Potentially Subject to NEPA NEPA's environmental review requirements apply to any project potentially subject to federal control or responsibility. Such actions include projects and programs entirely or partly funded, assisted, conducted, regulated, or approved by federal agencies. With regard to disaster recovery, rebuilding, or mitigation projects, NEPA most generally applies if federal funds will be used for a project. Table 1 summarizes several potential funding sources for disaster-related projects, the types of projects potentially eligible to receive those funds, and the agencies authorized to provide funding. For more information about these federal programs, see CRS Report RL33330, Community Development Block Grant Funds in Disaster Relief and Recovery , by [author name scrubbed], CRS Report RL34537, FEMA's Pre-Disaster Mitigation Program: Overview and Issues , by [author name scrubbed], and CRS Report R43990, FEMA's Public Assistance Grant Program: Background and Considerations for Congress , by [author name scrubbed] and [author name scrubbed]. Agency and Applicant Roles Generally, there are three entities that play a significant role in the NEPA process for disaster-related projects: the lead agency, which is responsible for preparing the NEPA documentation; cooperating agencies, which may include any local, tribal, state, or federal agencies that have jurisdiction by law or special expertise regarding any environmental impact involved in a proposal; and the project applicant (who may also be referred to as a responsible entity or grantee under different agency requirements), such as local, tribal, or state entities requesting federal funds. For disaster-related projects, the lead agency coordinates environmental reviews for projects funded under that agency's programs. For example, FEMA would be the lead agency for debris removal operations involving PA Grant Program funds. In a disaster-stricken area, it is possible that multiple funding sources may be available for a single project. If more than one federal agency proposes or is involved in the same action, the agencies must determine which agency will serve as the lead and which will serve as cooperating agencies. If there is disagreement among agencies involved, factors including the magnitude of each agency's involvement and project approval/disapproval authority determine the designation of the lead agency. A cooperating agency is one that has jurisdiction by law or special expertise regarding any environmental impact involved in a proposal. This may include a tribal, state, or federal agency. For example, depending on the impacts associated with a given project, the following agencies may serve as cooperating agencies to develop appropriate NEPA documentation: EPA or state environmental protection agencies—to determine if the proposal would be subject to air or water quality standards. Advisory Council on Historic Preservation and/or state or tribal historic preservation officer—to determine whether the proposal is subject to compliance with the National Historic Preservation Act. The Corps—to determine whether a permit is required for proposals that may affect certain U.S. waters. The U.S. Fish and Wildlife Service—to determine whether or the extent to which the proposal may adversely affect threatened and endangered species. The U.S. Department of Agriculture—to ensure that impacts to farmlands are considered. Although the lead agency (such as FEMA or HUD) may be ultimately responsible for ensuring that NEPA documentation is complete, the project applicant plays a significant role in the NEPA process. The project applicant, such as a state or local agency, will likely be required to develop substantive portions of the environmental document, while the lead agency is responsible for its scope and overall content. For example, project applicants are required to provide information to support FEMA's Environmental and Historic Preservation compliance process. Funds will not be awarded, and the applicant may not initiate the project, until FEMA has completed its environmental review. Therefore, it is in the applicant's interest to gather and present all information necessary to assist the funding agency with meeting its environmental review requirements. Categories of Action Determining whether NEPA applies is generally not a complicated process. Determining what level of review is required for a project (i.e., whether its environmental impacts are significant) may not be as clear, and must be determined on a case-by-case basis. First, certain FEMA-funded projects authorized under the Stafford Act are statutorily exempt from compliance with NEPA. For any nonexempt proposals, the level of NEPA review will depend on the proposals impacts. Specifically, NEPA review will involve one of the following: Approval as a categorical exclusion—applicable to actions that normally do not individually or cumulatively have a significant effect on the human environment and that the agency has determined from past experience have no significant impact. Preparation of an Environmental Impact Statement (EIS)—required for actions will potentially have a significant environmental impact. Preparation of an Environmental Assessment (EA)—when the significance of environmental impacts is uncertain and must be determined. The requirement to produce an EIS is probably the most familiar element of NEPA compliance. However, actions requiring an EIS account for a small percentage of all federal actions proposed in a given year—and generally none of those associated with disaster response and recovery. For example, considering the types of projects funded by FEMA, the overwhelming majority are likely to be statutorily exempt or approved as categorically exclusions. When a project that involves potentially significant effects is implemented under emergency conditions, alternative compliance arrangements may be considered when determining how an environmental review may be carried out. These alternative arrangements and the various categories of action potentially subject to NEPA are discussed below. Statutory Exemptions In responding to emergencies and major disasters, existing provisions of the Stafford Act statutorily exempt certain FEMA-funded activities from NEPA. Statutory exclusions generally apply to actions that are emergency in nature or are necessary for the preservation of life and property. They apply to most Public Assistance actions funded by FEMA, but do not apply to hazard mitigation, flood mitigation, unmet needs projects, or FEMA grant programs. Specifically, response actions excluded from NEPA by the Stafford Act (at 42 U.S.C. §5159) include the following: General federal assistance—such as the utilization of personnel, equipment, supplies, technical and advisory services in support of disaster assistance. (See actions specified under 42 U.S.C. §5170a.) Essential federal assistance—including actions to meet immediate threats to life and property resulting from a major disaster, such as: the use of federal resources (e.g., equipment, supplies, and facilities), medicine, food, and other consumables; and work and services to save lives and protect property (e.g., debris removal, search and rescue, clearance of roads, demolition of unsafe structures, warning of further risks and hazards). (See actions specified under 42 U.S.C §5170b.) Repair, restoration, and replacement of damaged buildings—generally, this means restoring the facility to the same function, capacity, and footprint. (See actions specified under 42 U.S.C. §5172.) Debris removal—exempt debris removal activities include clearance of debris and wreckage resulting from a major disaster from publicly and privately owned lands and waters after a major disaster (long-term debris removal activities, such as decisions on landfill locations, may not be exempt from NEPA). (See actions specified under 42 U.S.C. §5173.) Federal emergency assistance—such as the utilization of personnel, equipment, supplies, technical and advisory services in support of disaster assistance; and assistance in support of medicine, food, and other consumable supplies and emergency assistance. (See actions specified under 42 U.S.C. §5192.) It is important to understand that, as with actions categorically excluded (discussed below), an action statutorily excluded from NEPA is not exempt from the requirements of other environmental statutes. FEMA would still be responsible for complying with all other applicable local, state, tribal, and federal laws and regulations relating to health, safety, and the environment. This could encompass federal environmental statutes including, among others, the Clean Air Act, Clean Water Act, Endangered Species Act, National Historic Preservation Act, Resource Conservation and Recovery Act, Coastal Zone Management Act, and the Coastal Barrier Resources Act. Also, these exemptions are specific to designated FEMA-funded activities authorized under the Stafford Act. Similar statutory exemptions do not exist for HUD-funded programs such as CDBG disaster assistance. In fact, under the CDBG funding program, states are allowed to seek waivers of certain program requirements, except those related to environmental review (and fair housing, nondiscrimination, and labor standards). Categorical Exclusions If a project is of a type that falls within an established category of activities the agency has previously determined to have no significant environmental impacts, it is categorically excluded from the requirement to prepare an EA or EIS. Sometimes such actions are referred to as being categorically excluded or exempt from NEPA. However, NEPA does apply to such actions; they are excluded only from the requirement to prepare an EA or EIS. Individual agencies are required to specifically list, in their respective NEPA regulations, those projects likely to be considered categorical exclusions. For example, FEMA has identified, among others, the following actions as generally classifiable as categorical exclusions: upgrades to codes and standards, removal of structures after addressing historic preservation needs, and minor improvements or minor hazard mitigation measures at existing facilities, such as placing riprap at a culvert outlet to control erosion. An example of a HUD-identified categorical exclusion is the "acquisition, repair, improvement, reconstruction, or rehabilitation of public facilities and improvements (other than buildings) when the facilities and improvements are in place and will be retained in the same use without change in size or capacity of more than 20 percent (e.g., replacement of water or sewer lines, reconstruction of curbs and sidewalks, repaving of streets)." Note that this categorical exclusion is similar to the Stafford Act's statutory exemption for projects that would repair, restore, or replace damaged buildings. Most agencies have identified similar activities in their list of categorical exclusions. Whether or what types of documentation may be required to demonstrate that a project is categorically excluded will depend on whether the project involves extraordinary circumstances that may cause a normally excluded action to have a significant environmental effect. Also, the fact that a project does not have a significant impact as defined under NEPA does not mean that it will not trigger statutory requirements of other environmental laws. For example, if historical sites, endangered species habitat, wetlands, or property in minority neighborhoods, to name a few, would be affected by a proposed federal action, compliance with related environmental laws or requirements, in addition to NEPA, may be required. Even though categorically excluded projects do not have significant environmental impacts, an agency may require a certain level of documentation to prove that the CE determination is appropriate. For example, FEMA's NEPA regulations identify three levels of categorical exclusions and the types of documentation necessary for each. If there are unresolved extraordinary circumstances that may have a significant adverse environmental impact, such as the potential to affect protected natural or cultural resources, the proposed action cannot be categorically excluded, and an EA is required. Projects Requiring an EA or EIS If a project is not statutorily exempt from NEPA or does not fit the criteria applicable to a categorical exclusion, it must be determined whether the environmental impacts of such a project will be significant, and hence require the preparation of an EIS. An EIS may be required for projects intended to facilitate long-term recovery of an affected region. Examples may include disaster-related flood-control or hurricane protection projects (e.g., new wetlands restoration projects or levee repair projects); construction of roads, bridges, storm water management projects, tornado shelters, temporary housing, fuel modification projects, and public facilities (e.g., schools, libraries, utilities); debris storage, staging, and removal; and building acquisition, relocation, and demolition. If past disasters can serve as a gauge, a disaster-related project will not likely require an EIS. However, the preparation of an EA may be required. CEQ regulations define an EA as a concise public document that serves to briefly provide sufficient evidence and analysis for determining whether to prepare an EIS or a finding of no significant impact (FONSI); aid agency compliance with NEPA when no EIS is required; and facilitate preparation of an EIS when one is necessary. The CEQ regulations require no standard format for EAs, but do require agencies to include a brief discussion of the need for the proposal, alternatives, impacts of the proposal and alternatives, and a list of agencies or individuals consulted. Individual agency regulations and/or guidance may include more specific requirements. Some agencies suggest that the process for developing an EA should be similar to the process for developing an EIS. For example, the applicant should consult interested agencies to scope the project to determine the potential for social, economic, or environmental impacts; briefly discuss the project's purpose and need; identify project alternatives and measures to mitigate adverse impacts; and identify any other environmental review requirements applicable to the project (e.g., permitting requirements under the Clean Water Act). Public participation in the EA process is left largely to the discretion of the lead agency. If at any time during preparation of the EA it is determined that a project's impacts are significant, EIS preparation should begin. If it is ultimately determined that impacts are not significant, the lead agency must prepare a FONSI. The FONSI serves as the agency's administrative record in support of its decision regarding a project's impact. The FONSI also must be available to the affected public. Alternative Compliance Arrangements In addition to categorical and statutory exclusions to NEPA, both CEQ and individual agencies have specified "Alternative Arrangements" for complying with NEPA's requirements in the event of an emergency. Alternative arrangements are available where emergency circumstances make it necessary to take an action with significant environmental impacts (i.e., a project that would otherwise require an EIS) without observing the provisions of the applicable NEPA regulations. In such circumstances, the federal agency taking the action should consult with CEQ about what those arrangements may be and the time frame within which they must be completed. Exactly what those arrangements involve and how they would be implemented would vary according to the nature of the disaster. Generally, their intent is to expedite the NEPA process when an EIS would otherwise be required. These Alternative Arrangements do not waive the requirement to comply with NEPA regulations, but establish an alternative means of compliance. Agencies and CEQ are to limit such arrangements to actions necessary to control the immediate impacts of the emergency. On September 8, 2005, CEQ released a memorandum that provides guidance on emergency alternative arrangements under NEPA. That guidance was specific to Hurricane Katrina, but could be applicable to any disaster response activities undertaken by federal agencies. For example, CEQ lists activities that could be considered for analyses in accordance with alternative arrangement provisions, such as the disposal of unsorted disaster debris (waste that includes both hazardous and nonhazardous constituents) at a specific site or the permanent replacement of certain major facilities when the agency expects that significant environmental affects will occur. Although alternative arrangements are an option after a disaster, they have rarely been used for disaster response, recovery, or mitigation projects. However, that is likely the case because alternative arrangements can be invoked for projects that require an EIS and most disaster-related projects will not require the preparation of an EIS. Conclusion When a community is devastated by a disaster, all at once it may be faced with the need to rebuild roads, bridges, private homes, and public buildings. Such projects, when undertaken under normal circumstances, may not qualify for federal funding, but when they do, as in the case after a disaster, the federal government must be assured that certain criteria are met before those funds are made available. Among other factors, the federal government needs confirmation that those funds will not be used in a way that increases the likelihood that their investment will be lost if and when another disaster strikes the same area. Further, before a federal agency will provide funds for disaster recovery or rebuilding, it must gain assurance that the project complies with applicable regulations, laws, and executive orders. The NEPA process is a vehicle by which that assurance can be obtained.

In the aftermath of a major disaster, communities may need to rebuild, replace, or possibly even relocate a multitude of structures. When recovery activities take place on such a potentially large scale, compliance with any of a number of local, state, and federal laws or regulations may apply. For example, when federal funding is provided for disaster-related activities, the agency providing those funds is generally required to identify and consider the environmental impacts of the proposed activities in accordance with the National Environmental Policy Act of 1969 (NEPA, 42 U.S.C. §4321 et seq.). As commonly implemented, the process of identifying potential environmental impacts, as required under NEPA, serves as a framework to identify any other environmental requirements that may apply to that project as a result of those impacts. This use of NEPA as an "umbrella" statute can lead to confusion. For example, before the Department of Housing and Urban Development's (HUD) can grant an applicant request for Community Development Block Grant (CDBG) funds, that applicant must complete an environmental review of the proposed project. A required element of that review is the applicant's certification that compliance with any applicable requirements related to historic preservation, floodplain management, endangered species, air quality, and farmland protection have been considered. This review is required not only to meet NEPA obligations, but also to ensure that the project being funded does not violate other applicable laws. From the applicant's perspective, this may blur the distinction between what is required under NEPA and what is required under separate compliance requirements identified within the context of the NEPA process. For many federal actions undertaken in response to emergencies or major disasters, NEPA's environmental review requirements are exempted under provisions of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act). (The Stafford Act does not, however, exempt such projects from other applicable environmental requirements.) In the past, some Members of Congress have been interested in the NEPA process as it applies to disaster-related projects. This interest has been driven, in part, by federal grant applicants who have been confused about both their role in the NEPA process and what the law requires. To address issues associated with the NEPA process, this report discusses NEPA as it applies to projects for which federal funding to recover from or prepare for a disaster has been requested by local, tribal, or state grant applicants. Specifically, the report provides an overview of the NEPA process as it applies to such projects, identifies the types of projects (categorized by federal funding source) likely to require environmental review, and delineates the types of projects for which no or minimal environmental review is required (i.e., those for which statutory or regulatory exemptions apply) and those likely to require more in-depth review.

Background: Fires Happen In temperate ecosystems, wildfires are inevitable. The combination of biomass plus dry conditions—in the short term (e.g., the annual dry season) or in the long term (e.g., drought or climate change)—equals fuel to burn. Add an ignition source, such as lightning, and wildfire happens. Fire is a self-sustaining chemical reaction that perpetuates itself as long as all three elements of the fire triangle—fuel, heat, and oxygen—remain available. Fire control focuses on removing one of those elements. There are two principal kinds of wildfire, although an individual wildfire may contain areas of both kinds. One is a surface fire , which burns the needles or leaves, grass, and other small biomass within a foot or so of the ground and quickly moves on. Such fires are relatively easy to control by removing fuel with a fireline, essentially a dirt path wide enough to eliminate the continuous fuels needed to sustain the fire, or by cooling or smothering the flames with water or dirt. The other principal kind of wildfire is a crown fire , also called a conflagration. Crown fires burn biomass at all levels—from the surface through the tops of the crowns of the trees—although they do not consume all the biomass; logs and large limbs may need to burn for hours before being completely reduced to ashes. Rather, a crown fire quickly burns the needles or leaves and small twigs and limbs on the surface and throughout the crown of the trees. Because the needles and leaves in the crown are green, they require more energy to burn than dry fuels on the surface. Furthermore, because of the green fuels and the often discontinuous biomass of the canopy, wind is usually needed to sustain a crown fire. Once burning vigorously, a crown fire can create its own wind (the strong upward convection of the heated air can draw in cooler air from surrounding areas, thus creating a wind that feeds the fire). The strong upward convection can also lift burning biomass ( firebrands ) and send it soaring ahead of the fire, creating spot fires and accelerating the spread of the wildfire. Crown fires typically include areas of surface fire and unburned areas within their perimeters. Not surprisingly, crown fires are difficult, if not impossible, to control. Unless quite wide, firelines may be ineffective to control crown fires, especially if winds are causing spot fires. Water or fire retardant ( slurry ) dropped from helicopters or airplanes can sometimes knock a crown fire down (back to a surface fire) if the area burning and the winds are not too great. Often, however, crown fires burn until they run out of fuel or the weather changes (the wind dies or it rains or snows). Nearly all fires are "patchy," with a mix of areas of varying fire severities, depending on site-specific fuel, moisture, and wind conditions. This patchiness makes understanding and controlling wildfires difficult at best. Protecting Structures from Wildfires Wildfires occasionally burn houses, in a zone commonly called the wildland-urban interface . In recent years, it seems one or more fires annually have burned down several to a few hundred homes and outbuildings (sheds, garages, etc.). These structures generally have ignited in one of three ways: through direct contact with fire, through radiation (heating from exposure to flames), and through firebrands. The likelihood of a structure burning from one of these ignition methods is called home ignitability . Home Ignitability Research has identified three essential elements to protecting structures: the roof; adjacent burnable materials; and the landscaping. Treating these three elements addresses all three ways by which structures are ignited—direct contact, radiation, and firebrands. The roof is critical to protecting structures from wildfires. Firebrands that land on a flammable roof can ignite the roof. Untreated red cedar shakes and shingles are particularly problematic: "A major cause of home loss in wildland areas is flammable woodshake roofs." Fire retardant treatments are sufficient for wood shakes, but the effectiveness of such treatments degrades over time. Alternatives include tile, slate, metals (e.g., copper or aluminum), and other non-flammable materials. Walls, doors and windows, and vents can also contribute to the protection, or destruction, of a structure, depending on materials, location, and other variables. Adjacent burnable materials are items that can burn that abut the house. This can include plants (live or dead) and flammable mulch (e.g., wood chips or bark) under an overhang or eave or next to the structure, gutters clogged with leaves or needles, decks and porches, sheds and garages, and especially woodpiles. These factors were particularly important for the 239 homes burned by the Cerro Grande fire in Los Alamos, NM, in May 2000: "The high ignitability of Los Alamos was principally due to the abundance and ubiquity of pine needles, dead leaves, cured vegetation, flammable shrubs, and wood piles that were adjacent to, touching, or covering parts of homes." One source recommended that "when assessing the ignition potential of a structure, attachments [such as decks, porches, and fences] are considered part of the structure." Finally, landscaping—the character of the vegetation surrounding the house—is critical to preventing both direct burning and ignition by radiation. Recommended defensible space around structures is at least 30 feet or 10 meters, with greater distances for steeper slopes (because of up-slope convection heating) and for larger vegetation (least for grass, more for shrubs, most for mature forest). Others recommend greater distances, such as 100 feet. One researcher calculated that the ignition time for an untreated wood wall was more than 10 minutes at a distance of 40 meters (about 130 feet). With burning durations for crown fires "on the order of 1 minute at a specific location," the "safe distance" for an untreated wood wall was calculated to be 27 meters (less than 90 feet), which is consistent with field tests documenting wall ignition times for experimental crown fires in Canada. The same source notes older fire case studies documenting structure survival—95% survival for 10-18 meter (about 32-60 feet) clearance in the 1961 Belair-Brentwood (CA) fire and 86% survival for 10+ meter clearance in the 1990 Painted Cave (CA) fire. Thus, clearing to 40 meters would likely be considered ideal, to 30 meters desirable, and to at least 10 meters essential to achieving about 90% probability of survival. Note also that "clearing a defensible space" does not require an expanse of concrete or gravel; relatively non-flammable vegetation, such as a lawn or succulent, herbaceous plants and flowers, can provide comparable protection. The importance of landscapes in protecting structures can also be deduced from evidence from the 2002 Hayman fire, the largest wildfire in Colorado history. A total of 132 homes were burned in the Hayman fire. Of these, 70 (53%) "were destroyed in association with the occurrence of torching or crown fire in the home ignition zone. Sixty-two [47%] were destroyed by surface fire or firebrands." Conversely, 662 homes—83% of the homes within the fire perimeter—survived the Hayman fire relatively unscathed. Since 35% of the Hayman fire was a high-severity burn, and another 16% was a moderate-severity burn, it seems likely that at least some of these homes (the number and portion are not documented) survived despite crown fire around them. Thus, it seems reasonable to conclude that the nature of the structure—rather the nature of the fire—primarily determines whether a structure survives a wildfire. Responsibility for Protecting Structures Owners are responsible for their structures. Insurance companies and the relevant state agencies that regulate insurance can contribute to structural protection by requiring certain materials and actions to obtain a policy for compensation following wildfire losses or by adjusting premiums based on homeowner actions. Local governmental agencies also play a role, since the building and zoning codes that could implement some of the safe-structure requirements are generally developed and enforced locally. Alternatively, states can play a role; as of January 1, 2008, the California Building Standards Commission is enforcing wildland-urban interface building standards in very high hazard zones. The structure owners are also primarily responsible for the defensible space surrounding their structures. A 10-meter-wide clearing around a 3,000-square-foot structure encompasses less than a third of an acre—almost certainly private land owned in conjunction with the structure. Even a 40-meter clearing encompasses less than 2 acres, and thus is commonly part of the structure owner's property in the wildland-urban interface. When a structural fire starts, the local fire department is responsible for controlling the blaze. State agencies may provide support for local fire departments, especially in the wildland-urban interface where a structural fire could cause a wildland fire. Occasionally, because of the location of firefighting resources, the federal agencies may be the first responders on a structural fire in the interface, but federal firefighters are generally not trained for safety in structural firefighting. The federal government has no responsibility for structural fire control in the wildland-urban interface. However, the Forest Service (FS) does have programs to provide technical and financial assistance to states and to volunteer fire departments. Given the nature of efforts needed to protect structures and the fact that developing, adopting, and enforcing building codes are local and state responsibilities, there is no clear federal responsibility in protecting structures from wildfires. However, the federal government often provides disaster assistance in the wake of a catastrophic wildfire, generally at the request of a governor. Federal disaster assistance is expensive and could be avoided if action to protect homes were taken in advance. Several federal agencies currently support FIREWISE, a program aimed at educating homeowners about how to make their structures safe from wildfire. Assistance to homeowners—such as technical assistance, low-cost loans, and cost-sharing on projects—might be a cost-saving federal investment. Federal assistance to prepare local firefighters is another means for addressing home protection from wildfires. Research on wildland-urban interface fire protection can also reduce losses. Another possibility might be federal wildfire insurance, comparable to the National Flood Insurance Program. Those living in an identified wildfire-prone zone would be required to purchase federal wildfire insurance (probably with an annual premium) to receive compensation for wildfire damages. The premiums could vary by eco-region, depending on the likelihood and risk of wildfires, and by aspects of the structure and landscaping (which might require periodic inspections). Protecting Wildlands and Natural Resources Wildlands and natural resources can also be damaged by wildfires. Wildfire damages vary widely, depending on the nature of the ecosystems burned as well as site-specific conditions. Activities to modify wildland biomass fuels can reduce damages, although the cost and effectiveness also vary. Finally, for fuel reduction activities on federal lands, delays and modifications—related to endangered species concerns and public involvement in decision-making—can affect the cost of fuel treatments. Wildland Ecosystems and Wildfire Ecosystem fire regimes can be classified in several ways; one common approach is to distinguish among surface fire ecosystems, stand-replacement fire ecosystems, and mixed fire ecosystems. Damages to lands and resources depend on the nature of those ecosystems. Surface Fire Ecosystems Surface fire ecosystems are ecosystems where fires burn relatively frequently (typically 5- to 35-year intervals), with the fires consuming leaves or needles, grasses, twigs and small branches, and sometimes small trees, but generally leaving moderate and large trees unharmed by the fire. The classic surface fire ecosystem is the western Ponderosa pine, where seedlings occasionally survive the surface fire to become the scattered, stately pines in fields of grass or low brush. The other archetypical surface fire ecosystem is that of the southern yellow pines—shortleaf, slash, loblolly, and especially longleaf pine. Surface fire ecosystems account for about 34% of all U.S. wildlands. Over the past century, surface fire ecosystems in the West have been affected by grazing, logging, and fire protection. Heavy grazing reduced grass cover, which commonly carried the surface fires. Logging in many areas emphasized large pines, often leaving true firs and Douglas firs (which are more susceptible to drought, insect damage, and crown fires) to replace the pines, at least in the northern Rockies and Pacific Northwest. Fire protection has similarly led to more firs and Douglas firs, and small Ponderosa pines, than would typically have survived. With fire return intervals of 5-35 years (i.e., fires typically burning once in that period), many surface fire ecosystems have missed two or more burning cycles. Thus, many forests now have an unnaturally large accumulation of small burnable materials and of trees susceptible to crown fires. Many are concerned that the unnatural fuel accumulations and fuel ladders (continuous fuels from the ground to the tree crowns) from many small and medium-sized pines, firs, and Douglas firs are causing crown fires in ecosystems where such fires were rare. This could result in significant ecological damage to plants and animals ill-adapted to crown fires. It is unclear whether a new surface fire ecosystem will develop in the wake of an intense crown fire. Research on fuel reduction treatments (discussed below) has documented the effectiveness of such treatments on Ponderosa pine (a surface fire ecosystem), and activities that reduce fuel accumulations have been shown to reduce wildfire severity in surface fire ecosystems. Presumably, less severe wildfires cause less damage to timber, to watersheds, and to wildlife and wildlife habitats. Stand-Replacement Fire/Crown Fire Ecosystems Stand-replacement fire ecosystems are those where crown fires are normal, natural, periodic events to which the ecosystem has adapted. The interval for the stand-replacement fires varies widely—from a few years (prairie grasses) to more than 1,000 years (coastal Douglas fir)—depending on the ecosystem. Some ecosystems require periodic crown fires to regenerate the ecosystem. For example, lodgepole pine in much of the West and jack pine in the Lake States have serotinous cones, which only open and release their seeds after exposure to temperatures exceeding 250° Fahrenheit. Similarly, chaparral in southern California and the desert Southwest, most perennial grasses, and aspen everywhere regenerate from rootstocks; burning the surface vegetation allows new plants to sprout from the underground stems, rhizomes, and root crowns. Stand-replacement fire ecosystems account for about 42% of all U.S. wildlands. It seems unlikely that stand-replacement fire ecosystems could suffer significant ecological damage from severe wildfires. In contrast to surface fire ecosystems, where crown fires could alter the ecosystem, in stand-replacement fire ecosystems, the exclusion of crown fires (if it were possible) would likely alter the ecosystems. This ecological change is implied by evidence from grass ecosystems (prairies and meadows), where fire suppression is feasible and which are being encroached upon by trees that would normally have been eliminated by the frequent fires. Activities that reduce fuel levels in stand-replacement fire ecosystems have no documented effect on wildfire severity. Anecdotal reports have asserted that crown fires were halted (became surface fires) when they arrived at treated areas, but research has not documented where and when such occurrences have happened. To date, no research has shown that fuel treatments consistently reduce the extent or severity of wildfires in stand-replacement fire ecosystems. The ineffectiveness of fuel reduction was particularly noted for southern California chaparral: "large fires were not dependent on old age classes of fuels, and it is thus unlikely that age class manipulation of fuels can prevent large fires." Mixed-Fire-Intensity Ecosystems Many wildlands have ecosystems that burn in crown fires of relatively limited scale, substantially mixed with surface fires. These ecosystems are called mixed-fire-intensity ecosystems. A classic example is whitebark pine, a species generally limited to high elevation sites, near timberline (a demarcation where trees no longer grow). Whitebark pine is a slow-growing species that invades harsh sites and moderates the micro-climatic conditions to allow true firs and spruces to germinate and grow. The sporadic mixed-intensity fires kill most of the competing trees and some of the whitebark pines, but some pines survive. Also, burned sites are preferred "cache" sites for Clark's nutcrackers, which is the primary means of whitebark pine tree regeneration. Other species that are commonly surface fire or stand-replacement fire species, such as Ponderosa pine and lodgepole pine, can be mixed-fire-intensity types under certain conditions, typically near the transition to another area with a different dominant tree species. Ponderosa pine, for example, may be a mixed-fire-intensity type on relatively moist sites, especially where it mixes naturally with Douglas fir, such as on north-facing slopes in the northern Rockies. Lodgepole pine may be a mixed-fire-intensity type on relatively dry sites, where the trees naturally grow farther apart, such as on the eastern slopes of the Sierra Nevada Mountains. Less is known about wildfire in mixed-fire-intensity ecosystems, even though they occupy about 24% of U.S. wildlands. It is unclear whether fuel loads have accumulated to unnatural levels, whether crown fires could cause significant ecological damage, or whether fuel reduction activities would alter wildfire extent or severity in these ecosystems. Wildfire Effects The effects of wildfires on natural resources are difficult to assess and are commonly overstated for two reasons. First, burned areas look bad—blackened trees and ground cover—even following surface fires. However, many plants recover from being burned. Conifers generally survive even with as much as 60% of their crowns scorched. Other plants, especially grasses, aspen, and some brush species, resprout vigorously after being burned. Furthermore, animals (regardless of their size and mobility) are rarely killed by wildfire. The other reason that wildfire effects are commonly overstated is that the reported burned area includes all the acres within the fire perimeter. However, even severe crown fires are patchy, leaving some areas lightly burned or unburned. For example, in the Yellowstone fires that were on the nightly news for weeks in the summer of 1988, 30% of the reported burned area was actually unburned and another 15%-20% had only surface fire. In the 2002 Hayman fire, the worst wildfire in Colorado history, 35% of the area had a high-severity burn and 16% had a moderate-severity burn; 34% had a low-severity burn and 15% was unburned. Thus, severely burned acreage is substantially less than the burned area that is reported. Severe wildfires can cause long-lasting resource damages. Crown fires kill many plants within the burned area, increasing the potential for erosion until the vegetation recovers. Some observers have reported "soil glassification," where the silica in the soils has been melted and fused, forming an impermeable layer in the soil, although research has yet to document the extent, frequency, and duration of the condition and the soils and conditions in which it occurs. Landslides can also occur in areas with unstable soils where the vegetation has burned, such as in coastal southern California. Timber can also be damaged, although burned trees can often be salvaged for lumber and other wood products. However, harvesting and processing costs are typically higher in burned areas, and many object to post-fire salvage harvesting because of its possible additional impacts on soils and other resource values. Wildfires, especially crown fires, can also have significant local economic effects—directly on tourism, and indirectly through effects on timber supply, water quality, and aesthetics. On the other hand, federal wildfire suppression efforts include substantial expenditures, many of which are made locally, and fire-fighting jobs are considered financially desirable in many areas. Protecting Wildlands and Resources The federal government is generally responsible for protecting federal lands and their natural resources from wildfire. Wildfire protection of other wildlands and natural resources—state, local government, and private lands—is the responsibility of the states, although the individual landowners are responsible for excessive fuel accumulations and other hazardous conditions on their own lands. As noted above, the FS has a technical and financial assistance program for state fire agencies. The principal goal for land and resource protection is to reduce the damages caused by wildfires. This can best be achieved by reducing burnable biomass (live and dead) to reduce wildfire intensity and duration, and especially by eliminating the fuel ladders (relatively continuous biomass from the surface to tree crowns) that facilitate wildfire transition from a surface fire to a crown fire. Fuel treatments can also reduce the crown bulk density (the biomass, especially fine fuels, in the tree crowns), making it more difficult for a crown fire to sustain itself, thus making a wildfire more controllable. Reducing burnable biomass, however, does not eliminate wildfires, because fuel reduction does not directly alter the dryness of the biomass or the probability of an ignition. The two principal mechanisms for reducing fuels are prescribed burning and mechanical treatments, although the two tools can also be combined. Each tool has benefits, costs, and risks or limitations to its use. Prescribed Burning Prescribed burning is intentionally setting fires in specified areas when fuel and weather conditions are within prescribed limits (e.g., fuel moisture content, relative humidity, wind speed). Some observers include, in their definition of prescribed burning, naturally occurring fires that are allowed to burn because they are within acceptable areas and conditions, as identified in fire management plans. The agencies term such fires wildland fire use , and do not identify them as prescribed fires, but do include the acres burned in wildland-fire-use fires as acres treated for fuel reduction. Prescribed burning is used for reducing biomass fuels because it is the only means available for eliminating fine fuels (grasses, needles, leaves, forbs, and twigs and shrubs less than a quarter-inch in diameter [pencil-sized]). Burning converts the vegetation to smoke (carbon dioxide, water vapor, fine particulates, and other pollutants) and ashes (mineralized forms of the organic matter, readily available for absorption by new plant growth). Reducing fine fuels is critical in wildfire protection and control, because fine fuels are necessary to carry wildfires; without fine fuels, wildfires cannot spread. Prescribed burning has various limitations. Smoke can be a problem, contributing to human health problems, especially in areas where inversions are common or with relatively stagnant airsheds. Also, prescribed burning is risky. It is not controlled burning; there is no such thing as controlled burning, because there is no switch to turn the fire off. Prescribed fire is also an indiscriminate tool for reducing tree density, crown density, and fuel ladders, burning what is available, depending on a host of site-specific and micro-climatic conditions. Finally, prescribed burning is expensive. Actually starting the prescribed fire is cheap—matches don't cost a lot. However, minimizing the risk to surrounding areas (especially private lands and housing developments) requires planning and preparation as well as sufficient trained personnel and supervisors to react when unexpected fire behavior occurs or weather conditions change. Prescribed burning costs are estimated to range from $12 to $174 per acre, depending on the fuel type, treatment method, size of area to be treated, steepness of slopes, site elevation, and other factors. A prescribed fire that becomes a wildfire, such as the Cerro Grande fire in Los Alamos, NM (which burned 239 houses in town), raises questions about the practice and about the fire managers who use it. Thus, fire managers tend to err on the side of excessive personnel (and cost) for a prescribed fire, rather than risk a costly, damaging wildfire with far higher costs. Mechanical Treatment Mechanical fuel treatment includes a wide array of activities designed to reduce biomass on a site. Foresters have a variety of terms for the various activities, including: pruning—removing lower tree branches, which eliminates fuel ladders and can reduce crown density. release—removing several to many trees from a young stand (saplings or smaller) to concentrate wood growth on desirable trees, which reduces crown density. thinning—removing a portion of the standing trees; the portion can vary widely from very light (relatively few trees) to very heavy (more than half the trees in the stand). Thinning can be commercial (if the trees are large enough for products) or precommercial. It can be used to eliminate fuel ladders and reduce crown density, depending on the approach and portion of trees removed. Thinning approaches include: —low thinning, or thinning from below, to remove the smallest and poorest specimens, which eliminates fuel ladders and can reduce crown density; —crown thinning, or thinning from above, to open the canopy to stimulate growth on the remaining trees, which substantially reduces crown density; —selection thinning, to remove the least desirable trees for the future stand, which reduces crown density and can eliminate fuel ladders; and —mechanical thinning, to provide appropriate spacing for the remaining trees, which reduces crown density and can eliminate fuel ladders. salvage harvesting—removing a portion to all of the standing trees, many of which have been killed or are in imminent danger. This includes presalvage harvesting (removing highly vulnerable trees before they are killed) and sanitation harvesting (removing trees to control the spread of insects or diseases). It reduces (or eliminates) crown bulk density, and might reduce fuel ladders. Treatment Choices Mechanical fuel treatment clearly involves choices—about the amount of biomass to be removed, and about the nature of the biomass to be removed (small and weak trees, lower limbs, vulnerable trees or species, etc.). The choice can also be over the method used for the treatment: a commercial sale, if the treatment yields commercially usable wood; a stewardship contract, if commercially usable wood can be exchanged for other activities; a service contract, for specified actions; an end-results contract, to specify what is left after treatment; or even treatment by agency personnel. All of these choices affect public acceptance of the proposed treatment. Benefits and Limitations The primary benefit of mechanical fuel treatment is the high degree of control over the results. One report stated: Mechanical thinning has the ability to more precisely create targeted stand structure than does prescribed fire.... Used alone, mechanical thinning, especially emphasizing the smaller trees and shrubs, can be effective in reducing the vertical fuel continuity that fosters initiation of crown fires. In addition, thinning of small material and pruning branches are more precise methods than prescribed fire for targeting ladder fuels and specific fuel components. The authors also observed some of the limitations of mechanical fuel treatment: However, by itself mechanical thinning does little to beneficially affect surface fuels with the exception of possibly compacting, crushing, or masticating it during the thinning process. Depending on how it is accomplished, mechanical thinning may add to surface fuels (and increase surface fire intensity) unless the fine fuels that result from the thinning are removed from the stand or otherwise treated.... Thinning and prescribed fires can modify understory microclimate that was previously buffered by overstory vegetation.... Thinned stands (open tree canopies) allow solar radiation to penetrate to the forest floor, which then increases surface temperatures, decreases fire fuel moisture, and decreases relative humidity compared to unthinned stands—conditions that can increase surface fire intensity.... An increase in surface fire intensity may increase the likelihood that overstory tree crowns ignite. Other sources have similarly reported the limitations of thinning: Depending on the forest type and its structure, thinning has both positive and negative impacts on crown fire potential. Crown bulk density, surface fuel , and crown base height [fuel ladders] are primary stand characteristics that determine crown fire potential. Thinning from below, free thinning, and reserve tree shelterwoods have the greatest opportunity for reducing the risk of crown fire behavior. Selection thinning and crown thinning that maintain multiple crown layers ... will not reduce the risk of crown fires except in the driest ponderosa pine ... forests. Moreover, unless the surface fuels created by using these treatments are themselves treated, intense surface wildfire may result, likely negating positive effects of reducing crown fire potential. No single thinning approach can be applied to reduce the risk of wildfires in the multiple forest types of the West. Thus, thinning and pruning have the potential to reduce the risk of crown fire, but may increase wildfire risk until the slash (non-commercial biomass) degrades (rots or burns, typically in a few years to decades, depending on the ecosystem), or is removed. In addition, thinning is an expensive proposition, with treatment costs ranging "from $35 to over $1000 per acre depending on the type of operation, terrain, and number of trees to be treated." Commercial operations—commercial thinning, stewardship contracting, and salvage logging—have been suggested as a means to moderate the high cost of mechanical fuel treatment. However, commercial timber sales on federal lands commonly cost more to prepare and administer than they return to the Treasury. The results of commercial operations for fuel reduction are also questionable: The proposal that commercial logging can reduce the incidence of canopy fires was untested in the scientific literature. Commercial logging focuses on large diameter trees and does not address crown base height—the branches, seedlings and saplings which contribute so significantly to the "ladder effect" in wildfire behavior. Others have also noted the likely net cost of thinning to reduce the risk of crown fires: Although large trees can be removed for valuable products, the market value for the smaller logs may be less than the harvest and hauling charges, resulting in a net cost for thinning operations. However, the failure to remove these small logs results in the retention of ladder fuels that support crown fires with destructive impacts to the forest landscape. A cost/benefit analysis broadened to include market and nonmarket considerations indicates that the negative impacts of crown fires are underestimated and that the benefits of government investments in fuel reductions are substantial. Combined Operations The ability to control the resulting stand structure with mechanical treatments and the ability to remove fine fuels with prescribed burning make combining the two treatments seem a logical choice. However, empirical evidence to document the effectiveness of such combined operations is limited: A more limited number of studies addressed the effectiveness of a combination of thinning and burning in moderating wildfire behavior. The impacts varied, depending on the treatment of the thinning slash prior to burning. In addition, the cost of combined operations is substantially greater than the cost of either alone. Area Needing Treatment The areas that might benefit from prescribed burning and/or mechanical treatment are not entirely clear. Table 1 , below, shows the acreage of national forest land, Department of the Interior land, and all other land by (a) historical fire regime (comparable to the ecosystem types described above); and (b) condition class—low risk (Class 1), moderate risk (Class 2), and high risk (Class 3) of losing key ecosystem components in a wildfire. Based on the discussion above of the effectiveness of various treatments, it seems reasonable to conclude that treating lands in the Class 3 (high risk), low severity (surface fire) regime could reduce the likelihood of crown fires in these ecosystems, where such fires are unnatural (or at least very rare). Table 1 shows this to include 28.8 million acres of national forest land, 6.5 million acres of Interior land, and 42.2 million acres of other federal, state, and private land. The cost to treat these lands varies widely. One study, cited above, reported mechanical treatment costs of $35 to $1,000 per acre, depending on terrain, type of operation, and number of trees to be cut. Others have similarly reported highly variable costs for commercial mechanical treatment above and below the "base case" cost of $150 per acre, depending on tree size, stand density, terrain, and whether the treatment was conducted in the wildland-urban interface. The same source reported similar variability in costs for prescribed burning, above and below the "base case" cost of $105 per acre. Federal appropriations for fuel treatment averaged about $170 per acre for FY2001-FY2006—$165 per acre for the Forest Service and $174 per acre for the BLM. The General Accounting Office (GAO, now the Government Accountability Office) used a Forest Service estimate of $300 per acre in its 1999 estimate of needed funding for fuel treatment, because of the higher cost per acre to treat additional western lands. At $300 per acre, Forest Service costs to treat the Class 3 surface fire regime lands would be $8.6 billion, and Department of the Interior costs would be $1.9 billion. Other surface (low severity) fire regime lands might also warrant treatment, although the lower risk of ecological damage suggests a lower priority for treatment. It is unclear whether any lands other than the surface fire regime lands warrant fuel treatment. The existing research evidence on fuel treatment for stand-replacement fire regimes raises questions about the effectiveness of both mechanical treatment and prescribed fire for reducing the likelihood of damages from a crown fire. One might even question whether ecological damage can be ascribed to a crown fire in a stand-replacement fire ecosystem, since these ecosystems have evolved adaptations to reestablish themselves following crown fires. Evidence is also lacking about the effectiveness of mechanical treatments and prescribed burning on mixed-intensity fire ecosystems. Thus, it is not certain whether fuel treatment on these mixed-intensity fire regime lands and stand-replacement fire regime lands would provide any significant wildfire protection. Delays and Changes in Federal Decision-Making Some advocates of fuel treatment are concerned that delays and changes to the implementation of fuel treatments might lead to catastrophic crown fires that could have been prevented by more expeditious fuel treatment. Concerns are generally linked to consultations under the Endangered Species Act (ESA, P.L. 93-205 ; 16 U.S.C. §§1531-1544), and to public involvement under the National Environmental Policy Act of 1969 (NEPA; P.L. 91-190, 42 U.S.C. §§4321-4347) and the Forest Service Appeals Reform Act (ARA; §322 of P.L. 102-381 , the FY1993 Interior Appropriations Act, 16 U.S.C. §1612 note). Involving the public and consulting over possible impacts on endangered or threatened species take time, and concerns and objections can delay, modify, or even prevent some proposed actions. However, others caution that expedited review or limits on ESA consultation and on public oversight of proposed fuel treatments may allow treatments to include commercial timber harvests or other actions that provide little wildfire protection and exacerbate fuel accumulations in the short run, while causing other environmental damages. This raises the question of the effect of delays on wildfire threats. Clearly, structures in the wildland-urban interface are threatened by wildfire, but as shown above, fuel treatment provides little, if any, fire protection for structures, and thus delaying fuel treatments has little consequence for structure protection. Resources in surface fire ecosystems with unnatural fuel accumulations are at risk from severe wildfires. The odds of having treated the "right" acres to prevent a crown fire with significant resource damages are, however, quite low. For the past decade, during which more area burned than in any other decade since 1960, wildfires have burned an average of 7.3 million acres annually. Total wildlands in the United States are 1.45 billion acres—roughly 640 million acres of federal land, and roughly 815 million acres of private forest and rangeland. Thus, the likelihood of any particular acre burning in any given year, on average, is less than 0.66% (i.e., burning once every 150 years). Obviously, the risk for certain areas in particular years can be much higher—5.4% of Idaho's wildlands burned in 2007, for example—but this is offset by much lower risks for those areas in other years and for other areas in the same year—0.2% of Idaho's wildlands burned in 2002, while 0.04% of Colorado wildlands burned in 2007, in contrast to 1.8% in 2002, when the Hayman fire burned. Wildfire risk is probably somewhat higher in western states than the national average, because the ecosystems in the Lake States, mid-Atlantic region, and New England experience less fire; however, even if the risk were 50% greater than the national average (which seems unlikely because the larger area in the West already contributes to a higher national average), the risk would still be less than 1% per year. In addition to the low probability of a particular acre burning is the modest likelihood of an area being treated. The Forest Service and BLM treated 2.7 million acres of their lands annually from FY2003 through FY2007. This is less than 8% of their Class 3 surface fire ecosystem lands, and less than 3% of Class 3 plus Class 2 surface fire ecosystem lands. If the same acreage of treatments are spread more broadly—to Class 1 surface fire ecosystem lands or to lands in other fire regimes—the probability of treating a particular acre to prevent a crown fire diminishes further. Nonetheless, lengthy delays can exacerbate the risks. Annual probabilities of a wildfire burning an area and of an area being treated are both cumulative. Over a 10-year period, the likelihood of an area burning is more than 6%, while the likelihood of a moderate- or high-risk surface fire ecosystem being treated rises to 15% (if half of all treatments are concentrated on these lands). Thus, relatively brief delays may have relatively little impact of the likelihood of an area being burned in an unnatural crown fire, but longer delays (a decade or more) could have a significant impact. ESA Consultations65 The ESA established a process for federal agencies to consult with the Fish and Wildlife Service (FWS), or with the National Marine Fisheries Service (NMFS) for some species, on any actions that might jeopardize a listed endangered or threatened species or adversely modify its critical habitat. This is not a problem for firefighting, as immediate, informal consultations can occur during an emergency, with formal consultation to follow after the emergency has passed. However, some fuel treatments might jeopardize a species or adversely modify its habitat, which would require ESA consultation. Consultation means the FWS (or NMFS) would review the proposed action and, if jeopardy or adverse habitat impacts are likely, propose a "reasonable and prudent alternative" to achieve the same purpose without jeopardy or adverse habitat modification. The vast majority of agency activities have a finding of no jeopardy, and most with jeopardy have a reasonable and prudent alternative; actions with jeopardy and no alternative findings are exceedingly rare. Fuel treatments that reduce the likelihood of crown fires in ecosystems where such fires were historically rare are generally unlikely to jeopardize or adversely modify the critical habitat of endangered species. Many species in North America are adapted to survive and even thrive with natural wildfires. One study reported that more than 90% of rare, threatened, and endangered plants in the 48 coterminous states either benefit from fire or are found in fire-adapted ecosystems. Also, as noted above, animal mortality in wildfires is rare. Thus, treatments that only restore forests to conditions that allow a historically natural ecological role for wildfire are more likely to benefit endangered and threatened species than to harm them. Nonetheless, ESA consultations take time, and can delay fuel treatments. This is more likely to be the case when restoration treatments (e.g., prescribed burning or thinning from below) are combined with other activities (e.g., commercial timber harvesting), such as in a stewardship contract. Thus, the method used to undertake the treatment, as well as the nature of the treatment itself, determines the length of delays and possible project modifications from ESA consultations. NEPA Environmental Analysis and Public Involvement67 NEPA requires federal agencies to review the environmental effects of "major Federal actions significantly affecting the quality of the human environment." Agencies must consider every significant aspect of the environmental impacts of a proposed action before making an irreversible commitment of resources to the project. NEPA also requires that agencies inform the public that they have considered those impacts in their decision-making process. In his executive order on NEPA implementation, President Richard Nixon directed the agencies to go beyond just informing the public, to actively involve the public early in the decision-making process. Fuel reduction treatments to protect resources from wildfires are generally considered to be major federal actions subject to NEPA. Environmental Analysis The action agency must analyze the possible environmental consequences of its actions. The first step is to determine if the action will have significant environmental impacts. There are three possible outcomes. If significant impacts are likely, then the agency prepares an environmental impact statement (EIS). If the impacts are normally insignificant—individually and cumulatively—the activity can be categorically excluded from further NEPA environmental analysis and public involvement. (See below.) If the significance of the impacts is uncertain, the agency prepares an environmental assessment (EA) to determine the significance of the impacts. The EA leads either to a finding of no significant impact (FONSI) or to an EIS. Advocates of expedited fuel treatment are concerned about the time needed to prepare an EIS or even an EA. Information collection and analysis may take from several days to a few months, depending on the magnitude and complexity of the proposed action. An EIS involves additional steps to assess the likely and the possible environmental impacts and to inform and involve the public. These steps include scoping (public discussions about the nature, location, and possible consequences of the proposal); a draft EIS, examining a range of alternatives and generally identifying a preferred alternative; public comments on the draft and the preferred alternative; and then a final EIS and record of decision (ROD). Only after completing this process—which can take a year or more for large, complex projects—can the agency undertake the action. Thus, proponents of expeditious fuel reduction projects often advocate various approaches to accelerate the process, discussed below. Categorical Exclusions (CEs) As noted above, certain projects can be categorically excluded from the requirement to prepare an EA or an EIS. Such a CE action is defined as: a category of actions which do not individually or cumulatively have a significant effect on the human environment ... and for which, therefore, neither an environmental assessment nor an environmental impact statement is required.... Any procedures under this section shall provide for extraordinary circumstances in which a normally excluded action may have a significant environmental effect. CEs are typically used for relatively minor, routine actions (e.g., thinning, debris removal) that the agency does frequently and has found to have at most insignificant environmental impacts. For projects approved under CEs, the Forest Service is not required to provide notice and opportunity for public comment as otherwise required for agency activities under the ARA. (See below.) In certain situations—such as those involving controversial issues (e.g., wetlands and roadless areas) or specifically protected resources (e.g., endangered species and archaeological sites)—known as extraordinary circumstances , CEs cannot be used. In 2002, the Forest Service modified its application of extraordinary circumstances, allowing the responsible official to determine whether the extraordinary circumstances warranted an EA or an EIS, rather than automatically precluding use of a CE in the presence of extraordinary circumstances. The Forest Service has identified numerous categories of actions for which a CE may be used; two relate directly to wildfire protection (for details on Forest Service CEs and extraordinary circumstances, see the Appendix ): 6. Timber stand and/or wildlife habitat improvement activities ..., [including] thinning or brush control to improve growth or reduce fire hazard ..., prescribed burning to control understory hardwoods in stands of southern pine, [and] prescribed burning to reduce natural fuel build-up.... 10. Hazardous fuel reduction activities using prescribed fire, not to exceed 4,500 acres, and mechanical methods for crushing, piling, thinning, pruning, cutting, chipping, mulching, and mowing, not to exceed 1,000 acres ... limited to ... the wildland-urban interface; or Condition Classes 2 or 3 [moderate or high risk of ecological damage] in Fire Regimes I, II, or III [surface fire, stand-replacement fire with a return interval of 35 years or less, and mixed-intensity fire]. (emphasis in original) Forest Service use of the latter CE was halted after a court found it was arbitrary and capricious. Other CEs have also been challenged, raising questions about the availability of CEs for fuel reduction projects. Forest Service Appeals Reform Act In addition to public involvement under NEPA, the Forest Service must also inform the public of its decisions and provide an opportunity for the public to request an administrative review of its decisions under the Forest Service Decisionmaking and Appeals Reform Act (ARA). Subsections (a) and (b) require the Forest Service to provide notice and an opportunity for public comment on proposed actions; this is the only provision requiring notice and comment on Forest Service proposals other than under NEPA. Subsections (c) and (d) specify an administrative appeals process—review by a higher-ranking official—for those who had commented on the proposal and object to the decision. GAO was asked to examine administrative appeals of fuel reduction projects. For FY2001 and FY2002, prior to promulgation of the hazardous fuel reduction CE, 59% of fuel reduction projects used CEs and could not be appealed. Of those that could be appealed, 58% were appealed (i.e., 24% of all fuel reduction projects during that period). Of those, 73% were implemented without change, 8% were modified, and 19% (less than 5% of all projects) were withdrawn or reversed. Furthermore, 79% of the appeals were resolved within the prescribed 90 days. These data are supported by a study of all Forest Service administrative appeals. This study found that 8% of appeals were granted (i.e., decision reversed) and that 9% of appealed decisions were withdrawn. A different study examined factors that increased the likelihood of a fuel reduction project being appealed. It reported that appeals were more likely for fuel reduction projects that (1) affected more area; (2) included more activities for the site; (3) included commercial timber harvest; (4) included as a purpose reducing fuels generated by the project; and (5) had at least one threatened or endangered mammal near the site. These factors are indirectly confirmed in the GAO study, since 92% of projects with EISs (larger projects with likely environmental impacts) were appealed, compared to 52% of projects with EAs (projects with uncertain environmental impacts). Conversely, projects were significantly less likely to be appealed if the project was (1) implemented by Forest Service personnel or a service contract; and (2) in the wildland-urban interface. These data suggest that administrative appeals are less of a problem than the advocates of fuel treatment suggest. Only about a quarter of proposed projects are appealed, with less than 5% prevented from being implemented, and delays of less than 90 days for most projects. However, for prescribed burning, a 90-day delay can be significant, since the period within the prescribed conditions can be brief. Expedited Procedures Proponents of aggressive fuel treatment continue to be concerned about delays from the ESA, NEPA, and ARA review processes, and have pressed for various means for accelerating the reviews. Some procedures are currently feasible under existing regulations, others have been enacted by Congress in various contexts, and more have been proposed. Expedited ESA Consultations As noted above, during emergencies, the agencies can consult informally for rapid action, with formal consultations to follow when the situation has stabilized. This clearly applied during wildfire suppression activities, but fuel reduction treatments are not emergency actions that require an immediate response to prevent damages. As discussed above, lengthy (multi-year) delays in fuel reduction activities can increase the likelihood of resource damages from wildfires, but brief delays have minor impacts. The agencies have developed an alternative approach to ESA consultations that is intended to accelerate the ESA review process: counterpart regulations. These regulations allow the Forest Service, BLM, and others to assess whether the proposed fuel reduction action is likely to jeopardize a listed threatened or endangered species or to adversely modify critical habitat, rather than to consult with the Fish and Wildfire Service on the likelihood of jeopardy or adverse habitat modification. While some ESA counterpart regulations have been challenged successfully, the counterpart regulations related to wildfire management remain in place. Expedited NEPA Reviews (Other than Through CEs) In addition to the option of CEs, the NEPA regulations of the Council on Environmental Quality (CEQ) allow for alternative arrangements in the event of an emergency. These alternative arrangements do not waive NEPA requirements, but establish an alternative means of fulfilling those requirements for actions necessary to control the immediate impacts of an emergency, typically with conditions on short-term and long-term actions. For example, in 1998, the Forest Service requested alternative arrangements for rapid restoration actions following a windstorm that damaged 103,000 acres of national forest land in Texas that contained critical habitat for the endangered red-cockaded woodpecker; CEQ concurred that the situation was an emergency and agreed to alternative arrangements that included subsequent preparation of an EA, limits on tree removal, long-term public involvement, emergency consultation under ESA, and more. For fuel treatment, NEPA alternative arrangements will rarely provide a means of accelerated action. First, alternative arrangements are not used very often—42 requests were made from 1980 through 2010. Second, alternative arrangements are to be used for emergencies. Fuel conditions in a delineated area might occasionally be an emergency, such as in the wake of a ice storm or a tornado, but fuel levels generally do not constitute an emergency requiring immediate action. Healthy Forests Restoration Act The Healthy Forests Restoration Act of 2003 (HFRA; P.L. 108-148 , 16 U.S.C. §§6501-6591) expedited review processes in several ways. In Title I, it modifies the NEPA environmental analysis and public involvement processes for authorized Forest Service and BLM fuel reduction projects (based on priorities, exclusions, and other standards in the act). The EA or EIS for each project may be limited to the proposed action, the no-action alternative, and possibly an additional alternative (in contrast to the range of alternatives normally required). The agencies "shall facilitate collaboration" with tribes and state and local governments and "participation" of interested persons; however, the law does not explain the distinction between collaboration with certain interests and participation by other interests. Title I includes two other changes to accelerate fuel reduction projects. First, for the Forest Service, it replaces ARA administrative appeals with a "predecisional administrative review process." This process is only available to persons who submitted "specific written comments that relate to the proposed action" during scoping or the public comment period on the draft NEPA document. The process is also limited to the period between completing the EA or EIS and issuing the record of decision, with no requirements for how long that period must be. Then, the act restricts judicial review, generally limiting plaintiffs to those who have exhausted administrative review processes and specifying the venue for review, while encouraging expeditious judicial review and requiring the courts to balance the short- and long-term effects of action and inaction in deciding on injunctions. In Title IV, HFRA allows the use of CEs for "applied silvicultural assessments"—timber harvesting and other vegetative treatments "for information gathering and research purposes." Each treatment is limited to 1,000 acres, with exclusions for certain areas and limitations on the adjacency of treatments, and with public notice and comment and "peer reviewed by scientific experts selected by the Secretary [of Agriculture or of the Interior], which shall include non-Federal experts." Total acreage of all applied silvicultural assessments using this CE is limited to 250,000 acres. Other Possibilities Congress can create other means of accelerating the decision-making process for fuel reduction treatments. Congress has exempted certain federal activities (such as construction of the Trans-Alaska Pipeline to deliver oil from the North Slope) from NEPA compliance. Congress has also directed in law that no EIS or EA be prepared in certain instances, through direct statutory language or by deeming that the authorized activities are not major federal actions that significantly affect the human environment. Congress has also pronounced certain analyses or substitute processes to be sufficient or adequate under NEPA. Congress has also established alternative review processes. Typically this is in addition to NEPA public involvement, to accelerate the review by obtaining broader, organized review early in the decision-making process, vetting the decision before public review. Examples include resource advisory committees (RACs) under Section 403 of the Federal Land Policy and Management Act of 1976 (FLPMA; P.L. 94-579 , 43 U.S.C. §1753) and under Title II of the Secure Rural Schools and Community Self-Determination Act of 2000 ( P.L. 106-393 ; 16 U.S.C. §500 note). Other advisory or collaborative groups have been established or acknowledged statutorily, commonly to provide supplemental public involvement. Considerations in Expediting Decisions Public acceptance of options to accelerate fuel treatments depends on a variety of factors. In general, earlier discourse among interests about the risks and needed treatments lead to greater comfort with the resulting decisions. One study found that survey respondents were willing to accept limitations on the rights to appeal and litigate agency decisions, but wanted to be more informed and involved in those decisions. Greater specificity in approved treatments also is likely to result in greater acceptance. For example, a treatment prescription that specifies "thinning from below to approximately 20-foot spacing of remaining trees and emphasizing retention of Ponderosa pine" is likely to be more acceptable than "mechanical treatment to reduce stand density." Finally, authors have identified the need for collective action to minimize conflict over decisions, and three broad social factors to achieve collective action: developing collaborative capacity, framing problems in mutually understood terms, and creating mutual trust among groups. These are factors that take time, and cannot be legislated directly, although Congress can foster (or negate) their development by the ways in which it authorizes agency action to promote wildfire protection. Conclusions As more acres and more homes have burned in the past few years, and more people are at risk from wildfires, Congress has faced increasing pressures to protect structures and resources. Congress decides what programs to authorize and fund, and many options exist. To protect homes, Congress could create new programs and expand existing ones for installing non-flammable roofing, removing burnable materials adjacent to structures, and creating a defensible space of at least 30 feet around the building. Programs could inform homeowners, or assist or require landowner action; the programs could be federal or implemented through state or local governments. Protecting resources poses different challenges for Congress, because ecological damages vary widely, depending on the ecosystem and on site-specific conditions. Fuel reduction can probably moderate crown fire damages in surface fire ecosystems, and possibly in mixed-intensity fire ecosystems. Existing programs for federal lands authorize prescribed burning (intentional fires under prescribed conditions) and mechanical treatments (cutting and removing some trees), the principal means of reducing fuel levels. However, prescribed fires are risky and mechanical treatments can cause other ecological damages, and both are expensive. Proponents of more fuel treatment advocate accelerated processes for environmental analysis and public review to reduce costs and expedite action. Others caution that inadequate analysis and review can allow projects with unintended damages and few fire protection benefits. Congress can alter the existing environmental and public review processes, recognizing the trade-offs between expeditious action and insufficient review. However, the fact is that crown fires occur; they cannot be halted and the damages they cause cannot be totally prevented. Appendix. Excerpts from Forest Service Handbook on NEPA Categorical Exclusions Related to Structural or Resource Protection From Wildfires The following materials are excerpts from the Forest Service handbook on NEPA categorical exclusions— FSH 1909.15 — Environmental Policy and Procedures Handbook. Chapter 30 — Categorical Exclusion from Documentation , Amendment No. 1909.15-2007-1 (February 15, 2007). Emphases (underscoring and boldface font) are in the original. 30.3 - Policy ... 2. Resource conditions that should be considered in determining whether extraordinary circumstances related to the proposed action warrant further analysis and documentation in an EA or EIS are: a. Federally listed threatened or endangered species or designated critical habitat, species proposed for Federal listing or proposed critical habitat, or Forest Service sensitive species. b. Flood plains, wetlands, or municipal watersheds. c. Congressionally designated areas, such as wilderness, wilderness study areas, or national recreation areas. d. Inventoried roadless areas. e. Research natural areas. f. American Indians or Alaska Native religious or cultural sites. g. Archaeological sites, or historic properties or areas. ... 31.2 - Categories of Actions for Which a Project or Case File and Decision Memo Are Required ... 6. Timber stand and/or wildlife habitat improvement activities which do not include the use of herbicides or do not require more than one mile o f low standard road construction.... Examples include but are not limited to: ... b. Thinning or brush control to improve growth or to reduce fire hazard including the opening of an existing road to a dense timber stand. c. Prescribed burning to control understory hardwoods in stands of southern pine. d. Prescribed burning to reduce natural fuel build-up and improve plant vigor. ... 10. Hazardous fuels reduction activities using prescribed fire, not to exceed 4,500 acres, and mechanical methods for crushing, piling, thinning, pruning, cutting, chipping, mulching, and mowing, not to exceed 1,000 acres. Such activities: a. Shall be limited to areas: (1) In the wildland-urban interface; or (2) Condition Classes 2 or 3 [moderate or high risk of ecological damage] in Fire Regimes I, II, or III [surface fire, stand-replacement fire at 35 years or less, and mixed-intensity fire], outside the wildland-urban interface; b. Shall be identified through a collaborative framework as described in "A Collaborative Approach for Reducing Wildland Fire Risks to Communities and Environment 10-Year Comprehensive Strategy Implementation Plan"; c. Shall be conducted consistent with agency and Departmental procedures and applicable land and resource management plans; d. Shall not be conducted in wilderness areas or impair the suitability of wilderness study areas for preservation as wilderness; and e. Shall not include the use of herbicides or pesticides or the construction of new permanent roads or other new permanent infrastructure; and may include the sale of vegetative material if the primary purpose of the activity is hazardous fuel reduction. ... 12. Harvest of live trees not to exceed 70 acres, requiring no more than ½ mile of temporary road construction. Do not use this category for even-aged regeneration harvest or vegetation type conversion. The proposed action may include incidental removal of trees for landings, skid trails, and road clearing. Examples include but are not limited to: a. Removal of individual trees for sawlogs, specialty products, or fuelwood. b. Commercial thinning of overstocked stands to achieve the desired stocking level to increase health and vigor. 13. Salvage of dead and/or dying trees not to exceed 250 acres, requiring no more than ½ mile of temporary road construction. The proposed action may include incidental removal of live or dead trees for landings, skid trails, and road clearing. Examples include but are not limited to: a. Harvest of a portion of a stand damaged by a wind or ice event and construction of a short temporary road to access the damaged trees. b. Harvest of fire-damaged trees. 14. Commercial and non-commercial sanitation harvest of trees to control insects or disease not to exceed 250 acres, requiring no more than ½ mile of temporary road construction, including removal of infested/infected trees and adjacent live uninfested/uninfected trees as determined necessary to control the spread of insects or disease. The proposed action may include incidental removal of live or dead trees for landings, skid trails, and road clearing. Examples include but are not limited to: a. Felling and harvest of trees infested with southern pine beetles and immediately adjacent uninfested trees to control expanding spot infestations. b. Removal and/or destruction of infested trees affected by a new exotic insect or disease, such as emerald ash borer, Asian long horned beetle, and sudden oak death pathogen.

Wildfires are getting more severe, with more acres and houses burned and more people at risk. This results from excess biomass in the forests, due to past logging and grazing and a century of fire suppression, combined with an expanding wildland-urban interface—more people and houses in and near the forests—and climate change, exacerbating drought and insect and disease problems. Some assert that current efforts to protect houses and to reduce biomass (through fuel treatments, such as thinning) are inadequate, and that public objections to some of these activities on federal lands raise costs and delay action. Others counter that proposals for federal lands allow timber harvesting with substantial environmental damage and little fire protection. Congress is addressing these issues through various legislative proposals and through funding for protection programs. Wildfires are inevitable—biomass, dry conditions, and lightning create fires. Some are surface fires, which burn needles, grasses, and other fine fuels and leave most trees alive. Others are crown fires, which are typically driven by high winds and burn biomass at all levels from the ground through the tree tops. Many wildfires contain areas of both surface and crown fires. Surface fires are relatively easy to control, but crown fires are difficult, if not impossible, to stop; often, crown fires burn until they run out of fuel or the weather changes. Homes can be ignited by direct contact with fire, by radiative heating, and by firebrands (burning materials lifted by the wind or the fire's own convection column). Protection of homes must address all three. Research has identified the keys to protecting structures: having a non-flammable roof; clearing burnable materials that abut the house (e.g., plants, flammable mulch, woodpiles, wooden decks); and landscaping to create a defensible space around the structure. Wildland and resource damages from fire vary widely, depending on the nature of the ecosystem as well as on site-specific conditions. Surface fire ecosystems, which burn on 5- to 35-year cycles, can be damaged by crown fires due to unnatural fuel accumulations and fuel ladders (small trees and dense undergrowth); fuel treatments probably prevent some crown fires in such ecosystems. Stand-replacement fire ecosystems are those where crown fires are natural and the species are adapted to periodic crown fires; fuel treatments are unlikely to alter the historic fire regime of such ecosystems. In mixed-intensity fire ecosystems, where a mix of surface and crown fires is historically normal, it is unclear whether fuel treatments would alter wildfire patterns. Prescribed burning (intentional fires) and mechanical treatments (cutting and removing some trees) can reduce resource damages caused by wildfires in some ecosystems. However, prescribed fires are risky, mechanical treatments can cause other ecological damages, and both are expensive. Proponents of more treatment advocate expedited processes for environmental and public review of projects to hasten action and cut costs, but others caution that inadequate review can allow unintended damages with few fire protection benefits.

Current Law Tax Law Churches qualify for tax-exempt status as IRC § 501(c)(3) organizations. These organizations may not "participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office." This is an absolute prohibition. Thus, a church that engages in any amount of campaign activity may have its § 501(c)(3) status revoked. It may also, either in addition to or in lieu of revocation, be taxed on its political expenditures under IRC § 4955. The tax equals 10% of the expenditures, which is increased to 100% if the church does not take timely action to recover the expenditures and establish policies preventing future ones. The tax may also be imposed on church managers at lower rates. IRC § 501(c)(3) only prohibits campaign intervention. Other types of political activities are permitted. The line between the two can be difficult to discern. Clearly, churches may not make statements that endorse or oppose a candidate, publish or distribute campaign literature, or contribute to a campaign. On the other hand, they may conduct activities not related to elections, such as issue advocacy and supporting or opposing individuals for nonelective offices. In general, an activity is permissible unless it is structured or conducted in a way that shows bias towards or against a candidate. Thus, churches may do such things as create and distribute voter education materials, host candidate forums, and invite candidates to appear at church functions so long as these activities do not show a preference for or against a candidate. Biases can be subtle, and whether an activity is campaign intervention depends on the facts and circumstances of each case. The tax laws do not prohibit religious leaders from participating in campaign activity as individuals. Religious leaders may endorse or oppose candidates in speeches, advertisements, etc., in their capacity as private citizens. A leader may be identified as being from a specific church, but there should be no intimation that he or she is speaking as a representative of the church. The church may not support the activity in any way. Thus, a leader may not make campaign-related statements in the church's publications, at its events, or in a manner that uses its assets. This is true even if the leader pays the costs of the publication or event. Campaign Finance Law The Federal Election Campaign Act (FECA), which regulates the raising and spending of campaign funds, is separate and distinct from the tax code. FECA prohibits corporations from using treasury funds to make contributions and expenditures in connection with federal elections, but does not prohibit unincorporated organizations from making such contributions and expenditures. FECA also requires regular filing of disclosure reports by candidates and political committees of contributions and expenditures, and by persons making independent expenditures that aggregate more than $250 in a calendar year. Under FECA, the term "political committee" is defined to include any committee, club, association, or other group of persons that receives contributions or makes expenditures aggregating in excess of $1,000 during a calendar year. As a result of a 2002 amendment to FECA, corporations—including tax-exempt corporations—are further prohibited from funding "electioneering communications," which are defined as broadcast communications made within 60 days of a general election or 30 days of a primary that "refer" to a federal office candidate. Federal Election Commission (FEC) regulations provide an exception to this prohibition for "qualified nonprofit corporations," which do not include churches. In McConnell v. FEC, the Supreme Court upheld the constitutionality of FECA's prohibition on corporate treasury funds being spent for electioneering communications. More recently, however, the Court in Wisconsin Right to Life, Inc. v. FEC (WRTL II) found that this prohibition was unconstitutional as applied to ads that Wisconsin Right to Life, Inc. sought to run. While not expressly overruling its decision in McConnell v. FEC, which had upheld the provision against a First Amendment facial challenge, the Court limited the law's application. Specifically, it ruled that advertisements that may reasonably be interpreted as something other than an appeal to vote for or against a specific candidate are not the functional equivalent of express advocacy, and therefore, cannot be regulated. Analysis of Legislation Bills introduced in the 110 th , 109 th , 108 th , and 107 th Congresses would have allowed churches to engage in some amount of political campaign activity without risking their tax-exempt status. Each bill addressed the issue in a different way. Thus, they provide examples of various approaches Congress could take, if it so chose, to amend the tax code's prohibition on campaign activity by churches. No such legislation has yet been introduced in the 111 th Congress. None of the bills would have changed the reporting requirements under current law. Churches, unlike most tax-exempt organizations, are not required to file an annual information return (Form 990) with the IRS. Tax-exempt organizations permitted to engage in political activities are generally required to report information about those activities on the form's Schedule C. Thus, while the bills would have permitted churches to engage in campaign activities, they would not have required churches to report to the IRS on those activities. H.R. 2275 (110th Congress) H.R. 2275 would have repealed the political campaign prohibition in IRC § 501(c)(3). Thus, it would have allowed churches and other § 501(c)(3) organizations to engage in all types of campaign activity without jeopardizing their tax-exempt status. The bill did not expressly impose any limitation on the amount of permissible campaign activity. However, the existing requirement in I.R.C.§ 501(c)(3) that organizations be "organized and operated exclusively" for an exempt purpose would appear to require that any such activity have been insubstantial. Churches and other organizations would have still been subject to tax on their political expenditures, thus possibly providing a disincentive to engage in activities with associated taxable expenditures. It appears the bill would have allowed churches and other § 501(c)(3) organizations to establish § 527(f)(3) separate segregated funds to conduct election-related activities. Churches would have still been subject to applicable campaign finance laws. H.R. 235 (109th Congress) Under H.R. 235 , the Houses of Worship Free Speech Restoration Act, churches would not have been treated as participating in campaign activity "because of the content, preparation, or presentation of any homily, sermon, teaching, dialectic, or other presentation made during religious services or gatherings." This rule would have applied for purposes of § 501(c)(3) status, eligibility to receive tax-deductible contributions under § 170(c)(2), various estate and gift tax provisions (§§ 2055, 2106 and 2522), and the § 4955 excise tax on political expenditures. The bill clarified that no church member or leader would be prohibited from expressing personal views on political matters or elections during regular religious services so long as those views were not disseminated beyond the service's attendees. Dissemination would have included a mailing with more than an incremental cost to the church and any electioneering communication. The bill expressly stated that it did not permit disbursements for electioneering communications or political expenditures prohibited by FECA. It appears that H.R. 235 would have permitted activities such as the express endorsement of a candidate by church leaders and others during religious services, requests for contributions to candidate committees and other political committees during religious gatherings, and written endorsements in church bulletins and inserts. Any expenditures for these activities would not have been subject to the § 4955 tax. The bill would not have allowed churches to set up § 527(f)(3) separate segregated funds or change existing campaign finance laws. H.R. 235 (108th Congress) H.R. 235 , an earlier version of the Houses of Worship Free Speech Restoration Act, was identical to the version introduced in the 109 th Congress except it did not reference IRC §§ 2055, 2106, 2522 and 4955 nor did it include the clarification concerning church leaders. While this version did not provide an exception from the § 4955 tax, it would seem from a practical standpoint that this difference between the two versions could be insignificant because many of the activities permitted under the bills would have little or no associated expenditures. H.R. 4520 (108th Congress) The provision in H.R. 4520 , former section 692 (Safe Harbor for Churches), was only briefly in the bill before the House Ways and Means Committee struck it by unanimous consent. It would have done several things. First, churches would not have been treated as participating in campaign activity solely because of their religious leaders' private statements. Second, churches that unintentionally intervened in a political campaign would not have lost their tax-exempt status or eligibility to receive deductible contributions unless the church or its religious leaders had done so on more than three occasions during the year. Third, unintentional violations of the § 501(c)(3) prohibition would have been subject to a new excise tax. If the church had at least three unintentional violations during the year, the tax would have equaled the highest corporate tax rate multiplied by the church's gross income, contributions, and gifts. If the church had two violations, then the tax would have equaled that amount divided by two. If the church had one violation, then the tax would have equaled the full amount divided by 52. The tax would have been reduced by any amount imposed under § 4955. This bill was more restrictive than the others because it would have only permitted unintentional violations of the campaign prohibition and even those violations would have been fined. Thus, this bill was specifically targeted at removing the risk that churches that inadvertently engaged in campaign activity could lose their tax-exempt status, as opposed to permitting churches to engage in such activity. The impact of the provision addressing religious leaders' private statements could be unclear because it could be interpreted as simply codifying existing law. H.R. 2357 and S. 2886 (107th Congress) H.R. 2357 and S. 2886 , the Houses of Worship Political Speech Protection Act, would have allowed § 501(c)(3) churches to engage in campaign activity so long as it was "no substantial part" of a church's activities. S. 2886 —but not H.R. 2357 —clarified that the bill would not allow disbursements for electioneering communications not permitted under FECA. H.R. 2357 received a floor vote on October 2, 2002, and failed to pass by a vote of 178 to 239. The "no substantial part" test, which is currently used to measure § 501(c)(3) organizations' lobbying activities, is a flexible standard. Thus, the bills would have required each church to be judged on a case-by-case basis as to whether its campaign activities were a substantial part of its activities. Churches would have been allowed to engage in any type of campaign activity; however, the § 4955 tax could have discouraged churches from conducting activities with associated taxable expenditures. It could be unclear the extent to which the bills would have permitted churches to establish § 527(f)(3) separate segregated funds without overstepping the "no substantial part" rule. Churches would have still been subject to applicable campaign finance laws. H.R. 2931 (107th Congress) Under, H.R. 2931 , the Bright-Line Act of 2001, a church would only have violated the campaign prohibition if it normally made expenditures for campaign activity in excess of 5% of its gross revenues. Lobbying expenditures could not have normally exceeded 20% of its gross revenues, and the church could not have normally spent more than 20% of its gross revenues on campaign and lobbying activities combined. The bill did not define the term "normally." The bill would have permitted churches to routinely engage in any type of campaign activity without risking their tax-exempt status so long as their expenditures for such activities did not "normally" exceed the limits. Thus, in practice, no or low-cost campaign activities could have been conducted almost without limit. Churches would have been allowed to occasionally engage in campaign activity in excess of the limits so long as this did not normally happen. It could be unclear the extent to which a church would have been able to establish a § 527(f)(3) separate segregated fund under the bill and still comply with the 5% limit. Any campaign activity would have been subject to the applicable campaign finance laws.

In recent years, there has been increased attention paid to the political activities of churches. Churches and other houses of worship qualify for tax-exempt status as Internal Revenue Code § 501(c)(3) organizations. Under the tax laws, these organizations may not participate in political campaign activity. Separate from the prohibition in the tax code, the Federal Election Campaign Act (FECA) may also restrict the ability of churches to engage in electioneering activities. Legislation had been introduced in the past several Congresses that would have allowed churches to participate in at least some campaign activity without jeopardizing their § 501(c)(3) status. These bills were the Houses of Worship Free Speech Restoration Act, H.R. 235 (109th Congress) and H.R. 235 (108th Congress); a provision briefly included in the American Jobs Creation Act of 2004, H.R. 4520 (108th Congress); the Houses of Worship Political Speech Protection Act, H.R. 2357 and S. 2886 (107th Congress); and the Bright-Line Act of 2001, H.R. 2931 (107th Congress). In the 110th Congress, H.R. 2275 would have repealed the prohibition against campaign intervention in IRC § 501(c)(3). Unlike the other bills, H.R. 2275 would have applied to all § 501(c)(3) organizations and not just churches. No similar legislation has yet been introduced in the 111th Congress. This report provides an overview of the tax and campaign finance laws relevant to these bills and a discussion of how each bill would have amended current law. For further discussion of the laws restricting campaign activity by churches, see CRS Report RL34447, Churches and Campaign Activity: Analysis Under Tax and Campaign Finance Laws, by [author name scrubbed] and [author name scrubbed].

Background: U.S. Postal Service Board of Governors The Board of Governors of the U.S. Postal Service (hereinafter, the Board) was created by the Postal Reorganization Act in 1970 (PRA, 39 U.S. C. §202). The U.S. Postal Service (USPS) describes the Board as " comparable to a board of directors of a private corporation ." Guided by statute and its bylaws , the Board "directs the exercise of the powers of the Postal Service, reviews the practices and policies of the Postal Service, and directs and controls the expenditures of the Postal Service." The Board is composed of 11 members, including nine Governors who are appointed by the President with the advice and consent of the Senate. As noted in a USPS Office of Inspector General (USPSOIG) white paper , as an executive branch agency, the Postal Service is to be led by presidentially appointed and Senate-confirmed officers. The nine Governors serve this role. Additionally, the Board includes the Postmaster General, who is appointed, or may be removed, by the Governors, and the Deputy Postmaster General, who is appointed, or may be removed, by both the Governors and the Postmaster General. Under the PRA, Governors served nine-year terms, with the first nine appointees serving staggered terms of one to nine years. The Postal Accountability and Enhancement Act (PAEA, P.L. 109-435 ) reduced the Governors' staggered terms to seven years. Additionally, the PAEA requires that Governors represent the public interest and that at least four Governors be chosen based on their demonstrated ability to manage organizations with at least 50,000 employees. No more than five Governors may belong to the same political party. Appointments to the Board of Governors The President is required by law to consult with the Speaker of the House of Representatives, the minority leader of the House of Representatives, the majority leader of the Senate, and the minority leader of the Senate in selecting a nominee to the Board of Governors. While the statute stipulates that "not more than 5 of [the Governors] may be adherents of the same political party," it does not specify an order in which nominations are to be considered and confirmed to satisfy this requirement. Because USPS Governor nominations are advice and consent positions, Senate procedural considerations may affect the confirmation process. For example, a Governor nomination, like any other measure or matter available for Senate floor consideration, may be the subject of a Senate "hold." Senators place holds to accomplish a variety of purposes—to receive notification of upcoming legislative proceedings, for instance, or to express objections to a particular proposal or executive nomination—but ultimately the decision to honor a hold request, and for how long, rests with the majority leader. Typically, an executive agency head is appointed by the President, by and with the advice and consent of the Senate. In the case of USPS, however, the Postmaster General is only appointed, or may be removed, by the Governors. Similarly, the Deputy Postmaster General is only appointed, or may be removed by the Postmaster General and the Governors. No term limits exist for either the Postmaster General or Deputy Postmaster General. It is unclear whether the appointment or removal clauses of 39 U.S.C. §202 could operate as written, given the Board's current composition. Current and Former Members of the Board As of the date of this report, the Board has no Governors. The term of the last Governor, Chairman James H. Bilbray, expired on December 8, 2016. The Board's membership as a whole includes the Postmaster General, Megan J. Brennan, and the Deputy Postmaster General, Ronald A. Stroman. Figure 1 shows the terms of Governors serving at the time the PAEA was enacted and Governors appointed or reappointed since the PAEA was enacted. Nominations to the Board of Governors in the 114th and 115th Congresses President Barack Obama sent seven nominations to the position of Governor of the United States Postal Service to the Senate during the 114 th Congress. All seven nominations were returned to the President under the provisions of Senate Rule XXXI at the conclusion of the 114 th Congress on January 3, 2017. Of these seven nominations, one received a hearing. On April 21, 2016, the Senate Committee on Homeland Security and Governmental Affairs held a hearing to consider the nomination of Jeffrey A. Rosen. All seven nominations were subsequently reported favorably from the Senate Committee on Homeland Security and Governmental Affairs and all were placed on the Senate Executive Calendar. No votes were held on any of the nominations. In the 115 th Congress, President Trump sent four nominations for Governors of the USPS to the Senate on October 30, 2017. The three nominees are Robert M. Duncan of Kentucky (who is the subject of two nominations to two separate terms), Calvin R. Tucker of Pennsylvania, and David Williams of Illinois. Of the four nominations, three were placed on the Senate Executive Calendar on May 7, 2018. The fourth nomination, of Calvin R. Tucker, received a hearing on April 18, 2018. Table 1 provides details on each nomination. Responsibilities of the Governors Compared with Those of the Board Although many authorities and responsibilities are given to the Board, certain matters are reserved for decision by the Governors alone. Table 2 lists selected matters that are reserved for decision by the Governors alone or by the full Board. It is unclear whether decisions that are reserved to the Governors alone (e.g., appointment and removal of the Postmaster General) could be made when no Governors remain on the Board. Issues for Congress: Operation of the USPS without Governors The Postal Service's day-to-day operations are largely the responsibility of USPS senior leadership and may not be affected by the absence of Governors. As shown in Table 2 , however, certain actions may only be authorized or approved by the Board or the Governors. However, under 39 U.S.C. § 205 , vacancies may not prevent the Board from conducting its business as long as there is a quorum of members. To have a quorum, generally at least six members of the Board must be present. For example, if the Postmaster General, Deputy Postmaster General, and four Governors are present, then the Board would have a quorum for the transaction of business. The quorum requirement applies to the business of the Board, but not to the conduct of business related to those matters that are reserved for decision by the Governors alone. Loss of Quorum The Board lost its quorum when the term of former Governor Mickey D. Barnett expired on December 8, 2014, and the Board's makeup dropped to five members. Just prior to the loss of its quorum, the Board adopted a resolution delegating its authority to a Temporary Emergency Committee (TEC) , in order to "provide for continuity of [postal] operations" in light of the loss of a Board quorum. While the Board has the authority (with certain restrictions) to create such a committee, it is unknown to what extent the TEC may act on matters that are explicitly reserved to the Board . Further, unlike the loss of quorum, the loss of the final Governor leaves the USPS without legal authority for several actions that must be authorized by the Governors. Appointment and Removal Authority Select USPS appointment authority is provided to the Governors rather than to the Board. For example, the appointment of, removal of, and setting compensation for the Postmaster General requires an absolute majority of the Governors currently in office. In addition, the Inspector General is appointed by the Governors and may be removed only for cause "upon the written concurrence of at least 7 Governors." In the event the Postmaster General is incapacitated due to "an enemy attack or other national emergency," USPS guidance names the Deputy Postmaster General followed by the Vice President, Area Operations, Eastern Area, in the line of succession to perform the Postmaster's duties. The guidance does not specify whether a vacancy caused by lack of Governors would qualify as an emergency or trigger its emergency succession plan. Establishment of Mail Rates The Governors have sole authority to (1) establish rates for Competitive Mail Products (e.g., Priority Mail®, Priority Mail Express®) and (2) adjust rates of Market Dominant Products (e.g., First-Class Mail, Advertising Mail). As noted by the USPSOIG , without at least one sitting Governor, the USPS cannot perform these actions—or any actions listed in the left column of Table 2 —without subjecting itself to potential legal challenge. While Governor Bilbray remained on the Board, he continued to act on those matters alone. Prior to his departure, Bilbray wrote Governors' Decision No. 16-8 allowing for an increase in rates for USPS competitive products "on or about January 21, 2018." On October 6, 2017, USPS filed with the Postal Regulatory Commission (PRC) a notice of its intent to increase prices for certain Market Dominant Products under this authority, and the PRC approved the request on November 9, 2017. As mentioned earlier, Governor Bilbray's term expired on December 8, 2016. Authority of Newly Appointed Governors Another issue for consideration is the authority, in absence of a quorum, of any newly appointed Governors to act on matters reserved to the Board. As discussed above, prior to the loss of its quorum, the Board established and delegated its authority to the TEC in order to "provide for continuity of [postal] operations" in light of the loss of a Board quorum. The Board will continue without a quorum until four or more Governors have been confirmed. In its resolution establishing the TEC, the Board affirmed that "the inability of the Board to constitute a quorum does not prevent the Governors then in office from exercising those powers vested solely in the Governors, as distinguished from the Board" (emphasis added). The resolution, however, did not specify whether newly appointed Governors are automatically members of the TEC.

Unlike other executive agencies, the United States Postal Service is governed not by a single presidentially appointed, Senate-confirmed agency head, but rather by an entity known as the Board of Governors. The Board of Governors of the U.S. Postal Service (hereinafter, the Board) was created by the Postal Reorganization Act in 1970 (PRA, 39 U.S.C. §202). The U.S. Postal Service (USPS) describes the Board as "comparable to a board of directors of a private corporation." As currently constructed under the Postal Accountability and Enhancement Act of 2006 (PAEA, P.L. 109-435), the Board consists of the Postmaster General, the Deputy Postmaster General, and nine Governors, appointed to staggered terms of seven years. The Governors appoint, or may remove, the Postmaster General; the Deputy Postmaster General is appointed, or may be removed, by both the Governors and the Postmaster General. Currently, there are no Senate-confirmed Governors and the only members on the Board are the Postmaster General and the Deputy Postmaster General. It is unclear whether the appointment or removal clauses of 39 U.S.C. §202 could operate as written, given the Board's current composition. President Trump sent four Governor nominations to the Senate on October 30, 2017; however, as of the date of this report, none of the nominations have been confirmed. Under 39 U.S.C. §205, vacancies may not prevent the Board from conducting its business as long as there is a quorum of members. Without any appointed Governors, the Board cannot have a quorum. Just prior to the loss of its quorum, the Board adopted a resolution delegating its authority to a Temporary Emergency Committee (TEC), in order to "provide for continuity of [postal] operations." The Board will continue without a quorum until four or more Governors have been confirmed. Although the Board, as a whole, has many authorities and responsibilities, certain matters are reserved for decision by the Governors alone. The lack of any appointed Governors leaves the USPS without legal authority for actions that must be authorized by the Governors, such as the establishment of rates and classes of competitive products; the adjustment of rates for market dominant products; and setting compensation for the Postmaster General and Deputy Postmaster General.

Introduction As India's economy continues to grow, its energy needs, including for natural gas, will likely grow as well. India's economy is expected to grow fivefold by 2040, according to Prime Minister Narendra Modi. Its population is expected to surpass China as the world's largest by 2022, reaching approximately 1.4 billion people, creating greater demand for energy. In 2015 India accounted for 5.3% of global primary energy consumption, while China was the largest consumer with 22.9%. Overall, India imports almost three-quarters of its energy needs, making it highly dependent on other countries. The Organization for Economic Co-operation and Development (OECD) believes India will remain the fastest-growing G20 economy in 2017-2018, with an annual projected growth rate of 7.5%. By 2050, India has the potential to overtake the United States as the world's second-largest economy in terms of purchasing power parity (PPP). Natural gas makes up 7% of India's total energy consumption, well behind coal and oil. Similarly, natural gas accounts for 6% of China's energy mix, though China uses almost four times as much natural gas as India (see Figure 1 ). With an eye on increasing this percentage, India is instituting a number of policy initiatives like the Hydrocarbon Exploration and Licensing Policy (HELP) and major infrastructure investments such as expanding domestic gas pipelines and liquefied natural gas (LNG) import terminals. If global natural gas prices continue to be relatively low, natural gas consumption in India will likely grow in the coming decade. However, these changes likely will take significant investment and commitment from the Indian government to reach fruition. India's natural gas demand is forecasted to grow at about 6% annually over the next five years, according to the International Energy Agency (IEA) due to increases in domestic production and falling LNG import prices. India is continuing to build its energy infrastructure for natural gas, which had previously been almost exclusively configured for coal and oil, to reverse the recent declines in natural gas consumption. In 2015, India's natural gas consumption declined almost 18% since its peak in 2011, two-thirds of which occurred between 2012 and 2013, in part because of large drops in domestic production and an inability to compensate for the drop in domestic production with LNG imports. The Government of India (GoI) has indicated it will change this in the short term, but the GoI's commitment and resources necessary for these changes are uncertain. India has not been a major factor in global natural gas markets as a producer, but is growing as an importer. India is the 27 th -largest natural gas producer in the world, accounting for less than 1% of global production, according to the BP Statistical Review of World Energy . In 2015, India's natural gas production fell by 3.8%, its fifth straight year of decline. This has been due to a variety of factors, including difficult geology, cheaper alternative energy sources, and lagging infrastructure development. In 2015, India was the 14 th -largest consumer of natural gas in the world. This consumption comes from domestically produced and imported LNG, which has been growing. India is currently the 5 th -largest importer of LNG in the world and is likely to grow as more LNG import terminals are built. The United States has viewed India as an important strategic partner in advancing common interests in the Asia-Pacific region and globally. India is the dominant actor in South Asia and viewed by many analysts as a counterweight to China's growing influence. In 2015, India was the United States' 10 th -largest trading partner, comprising $39 billion in U.S. exports and $69 billion in U.S. imports. The two nations have also pledged to increase their annual trade about five-fold to $500 billion by 2024. India's relationship with the United States on energy issues, though not significant to the broader energy market, has grown closer in recent years. The United States has expanded technical assistance programs in order to help India meet its carbon emission reduction goals. Indian energy companies have also signed contracts to import U.S. LNG. While he was chief minister of Gujarat, India's most western state and an important natural gas producing area, current Prime Minister Narendra Modi took a strong interest in modernizing his state's energy supply, eventually bringing electricity to all of Gujarat's villages. Modi's party came into office with the first parliamentary majority in 30 years and has already enacted several policy changes intended to provide India with a reliable, secure, and diverse energy supply. For example, the Modi Administration has loosened offshore exploration regulations, as well as instituted a policy to provide fertilizer plants with subsidies for purchasing natural gas more affordably. Issues for Congress Some Members of Congress have been interested in enhancing energy cooperation between the United States and India since the mid-2000s. Bills were introduced in both houses that would support closer energy ties between the two countries; however, none were enacted into law. India's natural gas plans have implications for a number of issues in which Congress has expressed an interest. Those issues include the following: Prospects for U.S. natural gas exports; Prospects for U.S. energy companies' investments in India; Indian investment in the U.S. energy sector; India's ability to meet its global commitments to reduce greenhouse gas emissions in order to combat climate change; India's ability to reduce its chronic air pollution problems, especially in New Delhi, where recently smog has reached 16 times levels deemed safe; and India's political and economic relationships with regions such as the Middle East, a major supplier of LNG, and Central Asia, a potential supplier of natural gas via pipelines. Background: Government Control of Natural Gas For years, oil and natural gas exploration in India was carried out only by state-owned companies like Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL). By the 1980s, the GoI recognized the need for additional exploration, and began allowing foreign and domestic private companies through joint ventures and foreign direct investment to explore for oil and natural gas. In order to attract more foreign direct investment, the GoI liberalized the upstream and downstream domestic gas industries in a phased manner with the launching of the New Exploration Licensing Policy (NELP) in 1999. With India's energy use expected to double by 2040, in 2016 the Modi government introduced the Hydrocarbon Exploration and Licensing Policy (HELP), a new scheme intended to enhance domestic oil and gas production, entice major investment into the sector, and increase employment. HELP instituted a new investment-friendly policy, including for foreign companies, to provide uniform exploration and production standards for all domestic oil and natural gas production. Previously, the GoI's heavy-handed approach to energy investments led to frequent delays and disputes with foreign companies. Under HELP, there is to be a new streamlined revenue sharing model, which will allow the offshore energy-producing companies to market and sell their products with minimal government interference. As of January 2017, however, the first auction of oil and gas blocks under HELP has yet to take place. Key Indian Government Agencies Despite recent market-oriented reforms, additional energy policy guidance is still needed from the highest levels of the Indian government. This guidance mainly consists of schemes to improve access to and encourage consumption of natural gas. The GoI oversees four main ministries devoted to energy production, along with the Department of Atomic Energy. Natural gas production and distribution is regulated mainly through the Ministry of Petroleum and Natural Gas (MoPNG). Within the MoPNG are 11 public sector undertakings (PSUs) focused on petroleum and natural gas; the Directorate General of Hydrocarbons (DGH), which largely manages the awarding and implementation of the New Exploration Licensing Policy (NELP) scheme; the Petroleum Planning and Analysis Cell, which is responsible for periodically revising natural gas prices under the guidelines set in 2014; and the Petroleum Conservation Research Association, which promotes policies and strategies aimed at reducing India's dependence on oil. India's Major Energy Companies India's domestic natural gas production and distribution industry operates through a mix of state-owned and private companies. India's two main national companies, ONGC and Oil India Limited (OIL), were responsible for three-fourths of India's total domestic natural gas production in 2015-2016. In 2016, the industry newsletter Platt's ranked ONGC as the 20 th - and OIL the 201 st -largest oil and gas companies in the world. Additionally, Petroleum Intelligence Weekly , another industry publication, ranked ONGC 22 nd and 25 th for natural gas production and reserves in the world, respectively. A third state-run company, Gas Authority of India Limited (GAIL), is India's largest commercial marketer and domestic distributor of natural gas. The GoI has also promoted joint ventures. One of these, Petronet, is India's largest LNG importer. Petronet was formed by GAIL, ONGC, Indian Oil Corporation Limited (IOC), and Bharat Petroleum Corporation Limited (BPCL). Petronet is now publicly traded on the National Stock Exchange of India and is a major player in India's growing LNG market, operating two of India's largest LNG import terminals. Additionally, in early 2017, GAIL agreed to buy 3.5 million tons of LNG, or about 170 million cubic feet (5 billion cubic meters [BCM]), per year at a fixed fee of $3/million British thermal unit (mmBtu) from Cheniere's Sabine Pass LNG plant in Louisiana's Gulf Coast region. India also now has a number of large private companies that have expanded into natural gas production and development. Reliance Industries is a Fortune Global 500 company, and is the largest private sector company in India, with annual revenues over $34 billion. The company has made major investments in U.S. shale gas deposit projects with Pioneer Natural Resources in Texas and with Chevron in Pennsylvania. 12th Five-Year Plan (2012-2017) In five-year increments, the GoI lays out its plans and goals for key economic sectors, including for energy. During the period of the 12 th five-year plan, 2012-2017, India planned to continue relying on coal for the majority of its fuel to supply electrical power. According to the plan, coal would supply the energy for over 80% of the electrical capacity added during the Plan's period. The GoI planned to add 28 times more coal-fired capacity than that for gas. While India intends to lessen its dependence on coal in favor of nuclear and renewables after 2030, according to its 12 th five-year plan, coal will likely continue to be the primary energy source for electricity generation. By comparison, the plan projected only a marginal role for natural gas in meeting India's energy demands. In the plan, the GoI recognized the need for it to play less of a direct role in oil and natural gas "contract administration," as well as "capex/pricing decisions." This recognition led to the new Hydrocarbon Exploration and Licensing Policy (HELP) unveiled in late 2016. As a foreign investment policy, HELP is intended to make it easier and more profitable for foreign energy companies to extract India's offshore oil and natural gas resources. The first round of bidding on offshore drilling blocks is underway and expected to be finalized in early 2017. India's 13 th five-year plan is expected to be published sometime in 2017. It is unclear if the government intends to change course and place greater emphasis on natural gas in India's energy mix or not. U.S.-India Cooperation on Energy India-U.S. energy relations have steadily grown stronger in recent years. In 2009, the United States and India launched the Partnership to Advance Clean Energy (PACE) in order to accelerate low-carbon growth in India. As part of this program, the U.S. Department of Energy committed $25 million from 2011 to 2016 to support the U.S.-India Joint Clean Energy Research and Development Center (JCERDC). The Indian Ministry of Science and Technology also pledged to provide an additional $50 million in funding to support JCERDC research in India. PACE was strengthened and expanded in 2015 during a meeting between Indian Prime Minister Modi and President Obama, and in May 2016 the two governments announced the first nine recipients of off-grid innovation funding. In 2010, the Indian Ministry of Petroleum and Natural Gas (MoPNG) and the U.S. Department of State signed a memorandum of understanding (MOU) to expand cooperation on the development and extraction of India's shale gas resources. In 2012, through the State Department's Unconventional Gas Technical Engagement Program, the United States agreed to share experience and best practices to establish the necessary environmental protection and regulatory framework as India explores its own shale gas potential. A 2016 research partnership between the GoI, the Government of Japan, and the U.S. Geological Survey discovered highly enriched natural gas hydrates in the Bay of Bengal. It is believed to be the largest and most concentrated discovery of gas hydrates anywhere in the world. However, natural gas hydrates are currently uneconomic to produce with existing technology. Indian companies are increasingly investing in U.S. gas projects in the hope of improving technical expertise that can eventually be used on the 17 potential shale oil and gas well sites along the coasts of India. For example, in 2011 GAIL bought 20% equity in a project located in the Texas Eagle Ford shale play, while in 2012 OIL and IOC bought a 30% stake in a project located in Colorado's Niobrara shale oil and gas site. U.S. natural gas reserves and production currently far exceed India's (see Figure 2 ). Natural Gas Consumption: Not Meeting Its Targets In 2015, Indian energy use was dominated by coal, which accounted for 58% of India's total energy consumption. This was followed by oil at 28%. In contrast, natural gas accounted for 7% of India's energy consumption. The GoI expected demand for natural gas to grow from 71 BCM in 2011-2012 to 170 BCM in 2016-2017. Instead, India consumed just under 51 BCM in 2015. One likely explanation is the lack of growth in adequate infrastructure; the proliferation and integration of compressed natural gas into urban areas has not occurred as quickly as anticipated. India's domestic consumption of natural gas is dominated by the fertilizer (34%), electric power (23%), refining (11%), local distribution (11%), and petrochemical (8%) industries (see Figure 3 ). In recent years the GoI has undertaken initiatives to make imported LNG more attractive, especially to the power and fertilizer industries. For electricity generation, the Ministry of Power, along with the Ministry of Petroleum and Natural Gas, directed natural gas pipeline companies to reduce their tariffs to support greater natural gas use in electric power generation. In 2015, the GoI instituted a gas pooling policy to provide natural gas at a uniform price for all fertilizer plants. The GoI hopes that increasing the country's natural gas consumption will help meet the GoI's objective of reducing dependency on crude oil by 10% by 2022. In 2010, India already had the fifth-largest natural gas vehicle fleet in the world, with over 2.8 million natural gas vehicles. The IEA forecasts that India will constitute the third-highest growth in natural gas vehicles through 2040, after the United States and China. Indian companies are currently experimenting with ways to integrate natural gas into the transport industry. For example, Petronet and IOC are running a trial program of long-haul buses that run on LNG. Natural gas consumption varies widely by region across India. For example, the states of Gujarat and Maharashtra in the west and Uttar Pradesh in the north consume more than 65% of the India's natural gas, while making up only 31% of the population. The GoI is currently supporting initiatives to better balance the distribution and consumption of natural gas across the other regions of the country. Expanding India's use of natural gas is constrained by lack of infrastructure, particularly pipelines to move natural gas throughout the country. India currently has 15,000 km (roughly 9,320 miles) of domestic natural gas pipelines. The Petroleum and Natural Gas Regulatory Board (PNGRB) has recently tendered bids for the planning and construction of another 15,000 km (see Figure 4 ). Comparatively, the United States has approximately 484,826 km (301,257 miles) of natural gas pipelines as of 2015. India also lacks a broad network of distribution pipelines to move natural gas to consumers, especially residential users for heating and cooking. The GoI has recognized this shortcoming and has introduced plans to address it, but achieving their plans remains a goal. India is undertaking a concerted effort to bring low-carbon fuel sources to rural communities. Over the next three years the GoI is planning to connect 10 million households to the growing piped natural gas (PNG) network, a tripling of existing households. As of October 2016, 3.3 million households were connected to the PNG network. Additionally, the GoI has launched the Ujjwala welfare program, which is to provide 50 million Indian families free liquefied petroleum gas (LPG) connections over the next five years. Although LPG is not natural gas, this program fits in with the government's efforts to decrease in-home burning of wood and oil. In the first six months of the program 1 million families had already been provided with these free connections, which are intended to make rural households smoke-free. Environmental Commitments May Prompt Greater Gas Use Although India has very low energy consumption per capita because of widespread poverty, it is among the top five biggest carbon emitters, and faces major long- and short-term environmental challenges from climate change and local pollution. This stems from its use of coal in electric power generation, which accounts for 58% of India's total electricity production, as well as growing vehicular traffic, industry, and generally low energy efficiency. During the Paris Climate negotiations in 2015 (COP-21) India was viewed as a recalcitrant nation, but one whose participation was deemed essential to meet emission reduction goals. India's Intended Nationally Determined Contribution (INDC), released after signing the Paris agreement, outlined India's intention to pursue a 33% to 35% reduction in carbon intensity as a percentage of GDP from 2005 levels by 2030. The Modi government also committed to produce 40% of power from non-fossil fuel sources by 2030 (non-fossil fuels currently comprise 7% of India's electricity generation). Additionally, the Ministry of Environment, Forest, and Climate Change mandated that new and existing power plants will face stricter limits for various emissions beginning in January 2017. These restrictions favor increased natural gas-fired generation and renewables, and may promote greater use of both, if implemented and adhered to. The GoI anticipates that meeting the goals set forth in the INDC will require $2.5 trillion over 15 years, or $167 billion annually. Paying for this massive commitment is a major hurdle for development, but also is inspiring creative schemes for financing green projects. For example, in 2015 India's YES BANK issued one of the first ever "Green Bonds," worth $160 million. This loan was backed up by the India Infrastructure Finance Company Ltd (IIFCL), as well as by the Asian Development Bank. Although a relatively small amount compared to the government's goals, it is one example of a finance scheme to generate capital for India to meet its sustainable development and emission reduction goals. Government-Set Prices Limit Supply and Raise Demand In October 2014, the GoI introduced a new natural gas pricing formula, which is linked to a grouping of various prices on the international market. This new arrangement has kept the price in a range acceptable to domestic gas-consuming sectors, but many gas-producing companies have argued that this scheme does not offer sufficient financial incentives to expand investments in exploration and production, particularly in the offshore. The price of natural gas in India is determined twice each year by the government through a weighted average of the Henry Hub (United States), National Balancing Point (U.K.), Russian gas, and Canadian Alberta gas prices. The distribution of domestically produced gas is set by the government through its "Gas Utilisation Policy," which rations domestically produced gas and distributes it to certain priority sectors before it is released for sale to the general public. This is intended to benefit the so-called "Tier 1" industries (city gas for households and transport, fertilizer plants, grid-connected power plants). Imported LNG is available at prices that are significantly higher than domestically produced natural gas. In recent years there have been proposals to combine LNG with domestically produced gas to make it more accessible for domestic use and to increase consumption of imported LNG in the power sector. In November 2016, the Modi government proposed creating an Indian natural gas hub, similar to the U.S. Henry Hub, which is a physical distribution hub, or the U.K.'s National Balancing Point, which is a virtual pricing point. This development is intended to make the allocation of natural gas more efficient, make the market more dependable, and decrease political influence over trade. Supply: Untapped Potential India has many unexplored areas that may contain natural gas resources. India's total reserves are estimated to represent only 0.8% of the global total, but data are scarce for many of India's sedimentary basins and require additional scientific exploration in order to better assess their potential for producing natural gas. Over the next five to seven years, India's MoPNG plans to invest $20 billion to further develop its offshore deepwater natural gas potential, which is viewed as having greater immediate returns. India imports natural gas exclusively as LNG and will continue to do so in the near future. Despite some discussion of pipelines importing natural gas from Turkmenistan, Iran, and Russia, major political, security, and economic challenges must be overcome before pipelines become a viable option for India. India has emerged as one of the world's largest markets for LNG because of the falling price of LNG due to an abundance of supply. Onshore Shale gas has the potential to increase the role of natural gas in India's energy future. India has an estimated 96 trillion cubic feet (2,700 BCM) of shale gas resources, and the resource has been identified in six main geographic areas (basins) spread throughout the country: Cambay, Assam-Arakan, Gondwana, Krishna-Godavari, Cauvery, and the Indo-Gangetic plain. A shale policy issued in October 2013 assigned the rights to exploit shale gas to the national oil companies, but was opened to private investment under the NELP X licensing program in 2014. Despite the potential, no commercial shale production exists in India today. Problems over land use, water availability, and acceptance by local communities are likely to be major factors in shale's potential contribution to Indian energy. There is the potential for new gas discoveries onshore, but the potential for larger discoveries lies offshore. Offshore India's offshore territory remains largely unexplored. It is estimated that only 3,000 wells have been drilled in India's offshore basins. With an average density of one well per 146 km 2 , Indian offshore production remains far behind that of the United States in the Gulf of Mexico, where there is an average density of one well per 14 km 2 . The deep-water Krishna-Godavari basin (KG) has historically been the center of Indian offshore natural gas extraction. In 2002, Reliance Industries discovered what was then considered India's largest natural gas reservoir (the KG-D6). Early optimism in the region has given way to a more pessimistic long-term outlook. Extraction from the deep-water discoveries has been technically challenging. This has led to high development costs, deterring potential investors. The KG-D6 project, which had an initial capacity of 2.8 billion cubic feet per day (29 BCM), has also suffered from major extraction performance issues and disputes with the GoI. Recent pro-foreign-investment signals from the Modi government have led to renewed optimism for KG-D6. For example, BP and Reliance Industries have withdrawn from arbitration proceedings against the GoI, and intend to produce four times as much natural gas by 2022. HELP is intended to alleviate many of the previous bureaucratic barriers to investment in India's offshore resources. Specifically, the new policy will allow companies to choose more narrow exploration blocks than required under NELP, improving chances for success, and will combine all hydrocarbon extraction under one single license. In contrast to its earlier policy, the GoI is now factoring in the degree of geological difficulty by providing incentives for exploiting offshore resources. For example, a graded system of royalty rates has been introduced, making profits increasingly more lucrative for energy companies if they choose an ultra-deep-water block over a shallow-water one. Additionally, other incentives, such as an easier-to-administer revenue sharing model, are provided to companies that are awarded drilling blocks under this new system. Imported LNG India first began importing LNG in 2004, and by 2015 India had become the world's fifth-largest importer of LNG behind Japan, South Korea, China, and Taiwan. In 2015, India imported a total of 21.7 billion cubic meters (BCM) of LNG from 16 different countries: 62% from Qatar, 14% from Nigeria, 5% from Equatorial Guinea, and 5% from Australia (see Figure 5 ). In February 2016, India received its first LNG shipments from the United States. Given India's rising demand for LNG, and the growing U.S. LNG export capacity, it is likely additional U.S. natural gas will supply India in the future. For example, GAIL has signed an agreement with the Cove Point LNG facility in Maryland, which is under construction, for 50% of its capacity. India's domestic production of natural gas peaked in 2010 and has declined annually ever since. India's consumption of natural gas has also declined since 2010, but not as quickly as production. LNG imports have been making up a greater percentage of consumption each year from 2010 to 2015 (see Figure 6 ). This is due in large part to an increased abundance of cheap global LNG supplies, an improved ability to absorb LNG imports, and regulated domestic. The increased global supply of natural gas has shifted the market to one that favors the buyers. This increased bargaining power by the consumer has allowed Indian companies like Petronet to renegotiate long-term natural gas contracts, especially pricing terms, and gain other favorable concessions from companies like Qatar's RasGas. Due to India's proximity to major producers in the Middle East and Australia, it is likely to be a major LNG importer for years to come. Despite abundant global supplies of LNG, the resource remains too expensive to substitute for coal in electricity generation. If India is to increase reliance on natural gas, it would also require improving existing infrastructure and building new infrastructure. As of 2016, India had four operational LNG terminals, giving it a total import capacity of 22.5 BCM (see Table 1 ). Should all of these LNG terminals currently under construction and proposed be built, India's LNG import capacity could reach 41 BCM by 2019. This development would drastically improve access to natural gas along India's eastern seaboard, and possibly make it a more competitive alternative to coal. Pipeline Imports: A Work in Progress Increasing India's natural gas supply via international pipelines has centered primarily on two potential projects: the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline and the Iran-Pakistan-India (IPI) pipeline, both of which have been in development for many years. A third project has been proposed more recently to bring Russian natural gas to India, the Russia-India pipeline. TAPI has long been supported by the United States due to its potential to produce an economic windfall for Afghanistan. Though a ground-breaking ceremony for the project took place in Turkmenistan in 2015, there are still significant political and commercial obstacles to overcome, such as transiting Pakistan, if it is to be completed by its target date of 2019. With the loosening of sanctions on Iran's oil and gas industry, the prospects for the IPI pipeline were expected to improve. This renewed optimism was seemingly put to rest in 2016 when Iran's ambassador to India declared the project to be dead. The ambassador cited the lack of major investments in India's LNG infrastructure and the perceived inevitability that the United States would oppose its construction as the two major reasons for his pessimism. These two reasons are in addition to India's concerns of possibly relying on Pakistan as a natural gas transit country for Iranian natural gas. In October 2016, India and Russia agreed to build a 4,500 km to 6,000 km-long pipeline from Siberia estimated to cost $25 billion. However, the parties involved estimate the cost to transport Russia's natural gas to be at least double that of TAPI or IPI. In light of this, the two countries are now exploring an alternative gas swapping scheme involving China and Burma.

India's population is expected to surpass China as the world's largest by 2022, reaching approximately 1.4 billion people, creating greater demand for energy. India has the potential to be a much larger producer and consumer of natural gas. Competing political and economic factors have limited the government's effectiveness in changing the country's energy mix, which is heavily weighted toward coal and oil. Continually beset by high-profile environmental issues such as major air pollution and contaminated water supplies due to their reliance on coal and oil, the Indian government is now setting policies to increase lower-carbon energy use, but whether the government can overcome the economic and political hurdles remains a question. The portion of natural gas in India's energy mix, 7%, remains small compared to that of the United States, though it is comparable to similar emerging economies like Brazil, China, and South Africa. Despite India's intentions to double the proportion of natural gas consumption by 2022, achieving this goal would require major upstream, midstream, and downstream investments as well as the continued political will to enact the necessary changes to decrease reliance on coal and oil. India's natural gas plans have implications for a number of issues in which Congress has expressed an interest. Those issues include the prospects for U.S. hydrocarbon exports, U.S. energy companies' investments, Indian investments in U.S. natural gas production, India's ability to meet its international commitments to reduce greenhouse gas emissions in order to combat climate change, and India's plans for integrating itself into the growing South Asian energy market. In the mid-2000s, Members of both houses of Congress expressed interest to formalize closer energy ties between the United States and India, and legislation was introduced. The legislation was not enacted into law; however, the executive branch has implemented programs to further improve the energy partnership between the two nations. India's central government manages its energy sector mainly via four ministries: Power; Coal; Petroleum and Natural Gas; and New and Renewable Energy; along with the Department of Atomic Energy. Decades ago the Government of India created entities designated "Public Sector Undertakings (PSUs)" to ensure complete control of the petroleum logistics chain. These PSUs have become some of India's largest companies. The Oil and Natural Gas Corporation (ONGC), Gas Authority of India Limited (GAIL), and Indian Oil Corporation Limited are consistently ranked among the world's bigger energy companies. The PSUs are India's primary international and domestic energy actors, although some private sector companies have become key players as well. However, government control of the energy sector has stymied India's development of its domestic resources and hindered its efforts internationally. In the past decade, India has incentivized foreign access to its upstream sector as a way to increase domestic production. Some of India's energy companies are also investing more in U.S. energy projects and have signed contracts to import U.S. liquefied natural gas (LNG). Due to limited drilling activity and available information, how much technically recoverable natural gas exists in India is unclear. However, India's current assessment of total reserves—resources that are economically and technically viable under existing market conditions—is estimated to represent less than 1% of the global natural gas total. As India attempts to shift away from coal and oil over the coming decades, natural gas production, especially from offshore resources, is seen as a way to increase domestic supply. Combined with improving infrastructure for imported LNG, India could become a bigger natural gas consumer in the future.

Focus and Scope of This Report The U.S.-led effort to end permanently Afghanistan's role as a base for anti-western Islamicterrorists requires not only the defeat of the Taliban-which has been achieved through American,allied, and Afghan military action, but also the reconstruction of a stable, effective and ideologicallymoderate Afghan state. Otherwise, the country could again become a base for terrorism. Failure toachieve stability in Afghanistan is also likely to have wider repercussions for the stability of Pakistanand the Central Asian states. Unlike 1989, when the U.S. Government closed its embassy in Kabul only ten days after the withdrawal of the last Soviet forces, the Bush Administration has concluded that the United Stateshas a major stake in the creation of a stable Afghanistan, and that it cannot be left to the armedAfghan contenders for power alone to decide the country's future. The Administration has not yetgiven a detailed indication of what longer-term role it envisions for the United States in the political,economic, and social reconstruction of Afghanistan beyond current plans for emergency food andagricultural assistance, assistance in the formation of a new national army, and anti-narcotics aid. However, both the President and the Congress have declared that the United States will play a majorrole, in conjunction with NATO allies and Japan, the United Nations, and international financialinstitutions, to promote economic development and encourage political stability in Afghanistan. (1) The stakes for the United States include denying sanctuary and support for Al Qaeda terrorists, maintaining positive influence with a nuclear-armed and politically unstable Pakistan, curtailing themassive flow of opium-based drugs from Afghanistan, and, possibly, facilitating the creation of analternative to Iran and Russia as routes for the export of Central Asian oil and gas. For all of thesereasons, the future U.S. role in Afghanistan and the adjacent region is likely to be an important focusof interaction between the Administration and Congress in considering foreign assistance anddefense budget priorities and policy issues during the Spring of 2002. Congress has strongly supported American involvement in supporting the fledgling government headed by Karzai, and many of the several dozen Members of Congress who have visitedAfghanistan have advocated more U.S. aid than is currently planned, the more prompt delivery ofaid to the Karzai administration, and an expanded U.S. role in peacekeeping. In terms of action byCongress, H.R. 3994 (Hyde), the Afghanistan Freedom Support Act of 2002, wasintroduced "To authorize economic and democratic development assistance for Afghanistan and toauthorize military assistance for Afghanistan and certain other foreign countries." The bill wasmarked up by the House International Relations Committee on March 20 and reported (amended)on April 25 ( H.Rept. 107-420 ), addresses the overall direction and focus of U.S. policy towardshumanitarian relief and refugee repatriation, economic reconstruction, the suppression of narcoticsproduction, and support for a democratic and market-oriented Afghanistan. The bill would authorizeabout $1.05 billion in appropriations for assistance to Afghanistan, subject to certain conditions,from FY2002 to FY2005. A Senate version of the bill, S. 2712 , was introduced bySenator Chuck Hagel on July 9, 2002. This report provides information on and analysis of the current situation in Afghanistan, taking into consideration the country's essential characteristics and political developments since about thetime of the overthrow of the last Afghan King, Zahir Shah, in 1973, and sketches out four possiblescenarios for Afghanistan's future. The scenarios incorporate the profound effects of the Communistcoup of 1978, the 1979-1989 Soviet occupation, subsequent civil war, and the rise and fall of theTaliban. Finally, the report identifies and analyzes factors that will influence Afghanistan's politicalfuture, and discusses three policy areas in particular in which actions by the United States could becrucial, and three policy issues for congressional consideration. An appendix contains keydocuments relating to the December 2001 Bonn Agreement, which is the framework for currentefforts to create a stable and democratic Afghanistan. This report will be updated in response to major political developments, but it is not intended to track issues concerning Afghanistan on a regular basis. Broader and more frequently updatedcoverage of issues concerning Afghanistan and U.S. policy is contained in CRS Report RL30588 , Afghanistan: Current Issues and U.S. Policy Concerns , by [author name scrubbed]. For information andanalysis concerning U.S. and other international humanitarian and reconstruction assistance toAfghanistan, see CRS Report RL31355 , Afghanistan's Path to Reconstruction: Obstacles,Challenges, and Issues for Congress , by [author name scrubbed]. Current Framework for the Reconstruction of a Stable and Moderate Afghan State Achieving the goal of a stable and moderate Afghanistan depends on the establishment of apolitical process that has at least the tacit support of the major organized ethnic and tribal groups andcontenders for power, as well as ordinary Afghans who are simply seeking some kind of peace andnormalcy in their lives. After nearly three decades since the overthrow of the Afghan monarchy andthe onset of a three-cornered struggle involving the forces of moderate reform and market-orientedeconomic modernization, Islamic fundamentalism, and Marxism, most of the past elements ofAfghan unity and stability have been shattered and are not even remembered by the more than halfof the current population who were born after the overthrow of the last monarch, Zahir Shah. (2) Bonn Accord of December 2001 A beginning towards the goal of reconstructing a stable and moderate Afghanistan was made at an international conference near Bonn, Germany, during December 2001, when representativesof various parties and ethnic groups agreed to the creation of an Interim Administration, and aprocedure, with timetables, for drafting a new constitution and establishing, within two years, anelected government. As in the case of a U.N.-backed effort in 1992, which failed, the composition of the delegation was more representative on paper than in reality. The 23 signatories to the December 2001agreement represented four anti-Taliban groups: The Northern Alliance , representing the ethnicTajik and Uzbek forces then occupying Kabul and other northern cities; the Rome Process ,representing largely Pashtun exile followers of former King Zahir Shah; the Cyprus Group ,representing largely Shi'a Muslim groups supported by Iran; and the Peshwar Group , consistinglargely of Pashtun exile factions with headquarters in Peshawar, Pakistan. Of these, only theNorthern Alliance, which became closely allied with U.S. forces in the campaign against the Talibanand Al Qaeda, commanded significant military power. The composition of the Rome and Peshawargroups was heavily tilted towards Western-educated professionals and other members of the formerurbanized Pashtun elite. (3) Pashtun commanders andlocal shura (governing councils) in SouthernAfghanistan, the home base of the Taliban, were not directly represented. As agreed, the parties to the negotiations inaugurated a 28-member multi-ethnic interim Afghan administration on December 22, 2001, headed by Hamid Karzai, a prominent Pashtun tribal leaderwith a modern, democratic outlook, close ties to the former royal family and the westernized,expatriate elite, and good relations with the Tajik-dominated Northern Alliance. The InterimAdministration also included two women, both medical doctors, who head the ministries of women'saffairs and health, respectively. Indicative of the fragile nature of the bargaining to date, anagreed-upon roadmap for the achievement of a democratic political structure leaves most of thedetails for the future. (See Appendix I for the terms of the agreement.) Outcome of the June 2002 Emergency Loya Jirga Another important milestone was achieved in June 2002 with the generally successful conclusion of an Emergency Loya Jirga ("Grand Council"), which confirmed Karzai as head of aTransitional Administration charged with organizing an effective government, supervising thedrafting of a constitution, and preparing the country for national elections in December 2002. Thedelegates to the Loya Jirga also informally approved Karzai's choices for the most important cabinetposts, but not without considerable complaint from groups which felt they had received insufficientrepresentation in the new administration. These include members of the various Pashtun tribes, whotogether constitute a plurality of 35-40 percent of the population, and other non-Tajik ethnic groupssuch as the Uzbeks and Hazaras. (For a fuller analysis of the Loya Jirga outcome see below.) Development of the Afghan State under the Durrani Pashtun Monarchy One way to envision the circumstances that might support the creation of a stable and moderateAfghan state is to consider the country's past political history and the factors that in the past haveenhanced or undermined stability and modernization. The establishment of Afghanistan as a nationstate dates essentially from 1747, when Ahmad Shah Durrani, a tribal Pashtun (4) chief of the Sadozailine of the Abdali tribe, gained election by his tribe as the ruler (Amir) of territories approximatingthe present boundaries of Afghanistan. Under the Durrani ascendancy, Afghanistan experienced allthe vicissitudes of dynastic chance and survived as a political entity largely as a buffer state whosenorthern and southern boundaries conformed to the high water line of the expanding British andRussian empires, and the periodically resurgent Iranian empire. In the 20th century Afghanistan teetered between bursts of Western and Soviet-aided modernization and recurrent reaction spearheaded by the twin sources of rural power in the Pashtunheartland: secular leaders, including tribal chieftains, local notables, or commanders, and Muslimclerics of various kinds, including mullahs and influential pirs (spiritual leaders) of the mystical Sufi Islamic sects, which predominate in Afghanistan and Southern Asia. In many respects the traditionallocal power structure, outside of Kabul and a few other population centers, approximated that in therural, pre-industrial West, with men of property or learning exercising governmental power andclergy providing spiritual guidance, moral authority, and often local political influence. In general, modernization progressed faster among two sections of the population: Tajiks and Uzbeks in the North, who practiced settled agriculture or carried on commerce, and the morecosmopolitan, "Persianized," residents of Kabul of various ethnic origins, including "detribalized"Pashtuns. The traditional Pashtun tribes of Southern Afghanistan, many of whom are or werenomadic, have been more resistant to centralization and modernization, but nonetheless have longthought of themselves as the "real" Afghans. Pashtun dominance has long been a source of resentment among Afghanistan's minority groups: the Tajiks, Uzbeks, and Hazaras. Both the Afghan Tajiks and those in Tajikistan have linguistic andcultural connections with Iran, but usually not religious. In matters of religion, the Tajiks, like thePashtuns, follow the Sunni school of Islam, the larger of the two main Islamic divisions. TheUzbeks have ethnic and linguistic connections to Uzbekistan and Central Asia, and are also Sunn iMuslims. The Hazaras are a Shi'a Muslim minority with ethnic ties to Central Asia and religiousties to Iran. The language issue also divides the tribal Pashtuns from other Afghans. Dari, a form of classical Persian, has long been the language of the court and of commerce. In fact, more Afghansspeak Dari than Pashto. The former is the lingua franca of the North and West, and is spoken byabout 50% of the population, including most non-Pashtun minorities, whereas Pashto speakersaccount for something over one-third of the population. Some Afghan sources claim that the formerKing, Zahir Shah, and most of his relatives, cannot even speak Pashto. (5) Long-Standing Pattern of Violent Leadership Change The still-incomplete conversion of Afghanistan from a largely tribal society to a nation state has been a process of slow advance and frequent periods of violent traditionalist reaction. Every Afghanking during the past century was either assassinated or deposed (Table 1). The first modernizingKing, Habibullah Khan (1901-1919), was assassinated, probably for being viewed as a tool ofBritain. (6) The most ambitious modernizer, AmanullahKhan (1919-1929), was deposed. Hisfar-reaching economic and social modernization policies-especially the emancipation ofwomen-engendered a violent reaction on the part of mullahs , tribal leaders, and tribes opposed tothe dominant Durrani confederation, especially those of the numerically larger Gilzai confederation. Among other innovations inspired by his travel to Europe, Turkey, and Iran, Aminullah created theAfghan Royal Air Force, outlawed polygamy, instituted compulsory education for both sexes,separated secular and religious authority, and created the first consultative national assembly. Durrani rule was broken briefly by a bandit Tajik interloper, Bacha-i Saqqo ("Son of the Water Carrier"), who took power initially with support from dissident Gilzai tribes. His rule lasted onlynine months, but Pashtuns still consider the brief rule by a Tajik as a humiliation-sentiments thathave been resurrected by the dominance of the current Transitional Administration by Tajiks. (7) Table 1. Afghan Kings and Rulers Since 1901: A Record ofViolent Regime Change Growth of National Institutions Under Zahir Shah (1933-1973) The modern Afghan state reached its apogee, in a manner of speaking, under Zahir Shah, whoascended the throne in 1933 following the assassination of his father, Mohammad Nadir Shah. Mindful of the fate of his predecessors who were perceived as having sacrificed the country'sinterests to obtain foreign support, or as having too aggressively challenged the power of the tribalchiefs and mullahs, Zahir Shah attempted a cautious modernization program while keeping ajudicious distance (or so it seemed at the time) from both the United States and the Soviet Union,while accepting aid from both. Political Tensions Arising Out of Modernization (8) As in the case of the former Shah of Iran, Zahir Shah's efforts to promote modernization inadvertently fostered the creation of new social and political forces which ultimately underminedhis rule. Zahir Shah was and remains something of an enigma. He ascended the throne at age 19,and for thirty years largely left the government in the hands of relatives-first by uncles until about1953, and later by his cousin, Prime Minister Mohammad Daoud. Perhaps too late, Zahir Shahfinally took charge of the government in 1963, after Daoud's policy of hostility towards Pakistan (seebelow) led that country to close the common border, cutting of Afghanistan's southern trade linksand devastating the economy. Despite his effort to reduce the role of the royal family and hispromulgation of a new constitution with some limited democratic features, notably an elected, butparty-less bicameral parliament, with limited powers to check and balance the executive authority,Zahir Shah's liberalization program was still-born. This outcome generally has been attributed tothe King's lack of assertiveness and the fear of the country's social and economic elite of beingdisplaced by popularly elected leaders. Among other accomplishments, Zahir Shah and his new advisors and officials extended the reach of the central government by expanding the army and the national police system, enlarging thefunctions of the civilian bureaucracy, expanding the national educational system, and bringing acentral government presence down to the local level. Although these developments helped tostrengthen the state and weaken tribalism, their net effect was not wholly positive. The army andpolice were widely regarded as repressive, and the bureaucracy and local governmental apparatuswere said to be corrupt, grasping, incompetent, and dominated, at the upper levels, by the King'srelatives. The latter years of Zahir Shah's reign brought significant economic modernization, but not enough to take Afghanistan out of the ranks of the least developed countries. On the positive side,the middle class in Kabul and other cities swelled from an estimate of fewer than a thousand at theend of World War II to almost 100,000 by the early 1970s. But public frustration grew over the factthat the government bureaucracy was not up to the task of managing and maintaining the economicand physical infrastructure provided by aid donors. (9) Rise of Marxist and Radical Islamist Conflict. The political opening provided by the 1964 constitution boosted the aspirations of both a smallleftist intelligentsia and radical Islamic counterparts. The Marxist People's Democratic Party ofAfghanistan (PDPA) was founded on January 1, 1965, with the explicit goal of contesting theelections held that year under the new constitution-elections that were officially party-less. Theradical leftists tended to dominate parliamentary proceedings, while moderates, who had more tolose, remained cowed by political repression. Most of the major figures who later served in theSoviet-backed Marxist regime, notably Nur Mohamad Taraki, Hafizullah Amin, and Babrak Karmal,were active in the first elected parliament. (10) The emergence of the radical left was paralleled by the growth of a radical Islamist movement, starting with the foundation of the Organization of Muslim Youth at Kabul University in themid-1960s. The Islamists reacted not only to the rise of the left but also to the long tradition ofco-option of Muslim clerics by the government. Soon after emerging, both the Marxists and the Islamic right split along primarily ethnic lines. The PDPA was divided between a largely Pashtun Kalq ("masses") movement under Taraki andAmin, and a more urban and moderate Parcham ("flag") wing under Karmal. The split in theIslamist ranks was both ethnic and generational-between the followers of Professor BurnhanuddinRabbani, a Tajik religious scholar who founded the Jamiat-i-Islami (Islamic Society), and thoseattracted to "Engineer" Gulbuddin Hekmatyar, a Pashtun Kabul University engineering student. Hekmatyar became the leader in an even more radical organization, the Hezb-i-Islami .(IslamicParty). Both the leftists and the Islamists adopted similar authoritarian, Leninist-style, forms of partyorganization. (11) Zahir Shah's Counterproductive Foreign Policy Afghan foreign policy under Zahir Shah was characterized by two mutually reinforcing policy pillars that greatly influenced Afghanistan's subsequent political history. The first was the doggedpursuit of the cause of "Pashtunistan" (or "Paktunistan" in the dialect of Southeast Afghanistan andamong Pakistani Pashtuns), a popular campaign for the return of ethnic Pashtun territories previouslyceded to British India. These territories became part of Pakistan's Northwest Frontier Province afterPakistan and India gained independence in 1947, but remained loosely tied to Afghanistan throughtrade, nomadic grazing, and family connections. (12) The second foreign policy pillar was the effortto reap maximum gains from the East-West Cold War by playing one superpower off against theother. Chronically Strained Relations with Pakistan. The Paktunistan campaign was pursued with particular intensity during the period 1953 to 1963,when the King's cousin, Mohammad Daoud, served as prime minister. The diplomatic agitation andfrequent border incidents led to chronic strains in Pakistan-Afghan relations, including periodicclosures by Pakistan of the common border, driving Afghanistan deeper into dependence on theSoviet Union for aid, trade, and military support. Ultimately, Daoud's policies so harmed theAfghan economy that the King sought and received his cousin's resignation. (A decade later Daoudwould overthrow the monarchy and make himself President of the first Afghan republic.) (13) Rising Soviet and Declining U.S. Influence. The conjunction of Afghan irredentism and the U.S. Cold War alliance with Pakistan caused friction inU.S.-Afghan relations and led Kabul to drift into the Soviet orbit. U.S. arms assistance to Pakistanunder the Mutual Security Program of 1954, which was aimed at checking Soviet expansion, hadunintended consequences in the case of Afghanistan. Partly to placate Islamabad, the EisenhowerAdministration and its successors rejected Kabul's requests for military aid, causing the U.S.S.R.to become Afghanistan's main supplier of arms and military training. Soviet weapons and thepresence of Soviet advisors gave Moscow extensive influence within the Afghan army and air force. The Soviets also constructed important military airfields at Bagram, Mazar-i-Sharif, and Shindand,a gas pipeline to Soviet Central Asia, and a network of surfaced roads linking Afghanistan to theU.S.S.R. The northern road network and Bagram air base played key roles in the 1979 Sovietinvasion of Afghanistan. (14) The United States actively contested for influence with the U.S.S.R., but was handicapped by geography and geopolitics. Vice-President Richard M. Nixon visited the country in 1953, at theoutset of the Eisenhower Administration, and President Dwight D. Eisenhower visited Kabul in1959. King Zahir Shah, likewise, visited Washington in 1963, about the time that he began takinga more active role in governing the country. The United States continued to provide economicassistance for projects such as the Helmand River irrigation project in southern Afghanistan, and theconstruction of an international airport at Kandahar that became a classic foreign aid "whiteelephant" project, but Moscow's influence became dominant. (15) Mohammad Daoud and the Afghan Republic, 1973-1979 In 1973 Daoud emerged from the political wilderness to overthrow the monarchy and establish the Republic of Afghanistan, using younger, Soviet-trained army officers who were members of theParcham ("Banner") wing of the Marxist PDPA to carry out a relatively bloodless coup. The King,who was in Rome for medical treatment, remained there permanently. Daoud became president ofa new Afghan Republic, with a president and a single-party legislature. The new constitution wasapproved by a Loya Jirga ("Grand Council"), the traditional mechanism for giving assent to the rulerby representatives of tribes, ethnic groups, and other interests, in January 1977. To the consternation of his supporters, Daoud as president reversed a number of policies from his days as prime minister. After using leftist allies to repress Islamic militants during the first twoyears of his rule, Daoud turned on them in the mid-1970s, purging leftists from the army andcracking down on the PDPA. He also began slowly to distance himself from the Soviet Union andcultivate relations with the Shah of Iran and the Saudi monarchy, and improve ties with Pakistan. On the domestic front, Daoud did little to move Afghanistan towards modernity or democracy. Afghanistan remained one of the poorest countries in the world, with little in the way of industry oreconomic infrastructure. At the same time, his repression of both the Islamists and the leftists, histactical withdrawal of support for Paktunistan, and disregard for parliament, created a host ofenemies. The murder of a prominent Afghan communist in early 1978, allegedly by governmentagents, set in motion the April 27, 1978, coup against Daoud led by leftist army officers and thePDPA. Daoud and his family were murdered after rebellious troops stormed the Presidential palace,bringing to an end more than 230 years of Durrani Pashtun rule. Destruction of the Traditional Social Fabric: PDPA Rule and Soviet Occupation, 1978-89 Daoud's overthrow and the Soviet invasion caused a diaspora of Afghanistan's small educatedand professional elite and the families associated with the rule of Zahir Shah, leading to the collapseof most vestiges of the old order. The Afghan communists attempted a number of social changesthat under other circumstances would have been viewed as progressive, including measures topromote secular education and liberate women, but the PDPA leaders, who came mainly from urbanareas, had little understanding of the countryside or respect for rural traditions. Their clumsy effortsto overturn the social and political order in the tribal areas provoked widespread rebellion. Equallyimportant, a long-standing, bitter, and unresolvable split between the Kalq faction of the PDPA, ledby President Nur Mohammad Taraki and Prime Minister Hafizullah Amin, and Parcham faction, ledby Babrak Karmal, a Soviet protégé, brought the government to the point of collapse. In addition to the basic Parcham-Khalq conflict, the Afghan revolution spawned a number of violent radical groups, both leftist and Islamist. In early 1979, under circumstances still describedas "murky" by the State Department, U.S. Ambassador Adolph "Spike" Dubs was kidnaped by agroup of men whose identities remain a matter of speculation and dispute, but who were alleged tobe Maoist opponents of the regime. Dubs was killed in a fusillade of fire when Afghan interiorministry forces, reportedly at the urging of Soviet advisors, stormed the building in which he wasbeing held. (16) The more nationalistic Khalqis gained the upper hand in the summer of 1978 and sent Babrak Karmal and a number of other prominent Parchamites, who tended to have pro-Soviet leanings, intoexile as ambassadors to Soviet Bloc countries. By early 1979 the renewed split in the PDPA and thereckless policies of Prime Minister Amin, the most energetic of the governing duo, had sparkedwidespread rebellions. Taraki visited Moscow in September 1979, where he was elaborately feted,and returned probably with orders to get rid of Amin. In October 1979, however, Amin moved first,organizing the murder of Taraki and seizing power. Amin's ruthless power grab and the emergence of an anti-Marxist tribal revolt alarmed the Soviet Union, which feared that Amin was single-handedly destroying the revolution. In December 1979,Leonid Brezhnev gave the fateful order for the invasion and occupation of Afghanistan to keepPDPA government from collapsing. The spearhead forces of the Soviet invasion stormed thepresidential palace and killed Amin, replacing him with Babrak Karmal, the Parcham leader who hadbeen in exile in Moscow. (17) Anti-Soviet War and the Rise of Islamic Extremism U.S. policymakers and supporters of the Afghan resistance movement expected that theanti-Soviet campaign by the Afghan mujahidin would contribute to the forging of a new sense ofAfghan nationhood, but the war actually had the opposite effect. Instead of coalescing around acommon cause, the particular circumstances of the conflict intensified the existing ethnic, tribal,religious, and ideological divisions of the society, and intensified power rivalries among individualleaders. Several aspects of the anti-Soviet war period were particularly divisive, and continue to impede national reconciliation today. One was the boost given to Islamic extremism, which developed ina context of ideological conflict with Western-educated secularists and personal power rivalries. Atbottom, the rise of radical versions of Islam had roots in a reaction against modernization and risingWestern influences associated with what some Islamists viewed as a corrupt and decadent monarchy,and against the Marxists. Although the anti-Soviet mujahidin often were perceived as backward, albeit admirably dedicated tribesmen, most of the principal Islamist political leaders in the anti-Soviet war inAfghanistan were men of education and social position. More than half of the seven leaders of theso-called Peshawar Alliance that was headquartered in Peshawar, Pakistan, during the anti-Sovietconflict, were university educated. (18) By and large,however, real power in the anti-Soviet resistancetended to flow to younger leaders with an Islamist orientation but a secular background, such asGulbuddin Hekyatyar and Ahmad Shah Masud, who had organizational and military skills, and whocould command, or at least support, mujahidin in the field. Last, but not least among the sources of division, and increasingly important after the PDPA coup in 1978, was the role of a number of foreign powers, most notably Pakistan, Saudi Arabia, andIran, each of which backed ethnic and ideological favorites, and private promoters of radicalideologies. Pakistan favored Gulbuddin Hekmatyar, Saudi Arabia backed Professor Rasul Sayyaf,and Iran supported several small Shi'a Hazara groups. Osama bin Laden's role dates from late1980s, when he and a number of other private Saudis attempted to promote their radical version ofSunni Islam among the Afghan mujahidin . Collapse of the Afghan State, 1989-1996 A power struggle following the Soviet withdrawal set the stage for the rise of the Taliban. Theinitial round involved rival mujahidin groups headquartered in Peshawar, who were members of theso-called Alliance and the remaining supporters of the communist government headed byNajibullah, including a reduced but still intact Afghan army. Despite several promising negotiations,neither the seven Alliance parties headquartered in Peshawar, nor the commanders in thecountryside, who met separately in a meeting organized by the late Abdul Haq, one of the mostprominent field commanders, were able to agree on a division of power. Failure of a U.N. Brokered Power Transfer In 1992 The regional power rivalries and unbridled ambitions of the principal political leaders and field commanders did much to turn victory over the Soviets into a new period of misery for the country. The chain of events following the Soviet withdrawal may provide some lessons for the present,especially the effort during 1991 and 1992 of Benon Sevan, the representative of the U.N. SecretaryGeneral, to broker a peace settlement between the Najibullah regime in Kabul and the mujahidin . The final version of the plan, which had been accepted by most of the parties and commanders andtheir foreign backers, especially Pakistan and Iran, provided for a peace settlement on lines verysimilar to the Bonn Accord of December 2001: the early (within weeks) formation of "pre-transition council" a transitional authority to govern the country, leading to "free and fair elections" within about two years Sevan reportedly came close to gaining full agreement among the Afghan parties and their international supporters on the outlines of a proposed settlement, only to have the effort effectivelytorpedoed by dissension among the mujahidin parties and the decision of Najibullah, on March 18,1992, to retract his prior commitment to resign the presidency as part of a settlement. The negotiating deadlock was broken militarily by the General Dostum, an Uzbek and former "Hero" of the Marxist government, who abandoned the Kabul regime and joined forces with AhmedShah Masud, the much celebrated Tajik commander. Militarily, Dostum's move resolved athree-cornered power struggle between the Tajiks under Rabbani and Masud, the Uzbeks underDostum, and non-mainstream Pashtuns, under Pakistan's favorite, Gulbuddin Hekmatyar, in favorof the Tajiks. Dostum also blocked Najibullah's attempted flight to the Soviet Union. Instead,Najibullah fled to the United Nations compound, where he received political asylum. (One of thefirst acts of the Taliban after taking Kabul in September 1996, was to drag Najibullah from the U.N.compound and brutally execute him.) Three-Cornered Ethnic Power Conflict in the 1992-1996 Islamic Republic of Afghanistan With Hekmatyar on the outside - literally and figuratively - the new Islamic Republic of Afghanistan, like the current Transitional Administration, was largely a non-Pashtun affair. Theoriginal plan was that the presidency would rotate among the mujahidin leadership, but after the firstpresident, Sibghatullah Mojadedi, a moderate Islamist with no significant military forces, gave wayto Rabbani, the latter refused to give it up. The right to control Kabul became the object of a newfree-for-all among the well-armed, ethnically-aligned factions. The Uzbek Dostum switched sidesonce more, aligning with the Pashtun Hekmatyar against the Tajiks led by Rabbani and Masud. During 1993 and 1994 Hekmatyar's forces pounded much of Kabul to rubble with rockets, reducingthe population from about 2 million at the end of the Soviet occupation period to less than 500,000. In May 1996 Rabbani and Masud made a deal with Hekmatyar, giving him the presidency, but allof them were routed by the Taliban in September 1996. Hekmatyar fled ultimately to Iran, andRabbani and Masud to their redoubt in the Panjsher Valley, where they were sustained by limitedassistance from their old enemy, Russia. Rabbani, who in the interim had reclaimed the presidency,took the credentials of the internationally recognized Afghan Islamic Republic of Afghanistan withhim. (19) Rise and Fall of the Taliban The story of the rise of the Taliban (plural of Talib , an Islamic student) has been well coveredin the press and other media since the terrorist attacks of September 11 and the onset of theanti-terrorist war in Afghanistan. Several aspects of the Taliban's rise to power have continuingrelevance as cautionaries to the United States and other international supporters of the InterimAdministration under Mohammad Karzai: First, the Taliban were widely welcomed, especially in the Pashtun areas, for putting an end to endemic petty warfare and disorder, including especially the disruption of trade andcommerce. This is still a goal of great importance to commercial interests as well as ordinaryAfghans. Second, the Taliban recruited and coopted numerous tribal leaders who were motivated mainly by self-interest-the maintenance of their personal power-rather than ideology. Many of these same leaders and their followers continue to be a major factor in the PashtunSouth. Third, the Taliban represented a Pashtun resurgence in the reaction to the rising power of the non-Pashtun minorities, and completed the near total polarization of the country onPashtun/non-Pashtun lines. This conflict is by no means resolved, as evident by the bad feelingexpressed by many Pashtuns at the June 2002 Emergency Loya Jirga . Finally, the preference of the Taliban leader, Mullah Mohammad Omar, to rule from his southern home base of Kandahar, symbolized starkly the cultural alienation of Pashtunconservatives from the Tajik-dominated Northern Alliance, which had controlled Kabul, Bagram,and adjacent areas during the period 1992-1996, and had earned a reputation, especially amongPashtuns, for oppression and misrule. Prospects for Recreating a Stable and Moderate Afghan State Achieving the goal of the United States, its allies, and the international community of a stableand moderate Afghan state will depend on many factors, both internal and external. Most of thesefactors cannot now be predicted with any certainty, but if past is prologue, it may be possible toachieve a rough understanding of the requirements for ending Afghanistan's steady disintegrationand reconstructing a stable and moderate state. The following section evaluates the prospects ofachieving this goal by considering the main contributing factors in past periods of comparativestability, the status of these factors at present, the comparative strength of various claimants topower, and four possible scenarios that might result from the actions of internal forces and externalactors. Past Elements of Stability and Current Status Although many Afghans now tend to look back to the rein of Zahir Shah with somewhat rose colored lenses, Afghanistan did in fact enjoy a kind of stability during most of the reign of ZahirShah (1933-1973). Even if the conditions that facilitated past stability cannot be recreated, it isuseful to understand what they were, if only as an indicator of their presence or absence in thecurrent situation. Also, the factors that allowed stability under Zahir Shah proved temporary, andultimately led to political instability and the overthrow of the monarchy. After three decades ofbrutal civil war, Afghanistan today retains few of its characteristics under the Afghan monarchy oreven under Daoud's Republic. Sources of Legitimacy. In modern times the king and most senior officials have been members of the Durani Pashtun tribe. The 1964 constitution,which imposed some formal limits on royal authority, nonetheless provided that the succession "shallcontinue in the House of His Majesty Mohammad Nadir Shah." (20) For most of his reign, ZahirShah's legitimacy was perhaps accepted by most of the Pashtuns and others who counted politically,both in Kabul and in the countryside. By the end of his reign, however, the legitimacy of the Kingand his officials was increasingly contested by university students both on the left and the Islamicright, and by members of the growing middle and professional classes, who were frustrated at beingdenied a meaningful role in national affairs. Since the overthrow of Zahir Shah, each turn of thepolitical wheel has reduced the legitimacy of the state. Currently, the main sources of legitimacy of the Transitional Administration with ordinary Afghans are Karzai's personal acceptability to disparate elements, his ability to attract internationalsupport, and the promise of a future democratic political order. Opponents of the currentgovernment, especially current or former Taliban, radical Islamists, and warlords, do not accept itslegitimacy, though they may cooperate or avoid openly challenging it out of self-interest. Karzai'sconnection to the former royal family does not by itself convey legitimacy, but may appeal to someAfghans, especially Kabul residents and Pashtuns in southern Afghanistan, who remember bettertimes past. Among many Pashtun royalists, he is regarded as a turncoat. Acceptable Ethnic Balance. Ethnic and tribal conflict has long been the bane of Afghanistan. The main fault line has been between the Pashtuns,who form a plurality of something less than 40 percent of the population, and the minority Tajiks,Uzbeks, Hazaras, and others. In the best of times the ethnic balance was preserved through a kindof informal social compact that provided for Pashtun control over the main levers of power but leftconsiderable space for the Tajiks, and to a lesser extent the Uzbeks, to participate in the middlelevels of the administration and the army, and to dominate the commercial life of Kabul and othercities. Positive Center-Provincial Relations. The third element in past periods of stability has been comparative harmony between the state, whose officialsstaffed the central government ministries and the provincial administrations, and the tribal leaders,Muslim clerics, and other notables who constituted the local power centers outside the capital. Thisrelationship was aided by the fact that relatively few demands were imposed by the centralgovernment, which carried out limited functions. Relations between the state and local forces hadbecome progressively more difficult with the increase of modernization and economic development. The complete breakdown of any semblance of a functioning administration, starting with the Marxistcoup in 1978, including the destruction of the central bureaucracy and the complete disappearanceof the Kabul's involvement in provincial affairs, will make it very difficult to reestablish thestructure of a functioning nation state. Harmony Between the State and Islam. Last, but not least, past stability depended heavily on the maintenance of a balance between the spheres of thestate and Islam. For much of the country's history, the state managed provincial and tribal affairsthrough the agency of the mullahs and other clerics, who also enjoyed state patronage. By the 1970s,these relations had become strained owing to the rise of various ideologically Islamist movementsand parties. The Taliban successfully avoided this conundrum by creating a theocratic system thatlargely eliminated the apparatus of the state. Resistance from the Islamists and traditionalists couldcreate a serious challenge to the objectives of the United States, the United Nations, and theinternational community, all of which support in one way or another a modernist developmentagenda, including emphasis on matters such as women's rights and universal secular education. Critical Role of Foreign Powers. Interaction with foreign powers has been a critical dimension of Afghan history. In the distant past, Afghanistan wasboth a well-spring of empires and a corridor through which conquerors passed to the richer lands ofwhat are now India and Pakistan. The Afghan Lodhi Dynasty ruled parts of what is now Pakistanand northern India from the mid-tenth century until being displaced by the Moghul Empire in themid-16th century-a muticultural construction which included a large admixture of Afghans in themilitary ranks. In modern times Afghanistan has generally been the object of foreignconquest-especially by Persia, British India, and Russia. The Durrani Dynasty established andmaintained its dominance by fighting off British and Russian incursions. The collapse of Durranirule led to extreme foreign intervention in the form of invasion and occupation by the Soviet Unionand support to the anti-Soviet resistance by a host of powers, including especially the United States,Pakistan, Iran, and Saudi Arabia. The Taliban came to power with critical Pakistani and SaudiArabian support, while Russia and Iran sought to bolster the Alliance forces of Rabbani and Masud. Following the September 11, 2001, terrorist attacks, the effort to get rid of the Taliban brought the United States, Russia, Uzbekistan and other former Soviet Central Asian republics into an uneasycommon cause. The anti-Taliban campaign appeared initially to draw Iran into a more cooperativerelationship with the United States, albeit only tacitly, but Tehran's objectives became less clear withthe defeat of the Taliban and the growing presence of U.S. and other Western military forces in thecountry. Iran's reported reinvolvement in Afghan affairs, including alleged support to both IsmailKhan in Herat and the Uzbek leader, General Dostum, in Mazar-i-Sharif, have troubled U.S. andallied officials. (21) Since the collapse of the Taliban,Pakistan appears, at least for the time being,largely to have lost its former ability to influence Afghanistan by manipulating the Pashtuns andsupporting Islamic radicalism. Negotiating the Multi-Layered Afghan Power Matrix Resolving the ethnic problems and constructing a government with recognized legitimacy will be a daunting task that requires reconciling a wide array of competing interests and personalities. Rather than a two-dimensional schematic the Afghan political matrix has the appearance of aRubik's Cube, with numerous layers of independent actors, many of whom have the potential tointeract with each other in various combinations. Ethnicity. The country's ethnic divisions lie at heart of the problem of achieving national unity, and constitute the first layer. Even personalambition, the most overt driving force of disunity, operates within an ethnic context. Since theSoviet withdrawal in 1989 ethnicity has been the main common denominator of civil strife. Atpresent, Tajik-Pashtun rivalry is the core issue affecting Afghan politics, with the Pashtuns viewingthe Interim Administration as Tajik-dominated. Regionally-Based Warlords and Commanders. The second layer consists of warlords and commanders, whose ranks include the Panjsheri Tajikcommanders of the of the Northern Alliance, such as General Mohammad Fahim ; theUzbekstrongman General Rashid Dostum , who holds the nominal post of Deputy Defense Minister intheInterim Administration; Ismail Khan , a Tajik leader who controls four provinces in the areaaroundHerat who often acts independently from the Northern Alliance, with whom he is affiliated; andnumerous rival tribal leaders and warlords of the Pashtun belt, such as Kandahar Governor GulAgha Shirzai , a Durrani Pashtun, and various commanders among the Eastern Shura ("governingcouncil"), an influential body centered around Nangahar Province, which includes Jalalabad. Untilrecently Nangahar Province had been under the control of an ethnic Pashtun ally of the NorthernAlliance, Haji Abdul Qadir , elder brother of Abdul Haq, who was killed by the Taliban lastOctoberin a vain attempt to generate a uprising by local Pashtun tribes. Haji Qadir was murdered byunknown assassins outside his office in Kabul in early July 2002, a few days after accepting the postof vice-president (one of three so-designated). Last but not least are remnants of the Taliban whoare more known for their role as tribal leaders and commanders, rather than Islamic zealots, whoappear to retain local support, if not strength, in many parts of the Pashtun South. Ideologically-Oriented Political Party Leaders. These leaders constitute a third layer. They range from a few modernist politicians affiliated withex-King Zahir Shah, such as Sayyid Ahmad Gailani , an urbane hereditary leader ( pir) of themoderate sufi Islamic sect, through "moderate Islamists" like Cairo-educated SabghatullahMojadiddi , and a range of Islamic radicals. The more intensely anti-Western political aspirants include, most notably, Burnhanuddin Rabbani and his predominantly Tajik Jamiat-i-Islami ("Islamic Society"), and GulbuddinHekmatyar (Hezb-i-Islami) , once the favorite of Pakistan's Inter-Services Intelligence (ISI)andreportedly the largest recipient of CIA arms and assistance during the anti-Soviet war. The NewYork Times reported on May 9, 2002, that the CIA targeted Hekmatyar in an attack on a convoy nearKabul in order to preempt anticipated attacks on U.S., coalition, and Afghan government forces andfigures, including interim leader Karzai. Hekmatyar is said to have survived a strike on his convoyby a Hellfire missile fired from a Predator drone reconnaissance aircraft. Rabbani, a native of Badakhshan Province in the extreme Northeast, is more of a traditionalist than a radical, but has shown strong hostility to Western influence and secularization. Ideologically,the closest Pashtun counterpart to Rabbani may be Yunis Khalis , who heads a different factionofthe Hezb-i-Islami than the one headed by Hekmatyar, and was one of the few mujahidin politicalleaders to lead men in combat. A remarkably vigorous 87 year old who reportedly once exercisedinfluence over Mullah Omar before breaking with the Taliban, Khalis still enjoys support among theEastern Pashtun tribes in the region around Jalalabad. Rabbani, still viewed as the political "Godfather" of the Northern Alliance, now finds his authority challenged by younger leaders of his party, General Mohammad Fahim and YounisQanooni (who are also military commanders, as noted above) and Dr. AbdullahAbdullah , whois of mixed Tajik-Pashtun ancestry. This "Panjsheri Tajik triumvirate" overrode his objections andassumed the key ministries of defense, interior, and foreign affairs. Rabbani may still may wieldconsiderable influence with the rank and file of the party. The most pan-Islamic members of the ideological layer (and hence most inclined towards cooperation with Islamic terrorists) include Saudi-backed Abdul Rasoon Sayyaf and his Ittehad-e-Islami , and the aforementioned Gulbuddin Hekmatyar Both have beenmentioned in analleged plot against the Interim Administration that resulted in hundreds of arrests in Kabul earlyApril 2002. (22) Hekmatyar, a consummatepower-seeker who reportedly enjoys qualified support fromIran, recently has sought to make common cause with former Taliban opponents. (23) Rural-Based Leadership. The patchwork of local tribal headers, mullahs, educated notables, and large landowners constitutes a fourth layer. Thisgroup has multiple sources of connection to higher layers. After almost three decades of conflictwhich has steadily destroyed the basic social, political, and economic structure of the country, manyanalysts question whether traditional leaders are capable of regaining influence via the respectcustomarily given to age, lineage, and education. In the absence of a firm Afghan government orinternational peacekeeper presence, the new forces of local power-the commanders and militialeaders-are likely to engage in endless maneuvering for local dominance and control sources ofrevenue, such as "tax" collections on roads and the opium trade. Economic Interests. Layer Five is composed of a variety of economic interests with countrywide influence, most notably the " transport mafia ", drug kingpins , and smugglers , many of whom appear to play all three roles. A more positivecomponent of this economic interest layer would include exiles , ranging from businessmen,technocrats, and former civil servants, most of whose ties are to Kabul and a few other cities. Dynamic Interaction of Individual Actors and Forces These individual actors and forces are capable of considerable flexibility of alignment; the strongest operate across multiple layers. The Tajik component of the NorthernAlliance is thestrongest, but the organization also enjoys opportunistic support from the Uzbeks and Hazaras, andeven some Pashtuns. The Northern Alliance has the most effective military forces and apolitical-ideological party structure in the form of Rabbani's Jamiat-i-Islami . Finally, the NorthernAlliance benefits from having powerful foreign patrons-Russia, Iran, Uzbekistan, and, more recently,the United States. The Uzbek warlord, General Dostum , controls a vital road connection withCentral Asia and has made and broken several different governments and alliances, and has noapparent Uzbek rivals. The Pashtuns , on the contrary, are divided by tribal and personal loyalties,and weakened by the historical divisions among the Durrani Confederation and Gilzais, in the west,and between the Western Pashtuns as a group and the more independent and unaffiliated EasternPashtun tribal groupings. The Hazaras , a long repressed Shi'a minority of mongol stock, havegained in assertiveness as a consequence of their role in the anti-Soviet campaign and their struggleagainst ethnic cleansing by the Taliban. Organized under the banner of the Hizb-e-Wahadat , andled by Karim Khalili , the Hazaras are not strong enough to bid for power in their own right, buttheywill fight for their autonomy if they feel threatened. (24) During the June 2002 Loya Jirga PresidentKarzai named Khalili as one of three vice-presidents, with unspecified powers. Potential Swing Groups. The muddled matrix is complicated further by the unpredictable behavior of "swing" groups who historically have playedthe spoiler's role. In addition to Dostum, noted above, these include particularlyindependent-minded tribes in southeastern Afghanistan, especially the Shinwaris who inhabitNangahar Province and other areas around Jalalabad and the Kyber Pass. Traditionally the Shinwarisand other eastern Pashtun tribes have engaged in drug production and smuggling, and preyed onKhyber Pass goods traffic. Valuing their independence, they rejected the Durrani supremacy. TheEastern Pashtun tribes often have allied with Tajik and dissident Pashtun challengers to Durrani rule. During the anti-Soviet war, the Shinwaris and other eastern Pashtuns provided the main base ofsupport for competing radical mujahidin groups led by Yunis Khalis and Gulbuddin Hekmatyar, bothof whom belong to non-mainstream Pashtun tribes. These are the tribes who assisted U.S. forcesin the assault on the Tora Bora, some of whom also may have facilitated the escape of Al Qaedaforces. (25) Because Nangarhar Province is one ofthe most productive opium growing regions andcommands one of the main land routes to Pakistan and the West, internecine conflict among ahandful of powerful commanders and tribal leaders has greatly intensified in the post-Taliban era. (26) It was largely because of the potential swing value of the Shinwaris and other Eastern Pashtun tribes that Karzai and senior Tajik leaders in the Northern Alliance-dominated InterimAdministration had appointed the late Haji Abdul Qadir as governor of Nangahar Province, andalso why he was made a vice-president after the June 2002 Emergency Loya Jirga . Qadir, who washead of one of the wealthiest families in the region, was a former mujahidin commander who heldthe same governorship during 1992-1995. Stakes for the Participants. The participants in the current power struggle are driven by a variety of largely negative motives-especially ethnicnationalism, personal power aspirations, vanity, and greed. Principal among the more concretestakes is control and taxation of transportation routes and nodal points, and control of the drug trade. Several contenting impulses and aspirations currently dominate the struggle to define the future of Afghanistan. Most of these tendencies have both positive and negative aspects: despite the depth of ethnic and tribal divisions, all of the contenders for power continue to regard themselves as Afghans, but Pashtun-Tajik antipathy remains high, and Pashtunsare especially angry that Tajiks hold most of the power in Kabul; as it did with the Taliban, the powerful transportation mafia will stronglysupport the establishment of a government that can secure the highways and confine the collectionof taxes and customs duties to the border crossings; but the government currently has no power toprovide security, and cannot do so until basic power issues are resolved; the prospect of $10-15 billion in international aid provides substantialincentives for Afghans to cooperate, at least minimally, with the Interim Administration, but concreteaid has been very slow in arriving and non-governmental organizations (NGOs) and internationaldonor organizations are unable to deliver assistance to much of the countryside due to ongoing powerstruggles; finally, awareness among the current contenders for power, especially withinthe ranks of the Tajiks of the Northern Alliance, of the costs of the internecine conflict that followedthe Soviet withdrawal is evident, and most of the main figures in the Transitional Administrationappear to be eager not to repeat the mistakes of the past. However, as suggested by the conflictbetween Uzbek and Tajik forces for the control of Mazar-i-Sharif and the assassination of HajiQadir, what some call the 23-year-old civil war has not ended, and many Afghans are not ready toput aside past quarrels or give up their personal power aspirations. Four Scenarios for the Future Afghan State Because more than two decades of conflict have largely destroyed the old Afghan polity andeconomy, the past offers no reliable "roadmap" to constructing a politically stable and economicallyviable Afghan state. This conclusion is strongly suggested by two particular developments of thepast two decades-the collapse of the Durrani ascendancy, which started with Daoud's coup in 1973,and the rise of Tajik power and, to a lesser extent, that of other ethnic minorities. Durrani politicaldominance is not likely to be reestablished because of the scattering of the Afghan elite numberingperhaps 100,000, largely to North America and Europe, and the polarization of Pashtun society byinternal conflict and the rise of the predominantly Pashtun Taliban. The return of King Zahir Shahto his country after more than 30 years of exile, may lend some support to the political process butcannot restore the previous status quo-nor is it intended to under the Bonn Accord. A bid byrelatives of the king and their supporters to give the king-and, hence, themselves-a direct role in thegovernance of the country was checked by the exercise of forceful influence by Karzai, the PanjsheriTajik leaders of the Northern Alliance, and, reportedly, the United States. For better or worse, the Tajiks, who are less divided than the Pashtuns, now appear firmly established in Kabul and the Northeast, and Ismail Khan, another Tajik, who styles himself " Emir "(an Arabic word equivalent to prince or ruler) and acts independently of the his former NorthernAlliance colleagues, has largely uncontested control of Herat. General Dostum's control of Mazar-i-Sharif is being contested, but seems insured for the time being. On the other hand,Kandahar, Jalalabad, and other important population centers in the Pashtun South and Southeastshow no similar coalescence under one leader or group of leaders. Democratic Pluralism - A Necessity, Not a Luxury The breakdown of the royalist governing structure and the subsequent inability of either the mujahidin or the Taliban to establish a stable government suggests strongly that both at theprovincial and central levels, stability, if it is possible, seems most likely to come from some formof democratic process. After decades of civil war with a high level of involvement by nearly theentire society, many more Afghans have been politically mobilized than ever in the past. The ideaof returning to a traditional autocratic system, even a benign one, seems likely to be rejected by mostAfghans. As discussed below, a situation involving a largely powerless government in Kabul,coupled with control of the rest of the country by self-appointed regional warlords, might providesome temporary stability but would involve the de facto dissolution of the Afghan state-not aprescription for stability and moderation. These goals are far more likely to be achieved if thevarious competing groups can agree on a workable constitutional model that provides all of the mainethnic and other interests with fair representation and at least the opportunity to cooperate acrossethnic, tribal, and ideological lines to seek to participate in a governing majority. The future of the Afghan state, whether pluralistic or not, depends on a number of factors, especially the actions of the main Afghan contenders for power, the policies of neighboring countrieswith the capacity to intervene in Afghan affairs, and those of the United States and the internationalcommunity. At present, several different outcomes can be envisioned. Four of the more plausibleones are described below, in descending order of desirability for the Afghans and for U.S. interests. 1. Transitional Regime Leading to Pluralistic Democracy Under present circumstances the most desirable outcome would be the successful formation of a broadly representative transitional authority leading ultimately to the establishment of a pluralisticdemocracy, as envisioned by the agreement reached at Bonn in early December 2001. Although theJune 2002 Emergency Loya Jirga appeared to move the political process in the direction outlinedby the Bonn agreement, a number of basic question marks remain about the nature and effectivenessof the Transitional Administration and the outlines of the future constitution and political system. Both the negative lessons of recent history and the attraction of major international aid may constitute sufficient incentives for cooperation among the current members of the TransitionalAdministration in Kabul, but it is questionable whether these negative and positive incentives willbe enough to gain the cooperation of warlords and commanders in the main cities and the provinces. Likewise, an important obstacle to ethnic harmony-the collapse of Pashtun political cohesivenessand the related sense of being dispossessed-is unlikely to be solved by the adjustment of cabinetposts, since the Tajiks will not willingly give up effective control of the key ministries concernedwith defense, internal security, and foreign affairs. (27) The best chance of creating a government witha broadly accepted claim to legitimacy would be one that rests on the foundation of a representativelegislature. 2. Northern Alliance-Dominated State The most obvious consequence of the rise and fall of the Taliban is the stronger position of the minority ethnic groups of the Northern Alliance. Controlling Kabul, Mazar-i-Sharif, Kunduz, andHerat, the constituent elements of the Northern Alliance effectively hold sway over more than halfof the country and all its six international borders except the one with Pakistan. Whether the mainAlliance ethnic components-Tajiks, Uzbeks, and Hazaras - have adequately absorbed the lesson oftheir previous internecine conflict and self-serving opportunism remains doubtful at this point. SomeAlliance leaders clearly understand that the revival of Pashtun power under the banner of the Talibanoccurred because of past Alliance excesses. Others, notably General Dostum and Ismail Khan, stillappear to seek to create a local fiefdoms, and will cooperate with the other Alliance components onlyto the extent that it serves their personal power interests. The Panjsheri Tajiks retained their primacy in the June 2002 Northern Alliance, especially Marshal Fahim, who was continued as Defense Minister and who has been characterized by a seniorU.S. official as one of the "winners" coming out of the conclave. (28) The replacement of YunisQanooni as interior minister by Taj Muhammad Wardak is not viewed as a significant reduction ofTajik control, especially since Qanooni was given a new post as "Security Advisor" in addition toheading the education ministry. (29) It remains tobe seen whether non-Tajiks appointed to otherministries will actually become a part of the governing power structure. The Karzai administrationthus remains at risk of being perceived as simply a cover for Tajik dominance at the center. Sincethe former Northern Alliance still stands little chance of establishing effective sway over thesouthern Pashtun heartland, the end result could be a de facto partition, along the lines of the thirdscenario, below. 3. Disappearance of a Unified Afghan State The complete disappearance of an Afghan state, which still seems unlikely, could occur if current divisions become unresolvable. The regional consequences would be severe. It is doubtfulwhether neighboring countries would be able to avoid competing for control or influence overadjacent areas on the Afghan side of the border. Among other considerations, countries challengedby Islamic extremism or ethnic revolts, such as in the case of Uzbekistan and Tajikistan, would notwant to allow a "no man's land" on their borders. Russia would have a similar interest, i.e., toprevent the overthrow of friendly central Asian states or the establishment of havens for Chechensand other armed independence movements. In addition, if the prospects for Afghan unity were torecede, Russia could decide to give the de facto partition a push to enhance the prospects that the oiland gas of Central Asia exits through Russia and the loose successor to the Soviet Union, theCommonwealth of Independent States (CIS). Afghanistan's western and southern neighbors have a particularly strong traditional interest in influencing Afghan affairs. Iran would be tempted to extend its influence over vast parts of westernAfghanistan that had historically been part of the Persian empire, and also to protect the interests ofco-religionists in the central Hazarajat. Already ties between Iran and the four western borderprovinces commanded by Ismail Khan are close and apparently growing. Pakistan has foresworn any intent to interfere in Afghan affairs as part of its current cooperation with the United States, but if chaos should ensue, Islamabad likely would once again deem itnecessary to find and support Afghan allies who might be able to stabilize the Pashtun belt andcontest for power in Kabul with the Northern Alliance. Such potential allies are not now apparent,but could emerge out current leaders affiliated with Karzai, remnants of the Taliban or-less likelyat this point-the old protege of Pakistan's Inter-Services Intelligence (ISI) organization, GulbuddinHekmatyar. Many analysts and observers are concerned the current situation looks much like the most benign form of disintegration-i.e., the appearance of a unified government, but with little real poweror resources at its command. In addition to regional warlords, a number of areas are effectivelyunder the authority of regional or local shuras (councils of commanders, mullahs, and elders). Fromone point of view, these bodies represent a rough kind of tribal democracy, but in many cases theyare dominated by rich families and/or those with the most men under arms. One particular problemarising out of disintegration is that very little of Afghanistan is without significant numbers ofminorities. Hence, "ethnic cleansing" and voluntary population realignments could create a majorhumanitarian crisis. Some human rights abuses have already been inflicted on Pashtuns living inTajik-majority areas of the North, creating thousands of additional internally displaced persons(IDPs) in refugee camps for internal refugees. (30) The temptation of neighbors to secure their bordersand promote the interests of ethnic and religious counterparts would be strong. The descent of Afghanistan into chaos once again would jeopardize a number of important U.S. interests. These include access to the oil and gas resources of Central Asia, instability that couldspread to the Persian Gulf, a further expansion of opium production in Afghanistan, and thecontinued use of Afghan territory by terrorist groups. The already difficult task of maintainingPakistani cooperation against terrorism might become impossible. 4. Caretaker Ward of the International Community The potential negative consequences of failure to recreate a stable Afghanistan could conceivably impel the United States, its allies, important neighbors such as Russia, and theinternational community, to seek to set up an Afghan-staffed caretaker government backed withforeign advisors and enough international peacekeepers to maintain security in Kabul and othercities. This approach, by which international peacekeeping and nation-building would becomequasi-permanent, rather than transitional, could only work if the Afghans themselves-and thewarlords in particular-decided that accepting such an effort by the international community waspreferable to unending civil strife or undesired political outcomes. In theory, if basic security,services, and reconstruction could be provided to more densely populated areas, Afghans outside thereach of the immediate caretaker authority would gravitate to secure areas to seek the benefits ofinternational support. This scenario likely would require an interim government composed of figures who are acceptable to the major ethnic and other interest groups but who would not themselves be contendersfor power. (31) The most acceptable candidates arelikely to be found among the ranks of Afghans withtechnocratic qualifications, including former senior civil servants, Afghan nationals currently orpreviously with multilateral banks, and other professionals-including current exiles. Some of theseare already in the transitional cabinet. Undoubtedly the government would benefit from theassistance of foreign advisors, either from donor governments or international organizations. Especially weighing against this option is that given Afghanistan's history and current situation, sucha prolonged foreign role could easily become a military and political quagmire. Factors Affecting the Outcome Which, if any, of these scenarios prevails likely will be determined by a number of key factors. Some of these are susceptible to external influence, others can only be decided by the Afghansthemselves. Resolution of Disputes on Power Sharing in the Central Government Little progress can be achieved on other necessary steps until the parties and groups that have the ability to disrupt the process agree on how to share power. As of mid-2002 it still is not clearthat those with the power to disrupt the interim government will cooperate. Even if a stable powerbalance is achieved at the national level, the basic instinct of most of the Afghan leaders andwarlords still is to compete for "turf" and the opportunities to extract cash from the population in theform of taxes and other levies. This will make it very hard to establish effective centralizedinstitutions and extend the reach of the government into the countryside. Results of the June 2002 Emergency Loya Jirga. Given the circumstances and obstacles, observers generally regard the Emergency Loya Jirga thattook place in mid-June 2002 as substantially a success. Despite the fact that the sessions weredivisive and sometimes chaotic, and failed to resolve a number of issues concerning power-sharingin a way that is likely to promote peace and reconciliation, there were a number of positive aspectsto the conclave: the assembly easily confirmed Karzai as head of the new Transitional Administration, a significant vote of confidence in his performance to date and tacitly a victory forthe United States and the international community. a bid by relatives of Zahir Shah and royalist supporters to drop Karzai andpromote the candidacy of the ex-King as President, rather than just a figurehead, was defeated withapparent assistance from U.S. officials. (32) the delegates engaged in a remarkably free and often unruly debate that seemsto have brought some degree of satisfaction even to those who saw themselves on the losing end ofthe outcome. Islamic extremists evidenced little influence and did not obtain significantcabinet representation, although the delegates voted to declare the country an Islamicrepublic. despite the presence of numerous regional commanders with retinues of armedfollowers, the conclave featured a war of words rather than bullets. some 160 appointed women not only participated but were heard frequentlyin the debates. Karzai dropped from his cabinet Amanullah Zadran, a Pashtun, formerlyMinister of Tribal Affairs, whose brother Bacha Khan Zadran, a notorious warlord, has challengedKabul's authority in Paktia Province. The limitations of the meeting also are readily apparent: the process for selecting 1,501 delegates representing 32 provinces and several interest groups and communities was highly uneven and in a number of provinces locally powerfulwarlords reportedly used coercion and even murder to influence delegateselection. the outcome reflected continuing domination of the government by two groupswho have formed an alliance of convenience-Panjshiri Tajiks of the Northern Alliance and Afghanswho are associated with the so-called "Afghan diaspora" and who enjoy western support. Althoughmany of these are de-tribalized Pashtuns with professional backgrounds, they are just as divided astheir tribal cousins, and neither groups of Pushtuns have been able to coalesce in a way that wouldgive them a meaningful share of power. Karzai's strategy to coopt regional warlords by appointing them asvice-presidents appears to have failed, and might even have backfired in the case of Haji Qadir'sassassination. The rejection of the offered posts by Ismail Khan and General Dostum implies theircontinuing intention to maintain their regional autonomy. importantly, the delegates failed to reach agreement on any specific plan forcreating a legislature, or deciding whether the country needed a true legislature with powers to makelaw and approve a budget, or some form of advisory council. Failing to resolve this issue, Karzaiproposed that 45 members of the Loya Jirga remain behind as a council to come up with aproposal. (33) Economic Development and the Issue of Jobs or Guns Up to a certain point the reestablishment of normal life could allow armed fighters to return to peaceful civilian pursuits, but a resurrected traditional economy cannot provide enough jobs or theright kinds of jobs to fully absorb the ranks of the former combatants of whatever stripe. Withoutjobs, and without a public educational system, young Afghan men are likely to gravitate to theservice of warlords and/or to study in the Islamic madrassas, both in Afghanistan and Pakistan. (34) One significant problem is that the families of Afghan emigres have grown in the intervening years,and in many cases will be too large to be supported by the family farmstead, even if it is reclaimedand brought back into production. Some level of industrial development, even rudimentary activitiessuch as food processing, textile manufacturing, and the production of basic farm and householdimplements, would appear necessary to absorb surplus workers and farm labor. Economic Development and The Future Role Islam Because most of the Afghan combatants have mobilized on the basis of an appeal to Islamic sentiment, often of a radical fundamentalist nature, progress towards economic modernization islikely to encounter strong resistance, especially with regard to education and the employment ofwomen in the workforce. Nonetheless, reconstruction based on the revitalization and modernizationof the Afghan economy may be the only way to overcome tendencies towards internecine warfareand chaos. Unless the economy becomes more dynamic, politicized Islam is likely to remain the single most powerful ideological force, even if radical fundamentalism does not appeal to the majority ofAfghans. Assuming that the Taliban remain dispersed and do not play a visible political role, andthat other Islamist forces remain marginalized, religion may not necessarily reemerge as the mainrallying cry of anti-government forces. These are big "ifs," however. The central government mayface difficult choices in attempting to promote modernization and development along secular lines,while not stirring up an Islamist reaction. Issues for U.S. Policy Inevitably U.S. policy will have a significant influence on the outcome of the current effort toreconstruct a stable Afghan state. In addition to playing a key role in driving the Taliban frompower, in concert with Afghan forces on the ground, the United States has been the largest donor byfar to the feeding programs of the United Nations World Food Program (WFP), and it is certain tobe the among the leading contributors to economic reconstruction. For the future, three roles on the part of the United States would appear extremely critical, over and above humanitarian assistance: 1. Support for the Political Process The creation of a moderate Afghan state requires the establishment of a stable political order, the creation of effective state institutions, and the reconstruction of the country's economicinfrastructure and rural economy. Many other countries and international organizations can provideaid, technical assistance, and even security for Kabul and other important cities, but most observersbelieve that only the United States has the international prestige and influence, the logisticalcapabilities, and the military power to influence decisively the internal Afghan political process. Theinability of the United Nations and humanitarian NGOs to stave off Afghanistan's descent into chaosafter the withdrawal of the Soviet Union, makes clear that the reconstruction of a moderate Afghanstate cannot be accomplished without strong U.S. engagement. By most accounts the United States played a strong behind-the-scenes role at the June 2002 Loya Jirga in supporting Karzai and short-circuiting a bid by Pushtun supporters of the ex-king,Zahir Shah, to elect him head of state. Unfortunately, the picture of the ex-king, sitting in a chairflanked by Karzai and U.S. special representative for Afghanistan, Zalmay Khalilzad, anddeclaring-through a statement read by his aid-that he would not be a candidate, tended to reinforcedthe impression of American interference. On the other hand, the bid by relatives and supporters ofthe ex-king to make elect him head of state was widely viewed as a transparent ploy by individualswho are widely regarded as corrupt and out of touch with current Afghan realities. 2. Close Engagement with Pakistan Close U.S. engagement with Pakistan, the country with the greatest capacity for good or ill, will also be critical to the creation of a stable Afghanistan. Pakistan, which by far has the greatestcapacity to influence developments in the Pashtun South, is also the country whose perceivedinterests are the most threatened by the collapse of the Taliban and the rising power of the Tajik andUzbek-dominated Northern Alliance. Islamabad sees several potential sources of danger, theprimary ones being the possibility of ongoing conflict and chaos in the Pashtun belt and heightenedIndian, Russian, and Iranian influence in Kabul. The Bush Administration and the Congress appear to recognize that Pakistan's military president, General Musharraf, has crossed the Rubicon in committing to cooperate closely in theU.S.-led anti-terrorist campaign. The decision, which was largely dictated by extreme U.S. pressure,was not without a number of benefits for Pakistan, dramatically displayed during Musharraf'sFebruary 2002 visit to Washington. Apart from various kinds of new assistance and debt relief,Musharraf's crackdown on his own Islamic radicals showed that these groups generally lacked strongpublic support, and strengthened his hold on power. On the other hand, increasing tensions withIndia over Kashmir, fueled by Pakistan's own alleged support of local terrorist groups, hasintensified Islamabad's perception of being squeezed between a potentially hostile or unstableAfghanistan and a demonstrably hostile India. Especially because of the possession of nuclear weapons by both India and Pakistan, the United States has a compelling interest in pressuring both Pakistan and India to act responsibly on theKashmir issue, as was demonstrated during a tense standoff in mid-2002, while also making sure thatPakistan continues to play a positive role in Afghanistan and in the anti-terrorist fight. The twinAmerican stakes in cooperation with Islamabad and preventing an Indian-Pakistan appear to mandatethe continuing close engagement with Pakistan, including efforts to promote support for U.S.viewpoints among parties and leaders who are likely to influence Pakistani policies if and whenmilitary rule gives way to elections and the restoration of civilian government. 3. Bilateral Assistance and Participation in International Assistance and DevelopmentEfforts Both the Bush Administration and the Congress have made clear their intention to provide substantial aid to Afghanistan, but the actual amount and kind of assistance that the United Statesprovides could prove highly important to the prospects for recreating a stable Afghan government. The Tokyo meeting of aid donors in January 2002, which was co-hosted by Japan, the United States,the European Union, and Saudi Arabia, generated nearly $1.5 billion in near-term aid pledges,including a U.S. commitment of $296 million. (35) The Bush Administration has allocated about$311.3 million for humanitarian assistance to Afghanistan for FY 2002, which began October 1,2001. (36) U.S. aid provided through the WFP and NGOs will continue to be important in preventing famine, reconstructing agriculture, and restoring basic infrastructure, but visible bilateral Americanaid would also appear to be critical to influencing U.S.-desired political outcomes. In this respect,many argue that if the Bonn process is to be viable, warlords and others who are calculating whetherto cooperate with the Bonn process or carve out permanent fiefdoms arguably need to see that theInterim Administration, and the arrangements for creating a new, pluralistic democratic order havethe backing of the United States and other aid donors. Observers also note, however, that it is criticalthat U.S. support is seen as bringing concrete benefits for the country and not just influence over theKarzai administration. Conclusion: Issues for Congressional Consideration A number of assassinations and other incidents of political violence both before and after theEmergency Loya Jirga underscore that events in Afghanistan may be coming to a head sooner ratherthan later. As of July 2002, positive developments appear in many cases to be offset by negativeones, and the overall state of progress becomes a matter of individual judgment or perspective. Issues of Special Congressional Interest: Narcotics Production and Women's Rights In hearing statements, speeches, and in proposed legislation, Members of Congress have stressed their concerns particularly about Afghanistan's status as a major opium production area andabout the status of women. Both of these are extremely complicated issues given Afghanistan'ssocial and economic traditions. Progress on both issues, if it is to occur, clearly depends onfundamental economic and social modernization, which is most likely to occur under a governmentthat has both a progressive outlook and popular support based on participatory politics. Narcotics or Development. The U.S. stake in economic development in Afghanistan is even more clear with regard to Afghan's status as theworld's leading producer of opium. Many of the poppy-growing areas are the fiefdoms of triballeaders whose tribes which have for centuries depended on illicit sources of income, including drugsand smuggling. In the recent past, before the Taliban takeover, international agencies reportedly hadsome success in gaining cuts in poppy production in Nangahar and other poppy-growing areas ofsoutheastern Afghanistan, in exchange for economic assistance, but such gains tended to beinconsistent, at best. The Karzai administration has announced an ambitious U.S.-backed program to make one-time payments to farmers to destroy their opium crops or face destruction by government agents withoutcompensation. The payments are said to amount to something more than for a wheat crop, but muchless than the value of an opium crop. Reportedly, the United States, the U.K., and other Westerncountries have agreed to finance the program, but U.S. officials are also said to despair of having anymajor impact for three major reasons: (1) the Kabul government simply does not have the staff orreach to have an impact on many of the most important producing areas; (2) the crop is nearly readyfor harvest; and (3) the poppy growers and their affiliated smugglers and warlords will likely fightagainst any effort to forcefully destroy the crops. A decree signed by Chairman Karzai on behalf ofthe interim government, which would make illegal the collection of loans to opium growers, iswidely viewed as unenforceable. (37) Someobservers speculate that malfeasance in the anti-narcoticsprogram in Nangahar Province, and/or the opposition by drug lords, may lie at the root of HajiQadir's assassination in early July 2002. (38) Future Status of Women in Afghan Society. The issue of the rights of women in Afghan society has been at the center of the struggle betweenmodernization and tradition. The same political conditions that have created support for reactionaryreligious ideas have fostered retrogression in the status of women. Both in the refugee camps andin conflict areas, young men were separated from the company of even their female relatives. Someanalysts believe the lack of ordinary contact with women in the refugee camps across the border inPakistan has heightened sex discrimination in Afghanistan beyond traditional levels. Also, becauseof the concerns of women about their safety in a male-dominated society, they sometimes themselvesembrace the veil and burka out of self-protection. (39) The picture is not uniformly negative, however. Especially in urban areas, even socially conservative Afghans have recognized the importance of female education. Young women haveflocked enthusiastically to Kabul University and other educational institutions since they havereopened. Two regional warlords, General Dostum in the North and Ismail Khan in the West supportand fund female education. The real rate of progress in this area, however, probably will depend onthe pace of economic revival and modernization. Women's organizations and other observers regard the outcome of the Loya Jirga as mixed. On the one hand, women actively participated and their often eloquent speeches received a respectfulhearing. A woman even ran for president-coming in a distant second in a three cornered race. Onthe other hand, a conservative Islamic reaction against the participation of women in thecabinet-including a negative opinion from Karzai's appointee as Chief Justice of the Supreme Court,an Islamic conservative-caused the President not to re-appoint a woman, Dr. Sima Samar, as theMinister of Women's Affairs. He appointed her as head of the Human Rights Commission,instead. (40) Three Policy Issues for Possible Congressional Consideration Congress may wish to consider several issues in particular that bear on the ability of the United States to provide timely and effective assistance and support to the interim government and the Bonnprocess. The first is the reported inability of U.S. representatives in Kabul to provide reliableexpectations regarding the deliveries of various forms of assistance. One source of delay in thedelivery of U.S. support to the Transitional Administration is that funding is scattered over at leastsix different departments and agencies, all of which have their own bureaucratic procedures. Thesebottlenecks have been a persistent problem in a number of situations, including U.S. assistance toBosnia. (41) It may be possible to bring more orderand cohesion to this process without altering basiclines of department and agency authority and responsibility, which have evolved over a long periodof time and would be difficult to change. Tension between Dual U.S. Objectives. From the point of view of Afghan politics, an even more important issue may be a significant level oftension between the objectives of U.S. military operations against Taliban and Al Qaeda remnantsand the goal of bolstering the power of the Kabul administration vis-à-vis regional warlords. Bynearly all accounts, U.S. military forces made brilliant use of local Afghan militias and otherirregular forces, thereby advancing the date for the replacement of the Taliban government by theInterim Administration, as well as saving many lives-American, allied, and Afghan. Unfortunately,U.S. military strategy, including on-going operations, inadvertently has tended to bolster the powerof some warlords who are resisting the imposition of Kabul's authority, and also increased thepossibility that any renewal of internal conflict will be more intense and deadly. A start was madein resolving this contradiction by the recent "graduation" of the first contingent of a new,multi-ethnic national army, but as noted above, this will long remain a negligible force whencompared to those of the regional warlords - even those in Kabul itself. The mistaken air attacks on four villages in Uruzgan Province in the early hours of July 2, 2002, have generated a number of calls for a reconsideration of U.S. strategy, especially the heavy use ofair power based on intelligence information provided by local Afghan militias and warlords. Severalserious mistaken attacks on civilians, including reported Karzai supporters and villages friendly tothe government, have been blamed at least in part on bad intelligence supplied by local allies of U.S.and other western military forces. Some suspect that several of these incidents may be the result ofdeliberate actions by Afghan warlords and militia leaders to exact revenge on rivals. Clearly the U.S. and its western allies cannot operate without intelligence provided by local Afghan forces, but the use of extremely lethal ordnance makes any error highly costly in human life. Some analysts and even Afghan victims of U.S. air attacks have suggested that too much relianceis being put on stand-off air attacks and not enough on using ground troops to reconnoiter or engage suspected targets and verify them before initiating devastating air attacks. Because of theseincidents, some observers warn that the policies of the United States, and to a lesser extent itswestern European allies, are resting on shifting sands. Response to Calls for Expanded International Peacekeeping. Especially because U.S. forces are already engaged as de factoarbiters and peacekeepers, often at risk to the forces themselves, a number of Members of Congresshave called on the Bush Administration to reconsider its opposition to increasing the numbers anddispersion of international peacekeepers, possibly including U.S. forces. (42) The Defense Departmenthas argued that the presence of international peacekeeping forces could complicate the coordinationof their ongoing military operations, and that other countries are not eager to fill this role. Criticsrespond that gaining additional allied participation in peacekeeping requires U.S. leadership andparticipation. (43) International aid agencies and aid workers are almost universal in declaring that they cannot function without the security provided by international peacekeepers. Also, aid agencies note thatinternational peacekeepers have been a "draw" factor in attracting hundreds of thousands of refugeesback to their homes, but thus far mainly in the neighborhood of Kabul. International relief officialsargue that much more rapid progress could be made in returning both external and internal refugeesto their homes if the size of the peacekeeping force could be enlarged and deployed to otherpopulation centers. Possible Benefits of a More Transparent U.S. Military Role on theGround. Bush Administration officials say that the military phase of the war is allbut over, but that U.S. troops will remain for a long time in order to keep Al Qaeda and the Talibanoff balance and prevent them from regaining the initiative. Under these circumstances, one potentialbenefit of making the current U.S. role more transparent would be to defuse Afghan suspicions thatthe United States is seeking to convert the ongoing hunt for Taliban and Al Qaeda remnants into anindefinite military occupation. Afghanistan has a history of reacting harshly to the presence offoreign military forces and interference in Afghan politics. Every local conflict that U.S. forces maydefuse has the potential for creating enemies. This is an inevitable consequence of peacekeeping,but since many ordinary Afghans welcome an international presence and the security it provides,operating under U.N. or other international auspices may provoke less of a backlash. Given manyindications from American officials that substantial U.S. forces will remain in Afghanistan for a longtime to come, Congress may wish to consider further the nature and modalities of the U.S. militaryrole, including the relationship of U.S. forces to ISFA. Appendix I: Bonn Agreements on Afghanistan AGREEMENT ON PROVISIONAL ARRANGEMENTS IN AFGHANISTAN PENDING THE RE-ESTABLISHMENT OF PERMANENT GOVERNMENT INSTITUTIONS The participants in the UN Talks on Afghanistan, In the presence of the Special Representative of the Secretary-General for Afghanistan, Determined to end the tragic conflict in Afghanistan and promote national reconciliation, lasting peace, stability and respect for human rights in the country, Reaffirming the independence, national sovereignty and territorial integrity of Afghanistan, Acknowledging the right of the people of Afghanistan to freely determine their own political future in accordance with the principles of Islam, democracy, pluralism and social justice, Expressing their appreciation to the Afghan mujahidin who, over the years, have defended the independence, territorial integrity and national unity of the country and have played a major role inthe struggle against terrorism and oppression, and whose sacrifice has now made them both heroesof jihad and champions of peace, stability and reconstruction of their beloved homeland,Afghanistan, Aware that the unstable situation in Afghanistan requires the implementation of emergency interim arrangements and expressing their deep appreciation to His Excellency ProfessorBurhanuddin Rabbani for his readiness to transfer power to an interim authority which is to beestablished pursuant to this agreement, Recognizing the need to ensure broad representation in these interim arrangements of all segments of the Afghan population, including groups that have not been adequately represented atthe UN Talks on Afghanistan, Noting that these interim arrangements are intended as a first step toward the establishment of a broad-based, gender-sensitive, multi-ethnic and fully representative government, and are notintended to remain in place beyond the specified period of time, Recognizing that some time may be required for a new Afghan security force to be fully constituted and functional and that therefore other security provisions detailed in Annex I to thisagreement must meanwhile be put in place, Considering that the United Nations, as the internationally recognized impartial institution, has a particularly important role to play, detailed in Annex II to this agreement, in the period prior to theestablishment of permanent institutions in Afghanistan, Have agreed as follows: THE INTERIM AUTHORITY I. General provisions 1) An Interim Authority shall be established upon the official transfer of power on 22 December 2001. 2) The Interim Authority shall consist of an Interim Administration presided over by a Chairman, a Special Independent Commission for the Convening of the Emergency Loya Jirga , anda Supreme Court of Afghanistan, as well as such other courts as may be established by the InterimAdministration. The composition, functions and governing procedures for the InterimAdministration and the Special Independent Commission are set forth in this agreement. 3) Upon the official transfer of power, the Interim Authority shall be the repository of Afghan sovereignty, with immediate effect. As such, it shall, throughout the interim period, representAfghanistan in its external relations and shall occupy the seat of Afghanistan at the United Nationsand in its specialized agencies, as well as in other international institutions and conferences. 4) An Emergency Loya Jirga shall be convened within six months of the establishment of the Interim Authority. The Emergency Loya Jirga will be opened by His Majesty Mohammed Zaher[sic], the former King of Afghanistan. The Emergency Loya Jirga shall decide on a TransitionalAuthority, including a broad-based transitional administration, to lead Afghanistan until such timeas a fully representative government can be elected through free and fair elections to be held no laterthan two years from the date of the convening of the Emergency Loya Jirga . 5) The Interim Authority shall cease to exist once the Transitional Authority has been established by the Emergency Loya Jirga . 6) A Constitutional Loya Jirga shall be convened within eighteen months of the establishment of the Transitional Authority, in order to adopt a new constitution for Afghanistan. In order to assistthe Constitutional Loya Jirga prepare the proposed Constitution, the Transitional Administrationshall, within two months of its commencement and with the assistance of the United Nations,establish a Constitutional Commission. II. Legal framework and judicial system 1) The following legal framework shall be applicable on an interim basis until the adoption of the new Constitution referred to above: i) The Constitution of 1964, a/ to the extent that its provisions are not inconsistent with those contained in this agreement, and b/ with the exception of those provisions relatingto the monarchy and to the executive and legislative bodies provided in the Constitution;and ii) existing laws and regulations, to the extent that they are not inconsistent with this agreement or with international legal obligations to which Afghanistan is a party, or withthose applicable provisions contained in the Constitution of 1964, provided that theInterim Authority shall have the power to repeal or amend those laws and regulations. 2) The judicial power of Afghanistan shall be independent and shall be vested in a Supreme Court of Afghanistan, and such other courts as may be established by the Interim Administration.The Interim Administration shall establish, with the assistance of the United Nations, a JudicialCommission to rebuild the domestic justice system in accordance with Islamic principles,international standards, the rule of law and Afghan legal traditions. III. Interim Administration A. Composition 1) The Interim Administration shall be composed of a Chairman, five Vice Chairmen and 24 other members. Each member, except the Chairman, may head a department of the InterimAdministration. 2) The participants in the UN Talks on Afghanistan have invited His Majesty Mohammed Zaher [sic], the former King of Afghanistan, to chair the Interim Administration. His Majesty has indicatedthat he would prefer that a suitable candidate acceptable to the participants be selected as the Chairof the Interim Administration. 3) The Chairman, the Vice Chairmen and other members of the Interim Administration have been selected by the participants in the UN Talks on Afghanistan, as listed in Annex IV to thisagreement. The selection has been made on the basis of professional competence and personalintegrity from lists submitted by the participants in the UN Talks, with due regard to the ethnic,geographic and religious composition of Afghanistan and to the importance of the participation ofwomen. 4) No person serving as a member of the Interim Administration may simultaneously hold membership of the Special Independent Commission for the Convening of the Emergency LoyaJirga . B. Procedures 1) The Chairman of the Interim Administration, or in his/her absence one of the Vice Chairmen, shall call and chair meetings and propose the agenda for these meetings. 2) The Interim Administration shall endeavour to reach its decisions by consensus. In order for any decision to be taken, at least 22 members must be in attendance. If a vote becomes necessary,decisions shall be taken by a majority of the members present and voting, unless otherwise stipulatedin this agreement. The Chairman shall cast the deciding vote in the event that the members aredivided equally. C. Functions 1) The Interim Administration shall be entrusted with the day-to-day conduct of the affairs of state, and shall have the right to issue decrees for the peace, order and good government ofAfghanistan. 2) The Chairman of the Interim Administration or, in his/her absence, one of the Vice Chairmen, shall represent the Interim Administration as appropriate. 3) Those members responsible for the administration of individual departments shall also be responsible for implementing the policies of the Interim Administration within their areas ofresponsibility. 4) Upon the official transfer of power, the Interim Administration shall have full jurisdiction over the printing and delivery of the national currency and special drawing rights from internationalfinancial institutions. The Interim Administration shall establish, with the assistance of the UnitedNations, a Central Bank of Afghanistan that will regulate the money supply of the country throughtransparent and accountable procedures. 5) The Interim Administration shall establish, with the assistance of the United Nations, an independent Civil Service Commission to provide the Interim Authority and the future TransitionalAuthority with shortlists of candidates for key posts in the administrative departments, as well asthose of governors and uluswals, in order to ensure their competence and integrity. 6) The Interim Administration shall, with the assistance of the United Nations, establish an independent Human Rights Commission, whose responsibilities will include human rightsmonitoring, investigation of violations of human rights, and development of domestic human rightsinstitutions. The Interim Administration may, with the assistance of the United Nations, alsoestablish any other commissions to review matters not covered in this agreement. 7) The members of the Interim Administration shall abide by a Code of Conduct elaborated in accordance with international standards. 8) Failure by a member of the Interim Administration to abide by the provisions of the Code of Conduct shall lead to his/her suspension from that body. The decision to suspend a member shallbe taken by a two-thirds majority of the membership of the Interim Administration on the proposalof its Chairman or any of its Vice Chairmen. 9) The functions and powers of members of the Interim Administration will be further elaborated, as appropriate, with th assistance of the United Nations. IV. The Special Independent Commission for the Convening of the Emergency Loya Jirga 1) The Special Independent Commission for the Convening of the Emergency Loya Jirga shall be established within one month of the establishment of the Interim Authority. The SpecialIndependent Commission will consist of twenty-one members, a number of whom should haveexpertise in constitutional or customary law. The members will be selected from lists of candidatessubmitted by participants in the UN Talks on Afghanistan as well as Afghan professional and civilsociety groups. The United Nations will assist with the establishment and functioning of thecommission and of a substantial secretariat. 2) The Special Independent Commission will have the final authority for determining the procedures for and the number of people who will participate in the Emergency Loya Jirga . TheSpecial Independent Commission will draft rules and procedures specifying (i) criteria for allocationof seats to the settled and nomadic population residing in the country; (ii) criteria for allocation ofseats to the Afghan refugees living in Iran, Pakistan, and elsewhere, and Afghans from the diaspora;(iii) criteria for inclusion of civil society organizations and prominent individuals, including Islamicscholars, intellectuals, and traders, both within the country and in the diaspora. The SpecialIndependent Commission will ensure that due attention is paid to the representation in theEmergency Loya Jirga of a significant number of women as well as all other segments of the Afghanpopulation. 3) The Special Independent Commission will publish and disseminate the rules and procedures for the convening of the Emergency Loya Jirga at least ten weeks before the Emergency LoyaJirga convenes, together with the date for its commencement and its suggested location and duration. 4) The Special Independent Commission will adopt and implement procedures for monitoring the process of nomination of individuals to the Emergency Loya Jirga to ensure that the process ofindirect election or selection is transparent and fair. To pre-empt conflict over nominations, theSpecial Independent Commission will specify mechanisms for filing of grievances and rules forarbitration of disputes. 5) The Emergency Loya Jirga will elect a Head of the State for the Transitional Administration and will approve proposals for the structure and key personnel of the Transitional Administration. V. Final provisions 1) Upon the official transfer of power, all mujahidin, Afghan armed forces and armed groups in the country shall come under the command and control of the Interim Authority, and bereorganized according to the requirements of the new Afghan security and armed forces. 2) The Interim Authority and the Emergency Loya Jirga shall act in accordance with basic principles and provisions contained in international instruments on human rights and internationalhumanitarian law to which Afghanistan is a party. 3) The Interim Authority shall cooperate with the international community in the fight against terrorism, drugs and organized crime. It shall commit itself to respect international law and maintainpeaceful and friendly relations with neighbouring countries and the rest of the internationalcommunity. 4) The Interim Authority and the Special Independent Commission for the Convening of the Emergency Loya Jirga will ensure the participation of women as well as the equitable representationof all ethnic and religious communities in the Interim Administration and the Emergency Loya Jirga . 5) All actions taken by the Interim Authority shall be consistent with Security Council resolution 1378 (14 November 2001) and other relevant Security Council resolutions relating toAfghanistan. 6) Rules of procedure for the organs established under the Interim Authority will be elaborated as appropriate with the assistance of the United Nations. This agreement, of which the annexes constitute an integral part, done in Bonn on this 5th day of December 2001 in the English language, shall be the authentic text, in a single copy which shallremain deposited in the archives of the United Nations. Official texts shall be provided in Dari andPashto, and such other languages as the Special Representative of the Secretary-General maydesignate. The Special Representative of the Secretary-General shall send certified copies in English,Dari and Pashto to each of the participants. For the participants in the UN Talks on Afghanistan: Ms. Amena Afzali Mr. S. Hussain Anwari Mr. Hedayat Amin Arsala Mr. Sayed Hamed Gailani Mr. Rahmatullah Musa Ghazi Eng. Abdul Hakim Mr. Houmayoun Jareer Mr. Abbas Karimi Mr. Mustafa Kazimi Dr. Azizullah Ludin Mr. Ahmad Wali Massoud Mr. Hafizullah Asif Mohseni Prof. Mohammad Ishaq Nadiri Mr. Mohammad Natiqi Mr. Yunus Qanooni Dr. Zalmai Rassoul Mr. H. Mirwais Sadeq Dr. Mohammad Jalil Shams Prof. Abdul Sattar Sirat Mr. Humayun Tandar Mrs. Sima Wali General Abdul Rahim Wardak Mr. Pacha Khan Zadran Witnessed for the United Nations by: Mr. Lakhdar Brahimi Special Representative of the Secretary-General for Afghanistan ANNEX I INTERNATIONAL SECURITY FORCE 1. The participants in the UN Talks on Afghanistan recognize that the responsibility for providing security and law and order throughout the country resides with the Afghans themselves.To this end, they pledge their commitment to do all within their means and influence to ensure suchsecurity, including for all United Nations and other personnel of international governmental andnon-governmental organizations deployed in Afghanistan. 2. With this objective in mind, the participants request the assistance of the international community in helping the new Afghan authorities in the establishment and training of new Afghansecurity and armed forces. 3. Conscious that some time may be required for the new Afghan security and armed forces to be fully constituted and functioning, the participants in the UN Talks on Afghanistan request theUnited Nations Security Council to consider authorizing the early deployment to Afghanistan of aUnited Nations mandated force. This force will assist in the maintenance of security for Kabul andits surrounding areas. Such a force could, as appropriate, be progressively expanded to other urbancentres and other areas. 4. The participants in the UN Talks on Afghanistan pledge to withdraw all military units from Kabul and other urban centers or other areas in which the UN mandated force is deployed. It wouldalso be desirable if such a force were to assist in the rehabilitation of Afghanistan's infrastructure. ANNEX II ROLE OF THE UNITED NATIONS DURING THE INTERIM PERIOD 1. The Special Representative of the Secretary-General will be responsible for all aspects of the United Nations' work in Afghanistan. 2. The Special Representative shall monitor and assist in the implementation of all aspects of this agreement. 3. The United Nations shall advise the Interim Authority in establishing a politically neutral environment conducive to the holding of the Emergency Loya Jirga in free and fair conditions. TheUnited Nations shall pay special attention to the conduct of those bodies and administrativedepartments which could directly influence the convening and outcome of the Emergency LoyaJirga . 4. The Special Representative of the Secretary-General or his/her delegate may be invited to attend the meetings of the Interim Administration and the Special Independent Commission on theConvening of the Emergency Loya Jirga . 5. If for whatever reason the Interim Administration or the Special Independent Commission were actively prevented from meeting or unable to reach a decision on a matter related to theconvening of the Emergency Loya Jirga , the Special Representative of the Secretary-General shall,taking into account the views expressed in the Interim Administration or in the Special IndependentCommission, use his/her good offices with a view to facilitating a resolution to the impasse or adecision. 6. The United Nations shall have the right to investigate human rights violations and, where necessary, recommend corrective action. It will also be responsible for the development andimplementation of a programme of human rights education to promote respect for and understandingof human rights. ANNEX III REQUEST TO THE UNITED NATIONS BY THE PARTICIPANTS AT THE UN TALKS ON AFGHANISTAN The participants in the UN Talks on Afghanistan hereby 1. Request that the United Nations and the international community take the necessary measures to guarantee the national sovereignty, territorial integrity and unity of Afghanistan as well as thenon-interference by foreign countries in Afghanistan's internal affairs; 2. Urge the United Nations, the international community, particularly donor countries and multilateral institutions, to reaffirm, strengthen and implement their commitment to assist with therehabilitation, recovery and reconstruction of Afghanistan, in coordination with the InterimAuthority; 3. Request the United Nations to conduct as soon as possible (i) a registration of voters in advance of the general elections that will be held upon the adoption of the new constitution by theconstitutional Loya Jirga and (ii) a census of the population of Afghanistan. 4. Urge the United Nations and the international community, in recognition of the heroic role played by the mujahidin in protecting the independence of Afghanistan and the dignity of its people,to take the necessary measures, in coordination with the Interim Authority, to assist in thereintegration of the mujahidin into the new Afghan security and armed forces; 5. Invite the United Nations and the international community to create a fund to assist the families and other dependents of martyrs and victims of the war, as well as the war disabled; 6. Strongly urge that the United Nations, the international community and regional organizations cooperate with the Interim Authority to combat international terrorism, cultivation andtrafficking of illicit drugs and provide Afghan farmers with financial, material and technicalresources for alternative crop production.

The U.S.-led effort to end Afghanistan's role as host to Osama bin Laden and other anti-western Islamic terrorists requires not only the defeat of the Taliban but also the reconstruction of a stable,effective, and ideologically moderate Afghan state. Otherwise, the country could continue to be apotential base for terrorism and a source of regional instability. An important milestone wasachieved in June 2002 with the generally successful conclusion of an Emergency Loya Jirga ("grandcouncil"), which confirmed Hamid Karzai, an ethnic Pashtun member of the western educated elitewith family ties to the former king as head of a Transitional Administration. Karzai, who previouslyheaded an Interim Administration formed in December 2001, is charged with organizing agovernment, supervising the drafting of a constitution, and preparing for national elections to be heldin December 2003. The Loya Jirga failed to satisfy many of the participants, especially Pashtuns, who feel under-represented in distribution of cabinet ministries, but more than 1,500 Afghans from all ethnicgroups and walks of life had an opportunity to vent long pent up feelings and engage in free flowingdebate about the country's future. Karzai has gained the nominal support of major regional warlords,but his authority remains dependent on support from the militarily powerful ethnic Tajik minorityand his status as a broadly acceptable figure who can attract international assistance. The Bush Administration and the Congress have indicated strong support for humanitarian relief and reconstruction, but the nature of the longer term U.S. role remains to be determined. Asof mid-2002, the Administration remained focused on the military campaign and resistant toextensive participation in "nation building," a stance some in Congress say is too limited. In reality,U.S. forces have repeatedly played a de facto peacekeeping role in defusing conflicts among Afghanallies, and have sometimes become embroiled in local power struggles. Some Afghan warlords havebeen accused of causing mistaken attacks on civilians or pro-Karzai groups by providing falseintelligence to American forces. Major obstacles to the goal of a stable and ideologically moderate Afghan state include: long-standing power aspirations of rival tribal and ethnic groups; the long-term decline of Afghanstate institutions that began with the Communist/Soviet occupation decade of 1979-89, andaccelerated under the Taliban; the recent rapid increase in opium production and local powerstruggles for control of the lucrative drug trade; and the resiliency of politicized Islam, as promotedboth by the Taliban and other radical Islamist parties, which retains appeal to many Afghans. A stable and ideologically moderate Afghanistan is unlikely to be constructed without significant near-term aid to reestablish security, relieve immediate economic distress, and provide alternateemployment for former combatants, and extensive and long-term reconstruction support frombilateral and multilateral aid donors. To date, aid actually delivered to the Kabul administration hasbeen much less than promised. A stable Afghanistan also require that neighboring countries playa constructive role, or - at a minimum - avoid interfering in the country's internal affairs.

Introduction Congress is currently considering major legislation related to climate change. Climate change responses have typically been categorized into two broad types: mitigation and adaptation. Mitigation measures attempt to slow down the occurrence of climate change by, for example, reducing greenhouse gas emissions. Adaptation measures, on the other hand, aim to improve an individual or institution's ability to cope with or avoid harmful impacts of climate change, and to take advantage of potential beneficial ones. While much attention has been paid to mitigation efforts, a growing focus on current impacts of climate change has led to specific provisions in several bills that would increase research on and programmatic attention to possible options for adaptation. Climate change mitigation and adaptation activities are not mutually exclusive, and in most cases can actually be complementary. Because the extent of climate change impacts upon different ecosystems, regions, and sectors of the economy will depend not only on the sensitivity of those systems to climate change, but also on the systems' ability to adapt to climate change, both types of activities are considered by many to be an essential part of a comprehensive approach to dealing with the impacts of climate change. The American Clean Energy and Security Act of 2009 ( H.R. 2454 ) passed the House on June 26, 2009. The Senate Environment and Public Works (EPW) Committee approved the Clean Energy, Jobs, and Power Act ( S. 1733 ) on November 5, 2009. Both H.R. 2454 and S. 1733 would establish a cap-and-trade system to regulate greenhouse gas emissions, and address energy topics including energy efficiency and renewable energy. Both bills also include adaptation provisions that (1) seek to better assess the impacts of climate change and variability that are occurring now and in the future; and (2) support adaptation activities related to climate change, both domestically and internationally. This report summarizes and compares the adaptation-related provisions in H.R. 2454 and S. 1733 . A side-by-side table in an Appendix to the report compares relevant provisions related to climate change adaptation in both bills. The provisions are grouped into the following headings: International Climate Change Adaptation Domestic Climate Change Adaptation (including the National Climate Change Adaptation Program and the National Climate Services Program) State and Tribal Programs Public Health Natural Resources Adaptation Other Climate Change Adaptation Programs, including Water Resources (in S. 1733 only) Climate Change and Adaptation Importance of Adaptation Climate-related changes have been observed in the United States and globally. A recent report by the U.S. Global Change Research Program (USGCRP) provided scientific documentation of the impacts of climate change already occurring in the United States. The report analyzed different sectors and regions of the United States and concluded that climate disruption causes a wide range of damaging impacts in the United States currently, and that these impacts will continue to intensify, depending on the region. The report also found that population growth and increased use of resources will limit the ability of society and natural systems to adapt successfully. Specific findings include increased: stress on water resources, which will amplify regional droughts and reduce water supply, especially in regions dependent on western mountain snowpack; risk for coastal settlements, infrastructure, and ecosystems from sea-level rise and more intense hurricanes and storm surges; numbers of wildfires and areas of forest adversely affected or destroyed by pest outbreaks linked to warming; threats to human health related to heat waves, poor air quality, and insect-borne diseases; challenges to crop and livestock production due to increasing stress on water resources, increasing temperatures, increasing outbreaks of pests and diseases, and the need for new management practices; stress of population growth and overuse of resources, which will limit the ability of society and natural systems to adapt successfully. The Intergovernmental Panel on Climate Change (IPCC) stated in its Fourth Assessment Report that "adaptation will be necessary to address impacts resulting from the warming which is already unavoidable due to past emissions." The panel concluded that many industrial sectors and the natural environment, including agriculture, forestry, water resources, human health, coastal settlements, and natural ecosystems, will need to adapt to a changing climate or possibly face diminished productivity, functioning, and health. Adaptation can include a wide range of activities. For agriculture, examples of adaptation can include farmers changing management practices—for example, altering their planting dates and irrigation scheduling—or farmers switching to different crop varieties altogether, in response to changing temperature and rainfall regimes. For coastal regions, strategies to prevent damage from climate change and rising sea levels can include improving shoreline protection measures—for example, installing dikes, levies, other structures, and beach vegetation—or can result in companies relocating key business centers away from coastal areas vulnerable to inundation and hurricanes. The costs of implementing adaptation measures are generally considered in relation to the value of the assets protected, in order to assess the net benefit of adaptation investments. Current Status of Public Action While adaptation as an approach for dealing with the impacts of climate change is gaining increasing attention, few examples exist of concrete actions or strategies dealing with adaptation across different levels of government. According to a recent report by the National Research Council (NRC), individuals and institutions are unprepared both conceptually and practically for meeting the challenges and opportunities that climate change presents. Similarly, at a recent hearing of the House Select Committee on Energy Independence and Global Warming, experts testified that current U.S. adaptation efforts are largely ad hoc, uncoordinated, underfunded, and lacking the information needed to make critical decisions. Specifically, testimony from the Government Accountability Office (GAO), based on its recently released report on nationwide climate change adaptation efforts, concluded that adaptation efforts are often constrained by a lack of site-specific data, such as local projections of expected changes, and by a lack of clear roles and responsibilities among federal, state, and local agencies. The NRC report included recommendations to bolster the capacity of federal programs in the area of climate science and information; to strengthen research on adaptation, mitigation, and vulnerability; to initiate a periodic national assessment of climate impacts and responses; and to routinely provide policymakers and the public with the relevant scientific information, tools, and forecasts to make better-informed decisions. Adaptation initiatives are starting to gain traction at the federal and state levels. For instance, the Department of Interior (DOI) recently launched an internal agency initiative to develop a coordinated strategy to address current and future impacts of climate change. The DOI initiative, which was established through secretarial order, establishes a framework through which Interior bureaus will coordinate climate change science and resource management strategies. Also, the National Oceanic and Atmospheric Administration's (NOAA's) Regional Integrated Sciences and Assessments has a program that supports research to meet the adaptation-related information needs of local decision-makers. While federal agencies are beginning to recognize the need to adapt to climate change, there is still a general lack of strategic coordination across agencies, and most efforts to adapt to potential climate change impacts are preliminary. Some states have begun to make progress on adaptation independently and through partnerships with other entities, such as academic institutions. The state of California recently developed and released a draft California Climate Adaptation Strategy. This is the first example of a strategic, operational plan for collaborative action by state agencies to adapt to impacts of global climate disruption and sea-level rise. Maryland has also begun a strategic planning process to better understand the impacts of climate change on the state's economy and natural resources, especially the Chesapeake Bay region, and to coordinate state efforts. In devising these strategic plans for adaptation, states are often calling for more resources, leadership, and coordination from the federal government. Specifically, state agencies such as those in California and Maryland are advocating for: more federal support for state research programs that generate locally relevant data and information related to potential impacts of climate change; an integrated national intergovernmental strategy on adaptation that is coordinated among relevant state and federal agencies, and is multidisciplinary and inclusive of other sectors such as transportation, energy, agriculture, forestry, water resources, and utilities; more dedicated federal funding for adaptation, to carry out programs to protect coastal communities, natural resources, and the national interest from the impacts of climate change.  Some are skeptical of implementing wide-scale adaptation measures and argue that adaptation activities should not be comprehensively pursued because attention and resources will detract from mitigation efforts. Others think that adaptation activities are just another way for various interest groups and sectors to seek government subsidies for activities they would already otherwise be doing. Overview of Adaptation Provisions in S. 1733 (as Reported by the Senate EPW Committee) vs. H.R. 2454 (as Passed by the House) This report summarizes and compares the adaptation provisions in S. 1733 , as reported by the Senate Environment and Public Works (EPW) Committee on November 5, 2009, and H.R. 2454 , as passed by the House on June 26, 2009. Overall, while the two bills would authorize similar adaptation programs, they differ somewhat in scope and emphasis, and they also differ in the distribution of emission allowance allocations, which in effect provide monetary resources for specified programs and activities. Both bills contain provisions that address: international climate change adaptation; domestic climate change adaptation programs, including the National Climate Change Program and the National Climate Service; state and tribal programs; public health; and natural resources adaptation. S. 1733 contains five additional provisions (not contained in the House bill) that deal with: drinking water utilities; water system mitigation and adaptation partnerships; flood control, protection, prevention, and response; wildfire; and coastal Great Lakes state adaptation. Neither the Senate-reported bill ( S. 1733 ) nor the House-passed bill ( H.R. 2454 ) contains a process at the federal level for developing and implementing a national strategic plan to address the full range of sectors expected to be affected by climate change. Neither bill includes explicit provisions that address adaptation in major sectors such as transportation and energy infrastructure, or agriculture, although these activities are allowable under state programs for climate adaptation that are provided for in both bills. It should be noted that while forestry and agriculture are considered extensively in S. 1733 and H.R. 2454 with regard to supplemental emissions reductions, set-asides and allowances, and carbon offsets, these considerations are not specifically related to adaptation. Depending on the nature of the implementation, these programs could potentially assist in forest and agriculture adaptation to climate change. However, they have not been included in this report because emissions mitigation is their primary purpose (not adaptation), and adaptation is not necessarily a consideration in their implementation. Allowance Allocations for Adaptation-Related Activities Although there are significant differences in how the overall emission allowances are distributed, both bills would allocate allowances or auction revenues to fund various adaptation activities. Table 1 provides an overview of the emission allowances allocated to adaptation-related activities for 2016 and 2030, given as a percentage of total allowances for both bills. One significant difference between the two pieces of legislation is the distribution of allowances and proceeds from auction allocations and the subsequent availability of the amounts credited to certain funds. In the Senate bill, several of the adaptation-related provisions provide that the amounts in the funds are automatically available to be obligated (i.e., spent), "without further appropriation," for specified purposes, programs, and activities. In contrast, the analogous adaptation provisions in the House bill provide that the amounts in the funds would become available only by subsequent appropriations. That is, the amounts would not be available automatically, but instead would need to be provided in subsequent appropriations acts. H.R. 2454 both allocates allowances directly and creates several funds for the allocation of proceeds from the sale of allowances. It generally allocates allowances to states and tribes, and proceeds from the auction of allowances to federal government agencies. Authorizations are subject to future appropriations. For the adaptation provisions, the House relies on hortatory language, such as that found in Section 480(b), to support full appropriations for certain natural resources programs: "... such sums as are deposited in the Natural Resources Climate Change Fund, and the amounts appropriated for subsection (c) shall be no less than the total estimated annual deposits in the Natural Resources Climate Change Adaptation Fund." While the allocations of allowances and of the proceeds from auctions are distributed similarly by S. 1733 , in the Senate bill, in all cases related to adaptation, the auction proceeds for programs or funds would be automatically available to be obligated (i.e., spent) "without further appropriation." The provision of funding "without further appropriation" might be controversial. Comparable language in provisions of the House bill (none related to adaptation programs, however) has been scored by the Congressional Budget Office (CBO) as mandatory spending. Even with mandatory funding, the ultimate funding of specific programs and activities will in many cases be determined by agency, state, and/or tribal decision-makers. International Adaptation Developing countries, especially those that are least developed, and the poorest communities, are the most vulnerable to the impacts of climate change. In these vulnerable countries and communities, the impacts of climate change can pose a direct threat to people's very survival. Specific impacts highlighted by the Fourth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC 2007) include the following. By 2020, yields from the 93% of crop production in Africa that is rain-fed could be reduced by up to 50%. Worldwide, approximately 20%-30% of plant and animal species are likely to be at increased risk of extinction if increases in global average temperature exceed 1.5°C -2.5°C. Widespread melting of glaciers and snow cover will reduce melt water from major mountain ranges (e.g., Hindu Kush, Himalaya, Andes), where more than 1 billion people currently live. Displacement of an estimated 200 million people due to sudden climate-related disasters is projected by 2050; it is estimated that in 2008 more than 20 million people were displaced by sudden climate-related disasters. Increased adverse health impacts and mortality will result from higher frequency and intensity of climate-related diseases such as heat stroke, malaria, dengue, and diarrhea. International assistance for adaptation, especially to help the most vulnerable developing countries, is one of the major commitments of industrialized countries under the United Nations Framework Convention on Climate Change (UNFCCC), to which the United States is a party. Adaptation assistance is also one of the major issues under negotiation in an effort to reach agreement in Copenhagen in December 2009 on international cooperation to address climate change beyond the year 2012. Many have asserted that current overseas development aid (ODA) is insufficient to cover the adaptation needs of developing countries. A variety of international institutions and nongovernmental organizations have tried to estimate the costs of adaptation for developing countries and the associated needs for public funding. Figures range from $4 billion to several hundreds of billions of dollars annually by the year 2030, where definitions and scope of adaptation activities often account for many of the differences in funding requirements. The World Bank, in an updated study from September 2009, estimates the average annual adaptation costs from 2010 to 2050 to be between $75 billion to $100 billion annually, while EU leaders agreed in October 2009 that developing nations would need $150 billion annually by 2020 to tackle climate change and to deal with its consequences. Estimates for climate change adaptation by sector made by the UNFCCC are given in Table 2 . Much of the language in the House and Senate bills is identical, but there are several differences regarding programs to support international adaptation to climate change. Both bills establish an International Climate Change Adaptation Program, but S. 1733 would insert "and Global Security" into the title and makes clear that adaptation assistance should protect and promote U.S. interests. In H.R. 2454 , Section 495 provides explicit authority for a variety of activities and aid eligible for support, including research, planning, investments, and capacity-building, among others. S. 1733 does not include a comparable specific list of eligible activities. Both bills direct the Secretary of State or other designee of the President to distribute funding for international climate adaptation bilaterally or multilaterally. However, H.R. 2454 requires that 40% to 60% of funding go to multilateral funds or international institutions that meet given eligibility requirements. H.R. 2454 also specifies that no more than 10% of bilateral assistance may go to any one country; S. 1733 would not set such limits. The House bill also includes language directing that resources provided to this program must supplement, not supplant, other federal, state, or local resources that would similarly support international adaptation activities (i.e., requiring "additionality" of adaptation assistance). H.R. 2454 also does not explicitly provide for bilateral programs in other agencies that may have capacity-building, technological, financing, or other expertise that could be effective in assisting adapting to climate change. While H.R. 2454 gives responsibilities for oversight of funding distributions to the Secretary of State (or other presidential designee) and the Administrator of the U.S. Agency for International Development (USAID), S. 1733 would give that authority to a Strategic Interagency Board on International Climate Investment. Domestic Adaptation Improving adaptation in the United States to climate variability and change could include the following modified or new activities: climate observation and forecast services, such as season to interannual predictions of weather, or multi-decadal forecasts of temperature, precipitation, and other climate parameters; research and analysis on climate change impacts, including the identification of potential risks, benefits, and options for adaptation; development of vulnerability assessments and adaptation strategies within and across sectors, localities, states, agencies, and sectors; incorporation of climate variability and change into infrastructure planning and operating procedures; development of a comprehensive climate adaptation strategy that includes cross-sectoral and interagency strategies and plans; testing and demonstration of adaptation measures; and evaluation, training, and information-sharing of successful programs and experiences related to climate adaptation. In general, S. 1733 , as reported by the Senate EPW Committee, and H.R. 2454 , as passed by the House, reflect similar but not identical approaches and identified needs regarding climate change adaptation. Both bills would expand federal efforts to address adaptation to climate change, although the federal role is limited in different ways. The differences between the House and Senate bills reflect differences in priorities, and in determining which entities should be responsible for developing and implementing adaptation strategies. Neither of the bills is comprehensive in terms of authorizing an overarching strategy across sectors and levels of government. Both bills would establish national "climate services" to develop observational data, climate modeling, and access to information for federal, state, local, and private decision-makers, to help them develop and execute adaptation strategies. Both bills apparently place primary responsibility in the states and Indian tribes for developing most strategies and plans for domestic adaptation, financially supported by sales of federal greenhouse gas emission allowances. S. 1733 also would require states to provide a part of their funding to localities for climate change adaptation. Both the House and Senate bills supplement the state responsibilities with requirements to establish sector-specific adaptation plans and activities at the federal level, emphasizing adaptation to protect public health and natural resources. S. 1733 and H.R. 2454 provide authorities for domestic adaptation in three major categories: National Climate Change Adaptation Program; National Climate Service; and state and tribal adaptation programs. National Climate Change Adaptation Program At the national level, both H.R. 2454 and S. 1733 authorize expansion of the federal role in adaptation to climate change, although neither of the bills calls for comprehensive assessment and strategy to coordinate across levels of government. S. 1733 , however, would establish a new national adaptation program. The Senate approach, as outlined in S. 1733 , would establish a broad federal authority by directing the President to establish a National Climate Change Adaptation Program to increase "the overall effectiveness of Federal climate change adaptation efforts." The wording leaves wide discretion to the President, although it is seemingly limited to the interests and activities of federal agencies. For example, S. 1733 does not explicitly authorize that this program work with states, localities, and the private sector on cross-cutting strategies or to coordinate among different entities and stakeholders. H.R. 2454 does not explicitly provide similar broad authority to the President to establish a national climate change adaptation program (although some might argue that the President already has such authority). While earlier versions of the House bill also would have established a comprehensive federal adaptation program and strategy, these provisions were not included in the version of H.R. 2454 passed by the House. H.R. 2454 , as passed by the House, expands the focus of the U.S. Global Change Research Program (USGCRP) to include climate change adaptation, vulnerability assessments, and policy analysis. While the coordinating committee for the USGCRP would expand beyond the current science agencies and research programs to include agencies representing sectors that have a stake in adapting to climate change, the implication of the H.R. 2454 language is that federal adaptation efforts remain primarily a research, and not a programmatic, effort. These and other USGCRP efforts would be led by the White House Office of Science and Technology Policy (OSTP). Although S. 1733 would establish a National Climate Change Adaptation Program, it does not provide language authorizing funding or allocating emission allowances to the program. (Funding authorizations and allowance allocations are provided for other adaptation provisions in both bills.) H.R. 2454 increases authorization for interagency coordination of the USGCRP (not just for adaptation) to $10 million annually, approximately doubling recent expenditures. National Climate Service Many scientists and decision-makers agree that in order to adapt effectively to climate change, individuals and institutions need more accurate climate data and information that is specific to their locations and concerns. There is less agreement on the appropriate authorities, the scope of federal programs, and how federal programs should be structured and coordinated to implement plans and activities. Both S. 1733 and H.R. 2454 would establish national programs to develop and provide access to information to assist decision-makers in plannning for adaptation to climate change. The National Climate Service in H.R. 2454 would be established within the USGCRP. The language in S. 1733 is terse and broadly defined, while H.R. 2454 includes much more detail, authorizes several subsidiary programs, and specifies the organizations to manage them. The bills differ on the design and location of the National Climate Service (NCS) office. S. 1733 places it within the Department of Commerce's National Oceanic and Atmospheric Administration (NOAA), while H.R. 2454 would establish a new interagency entity called the National Climate Service, plus a NOAA Climate Services Office, but leaves the evaluation of options, and design and location of the National Climate Service program, to the President. In H.R. 2454 , the ultimate relationship of the NOAA Climate Services Office to the National Climate Service is left to be determined. The implementation plan of the NCS would be coordinated by the Director of OSTP. Key recipients of climate services in both bills would be states, localities, and tribal governments, as well as the public, to enable the development and implementation of adaptation strategies to reduce vulnerability to climate variability and change. Stakeholders might need training in how to use more extensive climate information, as well as in dealing effectively with the wide uncertainty that is likely to continue to surround projections of climate, especially at more refined temporal and spatial scales. State Adaptation Programs Many policies and programs that influence the impacts of climate change on people, businesses, and natural resources are under the primary authority of states, who may in turn delegate authorities to local governments and may to some extent coordinate intergovernmental authorities at the local level. Both H.R. 2454 and S. 1733 appear to leave most authority and responsibility for addressing climate change adaptation to the states. Both bills do provide a role for the Environmental Protection Agency (EPA), which will facilitate the process of reviewing and approving state plans and disseminating "lessons learned" across states and tribes. Both bills would require and help fund state and tribal adaptation programs. The Senate bill would require states to use the proceeds from the sales of allocated emission allowances exclusively for listed activities and as included in approved state climate change response plans, while the House bill identifies uses but provides a broader range of allowable activities that can be in compliance with approved state and tribal adaptation plans. Both bills use detailed and substantially identical language specifying the roles that states and tribes must play in developing and carrying out climate change adaptation plans. S. 1733 and H.R. 2454 would provide financial resources to the states and tribes to support their adaptation planning, strategies, and implementation of certain measures through emission allowance allocations. Public Health Potential public health impacts of climate change include a wide range of risks including: a decline in air quality and an increase in allergenic pollen; more extreme temperatures; more frequent wildfires; altered conditions that foster the spread of communicable diseases and vector-borne diseases; events that threaten basic life support systems, such as droughts and floods which could adversely affect water, sanitation, and food systems. The public health provisions in S. 1733 are essentially identical to those in H.R. 2454 . Both bills mandate measures to assist health professionals in adapting to the health effects of climate change, including "the development, implementation, and support of State, regional, tribal and local preparedness, communication, and response plans to anticipate and reduce the threats of climate change." Both bills would require the Secretary of Health and Human Services (HHS) to develop a national strategy for public health adaptation, based on regular needs assessments and with input from an advisory board, to be updated every four years. Both bills would establish a Climate Change Health Protection and Promotion Fund. The primary difference between the two bills is related to program funding and the use of the emission allowance allocations. S. 1733 would make funds obtained through revenue generated by emission allocation allowances available to the Secretary of HHS "without further appropriation," while H.R. 2454 makes funds available to the Secretary of HHS subject to further appropriation. Natural Resources Adaptation Adaptation of natural resources to climate change is a difficult concept to define, and determining a strategy to support it is complicated. To some extent, adaptation is occurring already: Trees in Alaska now grow much farther north than they did only 30 years ago. Small rodents in the Rockies are found at higher elevations than in the past. Freshwater marshes are being supplanted by salt-tolerant species. Fires are removing trees that cannot tolerate repeated droughts, and beetles that can now complete two generations in a year are speeding destruction of timber. Ecosystems lose species that are no longer able to find suitable habitat, or are unable to move rapidly enough to find it. Many of these changes are not considered desirable, and some constitute serious threats from an economic, public health, or aesthetic standpoint. Approaches by many parties have focused on lessening the negative effects of climate change, but more recently, planners have begun to plant different trees, map coastal areas to determine changes in tides and resulting vegetation, consider likely future ranges of species, and examine whether current use land patterns will permit species to reach more suitable habitats. Both the House-passed and Senate-reported bills attempt to encourage federal and state strategies that can be adopted to support the resilience of species and the ecosystems on which they depend in the face of relatively rapid climate change. Within the provisions relating to natural resources, there are only a few major differences between the two bills. Both bills provide for federal, state, tribal, and local programs. Considerable emphasis at both levels is on planning, and within plans, on a tremendous number of factors to be developed, researched, or evaluated. In addition, both bills would create or facilitate the dissemination of new information sources. Both create a new National Climate Service, for example. The natural resource adaptation activities in both bills would be funded through emission allowances, either through direct allocations or through revenues generated via auctioned allowances. The Senate bill would include a provision for land acquisition under the Land and Water Conservation Fund (LWCF), with funding available "without further appropriations," as has been proposed several times in the past. Such LWCF proposals have had considerable support from the scientific and environmental communities to protect rare ecosystems and/or recreational opportunities. However, opponents of LWCF—especially of LWCF proposals not subjected to annual appropriations oversight—have argued that the supervision of the appropriations process is necessary to protect property rights and landowners. In addition, those that seek to limit federal spending in general may argue against allocation of money to any of the funds in S. 1733 in the absence of annual control by the appropriations and budget committees. H.R. 2454 , on the other hand, requires that funds for natural resource adaptation programs be made available subject to annual appropriations. In addition, both bills mandate the creation of new programs to disseminate data via geospatial information systems (GIS). While some data concerning wildlife already exist in GIS databases around the country, and considerable cooperation already exists among many agencies and academia, federal agencies and other levels of government might find the data useful for a variety of additional purposes, such as finding suitable locations for energy development and transportation infrastructure. Moreover, many see further coordination of geospatial data as essential for interagency and cross-sector coordination and planning. In both the House and Senate bills, there is little consideration of soils outside of carbon sequestration, biofuels, and alternative energy in relation to adaptation. Agricultural adaptation is also essentially absent from both bills. For example, at least six agencies within DOI are mentioned specifically, as is NOAA within the Department of Commerce, but within USDA, only the Forest Service figures prominently. USDA's Natural Resources Conservation Service (NRCS) is not mentioned in either bill, even though the agency's major responsibilities involve preventing soil erosion, protecting watersheds, and cooperating at multiple levels of government to control runoff and ease the effects of drought. In addition, S. 1733 would address climate-change-exacerbated wildfire threats in several ways. It would define fire-ready communities, authorize cost-share grants to such communities, and direct cost-share agreements to encourage states and communities to become fire-ready. It also would direct mapping of fire risk in priority areas for fuel reduction treatments. Wildfires are not covered in the House-passed bill. Water-Related Adaptation Climate change is anticipated to affect water availability and use regionally, and may alter the frequency or intensity of water-related hazards, such as droughts and floods. Potential impacts of climate change are of great interest to utility officials, federal agencies, and others concerned with water management and use. According to the Intergovernmental Panel on Climate Change (IPCC), higher water temperatures, increased precipitation intensity, and longer periods of low flows will exacerbate many forms of water pollution, with impacts on water system reliability and operating costs, human health, and ecosystems. Similarly, climate change affects the function and operation of existing water infrastructure, as well as water management practices. Temperature change drives other changes in natural environmental processes that, in turn, affect the quality and quantity of water resources. A range of impacts are anticipated, although they are likely to vary by region, including warmer water, precipitation changes, loss of reservoir storage and snowpack, sea level rise, increases in storm intensity, increased risk of flood damage, water treatment and distribution challenges, increased wastewater treatment needs and costs due to heavier runoff, and increased demand in response to heat waves and dry spells. Water-related adaptation is likely to incorporate a range of measures: demand management and conservation, difficult land use choices in at-risk areas, investments in infrastructure, and aquatic ecosystem protection and restoration. Adapting to climate's water-related effects presents significant challenges, in part because of the wide variety of entities involved in managing and using water, and the ecosystems and species that depend on its availability, variability, and quality. Responsibilities for, and funding of, different water adaptation measures are at issue as Congress considers climate change legislation. S. 1733 would include provisions specific to water-related adaptation; no similar provisions are included in H.R. 2454 . To assist adaptation by water utilities, S. 1733 (in Division A) would establish a research program to assist drinking water utilities (Section 211) and a program of grants to states and Indian tribes for water system adaptation projects (Section 381). S. 1733 would also include two other water-specific adaptation provisions—Section 382, which would establish a grants program to states and Indian tribes for adapting to climate-related flood impacts, and Section 384, which would provide assistance to coastal (including Great Lakes) states for adapting to climate change. No specific provisions were included for drought or for adaptation of agricultural or energy sector water use to changed water resource availability and quality. Sections 381, 382, and 384 would be funded through the state climate change response account (Section 210 of Division B); Section 211 of Division A includes only an authorization of appropriations. These provisions focus to a greater extent on adapting to water quantity challenges of climate change (e.g., ensuring utilities' reliable delivery of water supply) than water quality (e.g., changes in dissolved oxygen levels or water chemistry resulting from warmer temperatures). Water-related adaptation planning and measures also are covered under broader provisions, most notably federal assistance for state adaptation efforts, federal research and assessment, and natural resources adaptation efforts by designated federal agencies. The bills would provide funding for select federal agencies to undertake aquatic ecosystem restoration activities and other water-related natural resource adaptation actions using allocations established for natural resources adaptation; otherwise, they do not specifically allocate funding for federal agencies to undertake climate change adaptation for water infrastructure (e.g., dams, levees, navigation improvements) or other water-related programs under their jurisdiction. The bills would direct federal water resource agencies, including the Bureau of Reclamation and the Army Corps of Engineers, to adapt their plans, programs, and activities. Because most water resource projects typically receive project-specific authorization from Congress, it is unclear how much authority and funding these agencies would have to implement adaptation actions. S. 1733 and H.R. 2454 largely focus their federal natural resources adaptation provisions on the agencies responsible for managing and protecting water resources, such as the U.S. Army Corps of Engineers, the Bureau of Reclamation, and the U.S. Environmental Protection Agency, not the agencies working with the users that depend on water resources. For example, neither U.S. Department of Agriculture agencies (e.g., Natural Resources Conservation Service) nor Department of Energy entities (e.g., power marketing administrations) are included. Agriculture, particularly in the West, is the largest consumer of water. The energy sector also withdraws significant quantities during extraction, processing, and generation. Water-related independent entities, like the Tennessee Valley Authority, also are not specifically addressed in the natural resources adaptation provisions. One exception is that S. 1733 would include the Federal Emergency Management Agency (FEMA) in the natural resources adaptation panel proposed in the bill (Section 365). FEMA manages flood hazard mitigation programs and the national flood insurance program; FEMA is not included in a similar provision of H.R. 2454 (Section 475). In summary, the water-specific provisions of S. 1733 , which have no comparable provisions in H.R. 2454 , would be focused largely on issues arising from water quantity changes (e.g., reduced municipal water supplies, increased flooding, higher sea levels). While broad natural resource provisions of the bills include water resource agencies and funding for aquatic ecosystem restoration, less attention is given in S. 1733 or H.R. 2454 to the adaptation of federal water resources infrastructure to changes in water resource quantity and quality; similarly, while S. 1733 would address some of the adaptation challenges faced by municipal water providers, little attention is given in either bill to managing adaptation in two of the largest water use sectors—agriculture and energy. Appendix. Comparison of Adaptation-Related Provisions in H.R. 2454 (as Passed by the House) and S. 1733 (as Reported by the Senate EPW Committee)

This report summarizes and compares climate change adaptation-related provisions in the American Clean Energy and Security Act of 2009 (H.R. 2454) and the Clean Energy, Jobs, and Power Act (S. 1733). H.R. 2454 was introduced by Representatives Waxman and Markey and passed the House on June 26, 2009. S. 1733 was introduced to the Senate by Senators Boxer and Kerry and, after subsequent revisions made in the form of a manager's substitution amendment, was reported out of the Senate Environment and Public Works Committee on November 5, 2009. Adaptation measures aim to improve an individual's or institution's ability to cope with or avoid harmful impacts of climate change, and to take advantage of potential beneficial ones. Both H.R. 2454 and S. 1733 include adaptation provisions that (1) seek to better assess the impacts of climate change and variability that are occurring now and in the future; and (2) support adaptation activities related to climate change, both domestically and internationally. Overall, while the two bills would authorize similar adaptation programs, they differ somewhat in scope and emphasis, and they also differ in the distribution of emission allowance allocations over time. Both bills contain provisions that address international climate change adaptation; domestic climate change adaptation programs, including the U.S. Global Change Research Program (USGCRP), the National Climate Service, and state and tribal programs; public health; and natural resources adaptation. S. 1733 includes five additional provisions not provided for in the House bill that deal with drinking water utilities; water system mitigation and adaptation partnerships; flood control, protection, prevention, and response; wildfire; and coastal Great Lakes states' adaptation. Neither the Senate-reported bill (S. 1733) nor the House-passed bill (H.R. 2454) contains a process at the federal level for developing and implementing a national strategic plan to address the full range of sectors expected to be affected by climate change. Neither bill includes provisions that explicitly address adaptation in major sectors such as transportation and energy infrastructure, or agriculture. Another difference between S. 1733 and H.R. 2454 is the distribution of allowance allocations over time, and the subsequent availability of the amounts credited to certain funds. The relative distribution of allowances to adaptation-related activities is slightly higher in the House bill than in the Senate bill, and the difference increases over time, but the actual amounts of revenue generated would be contingent on the number and price of emission allowances. The Senate bill provides that funds for many adaptation-related provisions, such as for natural resources and public health, are made available "without further appropriations." In contrast, the analogous provisions in the House bill provide that the funds would become available only by subsequent appropriations. A side-by-side table is included in an appendix to the report that compares adaptation-related provisions in H.R. 2454 and S. 1733.

Maine's Tobacco Product Shipment and Delivery Laws In 2003, Maine passed laws that instituted requirements for shipping and delivery sales of tobacco products that attempted to end sales to minors. The state argued that such laws helped the state "prevent minors from obtaining cigarettes." The first law at issue, the "recipient-verification" provision, stated: The tobacco retailer shall utilize a delivery service that imposes the following requirements: 1) The purchaser must be the addressee; 2) The addressee must be of legal age to purchase tobacco products and must sign for the package; and 3) If the addressee is under 27 years of age, the addressee must show valid government-issued identification that contains a photograph of the addressee and indicates that the addressee is of legal age to purchase tobacco products. The second law, referred to as the "deemed to know" provision, stated: A person is deemed to know that a package contains a tobacco product if the package is marked in accordance with the requirements of section 1555-C, subsection 3, paragraph B ["The tobacco retailer shall clearly mark the outside of the package of tobacco products to be shipped to indicate that the contents are tobacco products and to show the name and State of Maine tobacco license number of the tobacco retailer."] or if the person receives the package from a person listed as an unlicensed tobacco retailer by the Attorney General under this section. Violators of either provision could be subject to civil penalties. The Supreme Court Decision In Rowe v. New Hampshire Motor Transport Association , the Supreme Court held that the two Maine provisions were preempted by the Federal Aviation Administration Authorization Act of 1994 (FAAAA). That law prohibited states from "enact[ing] or enforc[ing] a law ... related to a price, route, or service of any motor carrier ... with respect to the transportation of property." This language was similar to language previously enacted in the 1978 Airline Deregulation Act, which included a preemption provision stating "no State ... shall enact or enforce any law ... relating to rates, routes, or services of any air carrier." The Supreme Court had analyzed the air carrier preemption language in Morales v. Trans World Airlines, Inc. and held that "federal law pre-empts States from enforcing their consumer-fraud statutes against deceptive airline-fare advertisements." In finding that Maine's mail-order tobacco product delivery laws were preempted, the Court relied on its interpretation of the preemption language at issue in Morales . The Court indicated that passage of the FAAAA motor carrier preemption language took into account its previous interpretation of the air carrier preemption language in Morales . The Morales Court found that preemption could occur even if the state law only had an indirect effect on carrier rates, routes, or services and that preemption did occur if "state laws have a 'significant impact' related to Congress's deregulatory and pre-emption-related objectives." However, the Morales Court effectively said that preemption may not occur if the state law affects carrier rates, routes, or services "in only a 'tenuous, remote, or peripheral ... manner." The Rowe Court first held that Maine's recipient-verification provision had a "direct 'connection with' motor carrier services" because "it focuse[d] on trucking and other motor carrier services" and that the Maine law had "a 'significant' and adverse 'impact' in respect to the federal Act's ability to achieve its pre-emption-related objectives." Therefore, the Rowe Court found that federal law preempted Maine's recipient-verification provision. The Court reasoned that Maine's law had the effect of substituting "government commands for 'competitive market forces' in determining ... the services that motor carriers will provide." The Rowe Court next held that Maine's "deemed to know" provision "applies yet more directly to motor carrier services" because the provision would "impose[] civil liability upon the carrier" if the carrier did not check each tobacco shipment "for certain markings and ... compare it against the Maine attorney general's list of proscribed shippers." As a result, the Court found that Maine's law would affect "Congress' major legislative effort to leave ... decisions, where federally unregulated, to the competitive marketplace," because if the Court allowed Maine's shipment checking system, then other states could impose their own shipment checking systems. This would appear to result in a "significant impact" on Congress's deregulatory objectives. Thus, the Rowe Court held that federal law preempts Maine's regulation "of the essential details of a motor carrier's system for picking-up, sorting, and carrying goods—essential details of the carriage itself." In making this determination, the Court rejected Maine's argument that federal law did not "preempt a State's efforts to protect its citizens' public health" and its assertion that its laws should not be preempted because they helped prevent underage smoking. Maine based its argument on the legislative history of the FAAAA and the Synar Amendment. The legislative history reference was to a conference report "containing a list of nine States, with laws resembling Maine's, that Congress thought did not regulate 'intrastate prices, routes and services of motor carriers.'" The Court held that the FAAAA did not include a public health exception for preemption of state laws. First, the Court stated that the legislative history did not indicate that Congress made a determination on or "focused upon" the delivery regulation issue. Second, the Court discounted Maine's reliance on the Synar Amendment, which "does not mention specific state enforcement methods." The Court further referenced the potentially broad nature of a "public health" exception to federal preemption of state laws related to carriers, noting "the number of products, the variety of potential adverse public health effects, ... and the difficulty of finding a legal criterion for separating permissible public-health-oriented regulations" and found that Congress did not likely intend to create a public health exception that could potentially affect tobacco shipments. However, the Rowe Court stated that general state public health laws would not always be preempted by federal law and that federal law would not preempt state laws with a "tenuous, remote, or peripheral" connection to carrier rates, routes, or services. Maine had further argued that because it could legally ban tobacco shipments "from entering into or moving within the State," it had the power "to regulate the manner of tobacco shipments." The Court also rejected this argument, noting that such regulation would allow the state to regulate carrier rates, routes, and services, and that federal law preempts such state laws that have a "significant impact" and more than a "tenuous, remote, or peripheral" effect. The Court also found that Maine's laws would be preempted for these reasons, regardless of whether, as Maine alleged, the overturning of Maine's laws would hurt its efforts to stop underage smoking. Justice Ginsburg's Concurrence Justice Ginsburg "wr[o]te separately to emphasize the large regulatory gap left by an application of the FAAAA perhaps overlooked by Congress, and the urgent need ... to fill that gap." In particular, she restated the concerns of Maine and others that age verification methods for mail-order sales of tobacco products could be used as an enforcement strategy to prevent tobacco sales to minors but noted that the FAAAA preemption provisions block states from enacting such methods. She stated that there is a lack of federal tobacco laws aimed at preventing tobacco sales to minors. Her concurrence then stated that state tobacco control measures, such as those that resulted from the Synar Amendment, "are increasingly thwarted by the ease with which tobacco products can be purchased through the Internet." Legislation has been introduced in the 110 th Congress, including H.R. 4081 and S. 1027 , the Prevent All Cigarette Trafficking Act, that would address sales of tobacco products over the internet. Justice Scalia's Concurrence Justice Scalia, who is well-known for not favoring the use of legislative history as a method of interpreting congressional intent, issued a one sentence concurrence. He joined the Court's opinion except where it relied on congressional committee reports to demonstrate congressional intent "with regard to propositions that are apparent from the text of the law, unnecessary to the disposition of the case, or both."

Maine adopted two laws regarding shipping and delivery sales of tobacco products that were aimed at preventing minors from acquiring tobacco products. In Rowe v. New Hampshire Motor Transport Association, the Supreme Court held that the two Maine laws were preempted by the Federal Aviation Administration Authorization Act of 1994 (FAAAA). That law prohibited states from "enact[ing] or enforc[ing] a law ... related to a price, route, or service of any motor carrier ... with respect to the transportation of property." In finding that Maine's mail-order tobacco product delivery laws were preempted, the Court noted that federal preemption would occur if state laws had a "significant impact" on carrier rates, routes, or services and if the connection with motor carrier services is not "tenuous, remote, or peripheral." Legislation related to federal regulation of tobacco products, including shipment and delivery, has been introduced in the 110th Congress: H.R. 1108, H.R. 4081, S. 625, S. 1027.

Introduction Most of the provisions in the Water Infrastructure Improvements for the Nation Act (WIIN Act; P.L. 114-322 ), enacted on December 16, 2016, relate to the U.S. Army Corps of Engineers. However, the WIIN Act also includes a subtitle (Subtitle J, §§4001-4013) with the potential to affect western water infrastructure owned by the Bureau of Reclamation (Reclamation; an agency in the Department of the Interior). Three sections in Subtitle J (§4007, §4009, and §4011) made alterations that would apply throughout Reclamation's service area, the 17 states west of the Mississippi River. The remaining sections of Subtitle J include provisions specific to the Central Valley Project (CVP), a multipurpose water-conveyance system in California operated by Reclamation. Most of Subtitle J's provisions were derived from bills that received consideration in the 112 th , 113 th , and 114 th Congresses. Due to the scarcity of water in the West and the importance of federal water infrastructure to the region, western water issues are regularly of interest to many lawmakers. Some parts of Subtitle J were controversial, thus increasing the likelihood that it would receive attention in the 115 th Congress. In addition to oversight, there may be ongoing debate as to the meaning and significance of individual provisions in the act. Observers are expected to closely monitor implementation of its new authorities, as well as any potential litigation. Of particular interest will be the WIIN Act's application to the operations of the CVP and federal support for the construction of new surface water supply projects. Some may also propose adding to or repealing parts of Subtitle J. Legislation considered in the 115 th Congress (e.g., H.R. 23 ) has proposed to build on and, in some cases, replace key parts of the WIIN Act. This report discusses selected provisions that were enacted under Subtitle J of the WIIN Act. It provides background information and context related to selected drought- and water-related provisions, summarizes the changes authorized in the WIIN Act, and discusses issues and questions that may be of interest to Congress. For more background on California water issues, see CRS Report R40979, California Drought: Hydrological and Regulatory Water Supply Issues , by Betsy A. Cody, Peter Folger, and Cynthia Brown, and CRS Report R44456, Central Valley Project Operations: Background and Legislation , by Charles V. Stern and Pervaze A. Sheikh. Background Bureau of Reclamation The Bureau of Reclamation (Reclamation), an agency within the Department of the Interior (DOI), is responsible for the construction and maintenance of many of the large dams and water diversion structures in 17 states west of the Mississippi River. Reclamation was founded in 1902, in part, to aid in the settlement of the arid American West. Today, Reclamation manages hundreds of dams and diversion projects, including more than 300 storage reservoirs in those 17 western states. These projects provide water to approximately 10 million acres of farmland and 31 million people. Reclamation is the largest wholesale supplier of water in the West and the second-largest hydroelectric power producer in the nation. Reclamation facilities also provide substantial flood control, recreation, and fish and wildlife benefits. Operations of Reclamation facilities often are controversial, particularly for their effects on fish and wildlife species and because of conflicts among competing water users. The Central Valley Project and the State Water Project The multipurpose federal Central Valley Project (CVP) in California is one of Reclamation's largest water-conveyance systems (see Figure 1 ). The CVP extends from the Cascade Range in Northern California to Bakersfield in Southern California. In an average year, it delivers approximately 5 million acre-feet of water to farms (including some of the nation's most valuable farmland); 600,000 acre-feet to municipal and industrial (M&I) users; 410,000 acre-feet to wildlife refuges; and 800,000 acre-feet for other fish and wildlife needs, among other purposes. The project is made up of 20 dams and reservoirs, 11 power plants, and 500 miles of canals, as well as conduits, tunnels, and other storage and distribution facilities. The State Water Project (SWP) is a separate major project operated by the state of California. The project delivers about 70% of its water to urban users, including water for approximately 25 million users in areas ranging from the South Bay (San Francisco Bay), to the Central Valley, to Southern California; the remaining 30% is used for irrigation. It is composed of 34 storage facilities, reservoirs, and lakes; 20 pumping plants; 4 pumping-generating plants; 5 hydroelectric power plants; and about 701 miles of open canals and pipelines. The SWP has been of interest to Congress because of its connection with federal CVP operations. Central to addressing water shortages in California from the federal and state perspective is the coordinated operation of the CVP and SWP, which affect much of the state. During a drought, water deliveries can be curtailed for CVP and SWP users. A key point of debate has been the extent to which delivery cutbacks are due to drought compared to other factors, some of which can be a function of state law or regulatory restrictions (e.g., environmental restrictions related to state water quality criteria and endangered species). Whereas the federal CVP serves mostly agricultural water contractors, the SWP serves largely urban or M&I contractors; however, both projects serve some contractors of both varieties. Complicating water deliveries of the CVP and SWP is a complex system of state water rights, in which some water deliveries are prioritized based on prior agreements with water rights holders that predate the CVP (e.g., Sacramento River Settlement Contractors and San Joaquin River Exchange Contractors). Two federal and state pumping facilities in the southern portion of the Sacramento and San Joaquin Rivers' Delta (Bay Delta, or Delta) near Tracy, CA, are a hub for water deliveries to users of both systems, and are key to water availability south of the Delta (see Figure 2 ). An estimated 25 million people get some, if not all, of their drinking and agricultural water supplies from the Bay Delta—often referred to as the hub of California's water supply system. WIIN Act Drivers: California Drought, Endangered Species Act Restrictions A number of factors created the impetus for the consideration and enactment of Subtitle J of the WIIN Act. A primary factor was the multiyear drought in California, which began in 2012 and was ongoing at the time of consideration of the WIIN Act in 2016. The drought significantly reduced water allocations, including "imports" (i.e., pumping) to agricultural areas and municipalities south of the Delta that receive water from the CVP and the SWP. Historic CVP and SWP pumping levels relative to more recent levels are depicted in Figure 3 . For the most part, these levels have followed one another, with major peaks and troughs coinciding with high water years and droughts, respectively. The drought also increased interest in federal efforts to maximize available water supplies through other efforts, including encouraging and subsidizing water conservation, repairing existing infrastructure and constructing new surface water storage, and investing in alternative water supplies (desalination, water reuse/recycling, and aquifer storage/recharge, among other things). Some perceive a lack of federal investment in new water supplies as exacerbating the impacts of drought (both in California and in other areas) and thus have focused on legislative efforts to facilitate such investment. Debates related to restrictions on water availability stemming from species and water quality laws preceded the aforementioned drought, but were given added emphasis during congressional debates from 2012 to 2016 as a result of the aforementioned major water shortages. Most significant in the context of federal legislation were federal regulations under ESA, including biological opinions (BiOps) for the Delta smelt and Chinook salmon. These regulations are important in the context of California drought because both the CVP and the SWP are subject to BiOps on the operations of these projects. Under certain scenarios, they can be a factor contributing to limitations on pumping and water deliveries that are important to water users and related industries (see below box, "Biological Opinions Under the Endangered Species Act"). Legislative History Several bills proposing to deal with the ongoing drought in California and drought in general were introduced and acted upon prior to enactment of the WIIN Act in December 2016. From 2012 to 2016, the House passed a number of such bills, but the Senate did not advance any of them. Although these bills differed in content, they shared some common goals, including the overarching aim of allowing for more flexibility in implementing federal environmental restrictions on pumping from the San Francisco Bay and Sacramento-San Joaquin Rivers' Delta (Bay Delta) from Northern to Central and Southern California. Additional information related to these bills is shown in Table 1 , below. The WIIN Act was a combination of Army Corps of Engineers water resource development authorizing provisions that had passed both chambers during the 114 th Congress (e.g., a Water Resources Development Act, or WRDA), as well as drinking water, water resources, and ecosystem-related provisions. It included under Subtitle J a number of provisions related to the Bureau of Reclamation in general and the operations of the California Central Valley Project in particular. These provisions were drawn largely from previous bills. However, in some cases, new provisions were included that combined elements from multiple previous bills. The following sections provide additional analysis of the WIIN Act. They are grouped in three sections: provisions specific to California water issues and the Central Valley Project; Reclamation provisions that apply on a West-wide basis; and savings clauses and related provisions that apply to different parts of the subtitle. Each section includes a discussion of relevant background, a summary of enacted changes, and a discussion of potential future issues for Congress. California Water Provisions A number of provisions in the bill addressed drought in California and the operations of the Central Valley Project. Those provisions that received the most attention during consideration of the WIIN Act are discussed below. Section 4001: Operations and Review In recent years, water managers have attempted to increase flexibility in the operations of the CVP and SWP to address changes in water supply. They have considered several changes to existing state and federal laws and regulations, in particular to the operational components of the overall water-conveyance system. Several of these components and actions are explained below. D elta C ross C hannel G ates Operations . The gates are a controlled diversion channel downstream of Sacramento that diverts water from the Sacramento River into the Mokelumne River. The gates are significant because of their role in maintaining water quality in the Delta, their effect on species listed under ESA, and their redirection of flows to the Delta-Mendota and Contra Costa canals and pumping facilities. When the gates are open, they allow a greater amount of water to flow to SWP and CVP pumps and lower the salinity in the western Delta. When the gates are closed, salmon migration is improved but salinity can increase. Inflow - to - E xport R atio for W ater T ransfers . The inflow-to-export (I:E) ratio is the ratio of San Joaquin River water flowing or projected to flow into the Delta during certain times of year (inflow) to the amount of water exported (export) south at CVP and SWP pumping stations in the south Delta area. The I:E ratio is used to manage the amount of water exported from the Delta through the pumps. Specific I:E ratios for different times of year are included in current BiOps for the coordinated operation of the CVP and SWP. A 1:1 ratio means that the entire river's inflow (measured at a certain point) can be exported out of the Delta. When a 2:1 ratio is in effect, only half the inflow may be exported. Actions to F acilitate W ater T ransfers . Several stakeholders have advocated the use of water transfers, or water marketing (i.e., the sale of water between users), as a mechanism to stretch water supplies during water shortages and to move water to high-value uses. CVP agricultural water users routinely transfer water within the CVP project area, sometimes transferring large quantities of water to urban agencies hundreds of miles away. Some contend that impediments exist for completing transfers in a timely manner. They note that water transfers are subject to lengthy environmental reviews and are limited to a specific period each year, from July 1 to September 30. Some have supported altering these restrictions to allow for more transfers. Others contend that reviews and a limited window for transfers are beneficial to the environment. Alterations to M onitoring and I ncidental T ake L imits . Coordinated operation of CVP and SWP pumping operations in the Delta are limited by, among other things, the amount of incidental take (referred to as the i ncidental t ake l imit , or ITL) of Delta smelt and other species listed under ESA. Some have criticized the methodology used to calculate the ITL for Delta smelt under the current BiOps, noting that the data used to calculate the ITL are outdated and cover a narrow time. Some have proposed alterations to monitoring that, among other things, aim to make the process more dynamic and allow it to reflect the most recent conditions. Others argue that the current system is robust and sufficient for decisionmaking purposes. Summary of Changes Section 4001 of the WIIN Act authorizes the approval of temporary projects and operations that aim to maximize water supplies as quickly as possible while remaining consistent with applicable laws and regulations. Some of the specific projects and actions authorized in the law include a pilot project to keep the Delta Cross Channel Gates open as long as possible, turbidity control strategies, and a deflection barrier to protect migrating salmonids. Section 4001(b)(1)(B) also authorizes the design and implementation of real-time monitoring capabilities for the operation of the Delta Cross Channel. Projects under this section may in some cases be approved within specific, accelerated deadlines pursuant to Section 4001(d) (discussed below). The law also authorizes the adoption of a 1:1 inflow-to-export ratio for increased flows resulting from the sale, transfer, or exchange of water supplies. This ratio is allowed unless the Secretaries of the Interior and Commerce determine in writing that the ratio "will cause additional adverse effects on listed salmonid species beyond the range of the effects anticipated to occur to the listed salmonid species for the duration of the salmonid biological opinion using the best scientific and commercial data available." The current BiOp allows a 1:1 ratio in "critically dry" years only. As water conditions improve, the BiOp allows for an increase in the ratio, up to 4:1 in "wet" years. The law also streamlines the approval process for water transfers to expedite water allocations. Section 4001(b)(10) requires the director of the Fish and Wildlife Service (FWS) and the commissioner of Reclamation to determine if a written transfer proposal is complete within 30 days after submission (no such requirement existed previously). Further, they must also complete all National Environmental Policy Act (NEPA; 42 U.S.C. §§4321 et seq.) and ESA requirements necessary to make decisions on the permit within 45 days of receiving the request. The law also directs FWS and Reclamation to approve such transfers to "maximize the quantity of water supplies available" on the condition that actions associated with the water transfer comply with applicable federal laws (including regulations). Section 4001(d) specifies conditions under which the Governor of California may request the Secretary of the Interior or Commerce to implement expedited procedures to make a final decision on a project that would provide additional water supplies during emergency drought conditions in California (as defined in the law). The expedited procedures would require the head of the agency responsible for the project to convene a final project decision meeting with other federal agencies authorized to make some decision regarding the project (presumably cooperating agencies). Within 10 days of that meeting, the agency responsible for the project would be required to issue a final decision on the project, with the condition that the agency's approval must be for proposed new federal projects or operational changes pursuant to subsection (a) or (b) of this law and to the extent that the projects comply with applicable law. Several other actions and projects are authorized under Section 4001 of the law that aim to improve real-time monitoring of Delta smelt and salmon and to maximize water supplies for users. Discussion Section 4001 of the WIIN Act enacted several directives aimed at increasing water supplies for users while complying with federal laws and regulations and without adversely affecting listed species beyond what is anticipated over the duration of the BiOps. The central authority in this section directs agencies to maximize water supplies for users through projects and actions. This authority could limit the discretion of water managers when operating the CVP, since they are required to pump at the maximum practicable level. Some contend that maximizing water supplies for users might not allow for a buffer to guard against unforeseen environmental circumstances that could adversely affect listed species. Further, some argue that maximizing water supplies for users in the present could have future consequences for species that might not be detected immediately or might not be addressed before the effects on the population are realized. These concerns could be tempered, in part, by provisions in the law that aim to increase real-time monitoring of species populations, which potentially could detect negative effects on species as soon as changes are implemented. Some others also contend that efforts should be made to maximize water to users and that mandating this directive in law will hold managers to task and provide them with legal cover for their actions. Similar to other areas of Subtitle J, the effectiveness of these provisions likely will hinge on how water managers interpret and implement policies under the law, and whether courts uphold those interpretations. Another component of Section 4001 is accelerating and streamlining project decisionmaking. The law requires a final decision on proposed projects within a certain deadline. The effect of such directives is difficult to determine, as an agency might choose to deny the project request if it could not meet the 10-day deadline for a decision or to approve the request with potentially limited analysis of the project's costs and benefits. No provisions in the law explicitly waive existing NEPA requirements associated with the issuance of permits or grants of right-of-way for federal land. That is, the subtitle establishes procedures that Reclamation must implement to coordinate the environmental compliance process, but it does not explicitly direct DOI or the U.S. Department of Agriculture to change its own procedures for implementing NEPA or processing permit applications. Reclamation's interpretation of the directives in this section likely will determine how these directives may be integrated with existing DOI and other federal agency procedures and how any new project-coordination procedures will differ from the existing NEPA and permitting processes. The law appears to include some requirements that add steps to the project-approval process (e.g., requirements related to the preapplication process, preparation of a unified environmental document, and data monitoring and record keeping). An overarching question to consider for this section is whether the authority and direction to maximize water supplies within the context of existing laws and regulations can or will result in more water supplies for users than before. The authority to implement projects and operations to maximize water supplies appears to be broad and could involve a multitude of projects. However, the benefits of these projects and operational changes to water users will be tempered by constraints put on flows due to water quality and species considerations. Ultimately, the answer to this question may depend on available water supplies and how water managers and legal experts interpret the language of the section. The WIIN Act also establishes a standard for measuring the effects of water operations on listed species. In Section 4001 and in several other places in Subtitle J, the law allows certain actions to go forward unless they are determined to cause "additional adverse effects" on listed species beyond the range of the effects anticipated to occur for the duration of the species BiOp. It is unclear how strictly this standard will be interpreted or measured, what level of analysis will be used to see whether projects exceed the standard, and whether the results will be reported. Section 4002: Scientifically Supported Implementation of Old and Middle Rivers Flow Requirements The Old and Middle Rivers (OMR) are channels of the San Joaquin River as it enters the Delta. The location of these channels can result in "reverse" flows when the CVP and SWP pumps are turned on and operating at certain levels under certain conditions, thus causing a negative flow rate. Higher pumping levels result in higher negative flows, which in turn increase the probability of fish being drawn into the pumps (entrained). Thus, observers closely monitor negative flow rates. During the drought, some argued that aggressive management of pumping was warranted to provide the maximum water supplies for users. However, others argued that the existing approach and careful management of environmental protections were more appropriate. Summary of Changes Section 4002(a) of the WIIN Act directs the Secretaries of Commerce and the Interior to manage water supplies at the most negative flow rate (i.e., a high rate of pumping) allowed under the applicable BiOps to maximize water to users. This action is to be implemented unless it would cause additional adverse effects on the listed fish species beyond the range of effects anticipated to occur to the listed species for the duration of the applicable biological opinion, or would be inconsistent with applicable state law requirements, including water quality, salinity control, and compliance with State Water Resources Control Board Order D-1641 or a successor order. If a lower flow rate is implemented, the law requires a series of conditions to make the change. Some of these conditions center on obtaining evidence from real-time monitoring and near-term forecasts using salvage models that show that the lower flow rate is necessary to avoid additional adverse effects to species beyond the duration of the BiOp. Further, the law lists several factors that are to be considered when making a decision to manage flows below the maximum. Some factors include the distribution of the listed species throughout the Delta, effects of potential entrainment of the species, and water temperature, among others. The justification for a lower flow rate is to be documented in writing under the law. Section 4002(f) directs the Secretary of the Interior to review, modify, and implement, if appropriate, the method to calculate reverse flow in the OMR for implementing the current or future BiOps of listed species. Discussion This section specifically directs water managers to provide water supplies at the most negative flow rate allowed under the applicable BiOps, which is -5,000 cubic feet/second (cfs). Supporters of this approach contend that it will allow for higher flows to users and that it will be implemented within the framework of the existing BiOps. Further, some note that limitations on the flow rate could be implemented if effects on listed species are measured and reported according to the standard defined in the law. The justification to reduce flows would have to be in writing, which presumably would give stakeholders a chance to review the science and parameters used to make a decision to reduce flows. The approach to managing flows in the enacted bill may be interpreted by some to deviate from the existing BiOps, and generates questions and concerns from some stakeholders. For example, some note that the flow rate of -5,000 cfs in the law is at the high end of the allowable flows under the Delta smelt BiOp during certain times of the year and might have detrimental effects on Delta smelt and other species. They also contend that the approach of initially setting a high baseline for flows and then measuring its effect on smelt could harm the species in the short term, decreasing the chances of mitigating effects on the population in the long term. Section 4002 of the WIIN Act implements a management strategy for maximizing flows for users. Under this strategy, the flow rate is at the high end of flows allowed under the existing BiOps. Consideration of the effects of this flow rate on listed species hinges on whether managers can determine if the flows adversely affect species beyond the range of effects expected over the duration of the BiOps. It is unclear how managers will evaluate these effects and measure them. Also unknown is how the short-term effects of this management regime on listed species will affect their long-term survival and conservation. Further, many different factors affect listed species in the Delta, and it could be challenging to model the long-term effects of flow rates on species over the duration of the BiOps. Another question is whether maximizing water flows under the BiOps will actually lead to additional flows for users considering limitations on flows due to water-quality concerns. In 2016-2017, hydrological conditions were such that there were not opportunities to implement these provisions; however, future years may be different. Section 4003: Temporary Operational Flexibility for Storm Events Some observers have noted that during certain high-flow, storm-related events, pumping limits pursuant to the BiOps result in negligible benefits for listed species and in large amounts of water not available for pumping or storage. During drought events, this water is particularly valuable, leading some to argue that winter storm periods resulting in high flows should be classified as "temporary" periods in which pumping limits under the existing BiOps (including limits calculated based on average pumping rates over multiday periods that include storms) do not apply. At the same time, others have noted that such a temporary period of flexibility on pumping limits could under some circumstances have a negative impact on species (e.g., salmon migratory periods) and reduce outflows to the ocean, which help to regulate ecosystem functions. Summary of Changes Section 4003 of the WIIN Act authorizes the Secretaries of Commerce and the Interior to allow pumping operations of the CVP and SWP at levels that allow, under certain circumstances, OMR flows to be higher than the most negative reverse flow allowed under the BiOps of the listed species. The intent of this authority is to capture peak flows during storm-related events. The level of flows authorized under this section is tempered by the effect of flows on listed species. Section 4003 notes that the flows are authorized unless there are additional adverse effects on the listed species beyond the range of effects anticipated to occur for the duration of the smelt BiOp. Further, actions to increase flows are to be consistent with applicable regulatory requirements under state law, notably those of the State Water Resources Control Board (SWRCB). The effects of CVP and SWP operations on water quality and flows for species are addressed, in part, by SWRCB. Three factors are to be considered when determining the effects of flows on listed species: (1) the degree to which the Delta outflow index indicates a higher flow for diversion; (2) relevant physical parameters, including projected inflows, turbidity, salinity, and tidal cycles; and (3) the real-time distribution of species. During the period when high flows are anticipated, the law directs Reclamation, in coordination with FWS, the National Marine Fisheries Service (NMFS), and the California Department of Fish and Game, to undertake an expanded monitoring program that would attempt to identify any negative impacts associated with the temporary flexibility being authorized under the section, including exceedance of incidental take levels under ESA. Further, when capturing peak flows under this section, the Secretaries of Commerce and the Interior are not to count such days toward the 5-day and 14-day running averages of tidally filtered daily OMR flows under the Delta smelt and salmon BiOps. Thus, they would not affect "normal" operational limits. Similar to other changes, this flexibility is allowed only if it is determined that it will avoid adverse effects on fish species beyond what is anticipated to occur through the implementation of the BiOps. In making determinations under Section 4003, the Secretaries are not required to provide supporting detail at a greater level than feasible within the time frame given to make a determination. Discussion Freshwater flows to the ocean help maintain a salinity gradient in the Delta and also provide dilution of other water pollutants from runoff or other sources. If water flows to the ocean are significantly reduced (i.e., because of greater pumping for users), the salinity gradient might move further east into the Delta and provide less freshwater for other purposes, potentially causing negative effects to the ecosystem and water quality. However, if water flows are sufficiently high to the ocean to maintain or surpass the desired salinity gradient, and other water quality factors remain stable, then increased pumping might not have a detrimental effect on water quality and ecosystem properties. Some stakeholders question whether additional water supplies exported out of the Delta during periods of high flows due to storms could lead to ecosystem changes that could affect water quality, the salinity gradient, and sedimentation. For their part, Obama Administration Reclamation officials had previously noted in testimony on similar legislation that the effects of increased pumping would be monitored and regulated within existing law. If adverse effects are recorded, then pumping levels are to decrease to protect species. Section 4004: Consultation on Coordinated Operations ESA Section 7 requires federal agencies to consult with FWS or NMFS to determine whether an agency project or action might (1) jeopardize the continued existence of species listed as endangered or threatened pursuant to ESA or (2) destroy or adversely modify a species's critical habitat. This process is known as consultation . Consultation concludes with the appropriate service issuing a BiOp on the potential harm the project poses. In the case of the CVP and SWP, federal agencies must consult on the coordinated operations of the two projects. Summary of Changes Section 4004 of the WIIN Act addresses how federal agencies should consult and cooperate with state and local agencies, including public water agencies that have water contracts with CVP and SWP, on actions related to the preparation of BiOps. Specifically, Section 4004(a) states that the Secretaries of Commerce and the Interior shall ensure that any public water agency with contracts for water with CVP and SWP has the following opportunities upon request: Have the opportunity to submit to and discuss information with FWS and the National Oceanic and Atmospheric Administration (NOAA) for consideration in the development of a biological assessment; Be informed of the schedule for preparing a biological assessment; Be informed of the schedule for preparing a BiOp; Receive a copy of any draft BiOp and have an opportunity to review and comment on the BiOp; Have the opportunity to confer with FWS or NOAA and the applicant about any reasonable and prudent alternatives (RPAs) prior to them being identified; and Be informed of how each component of the RPAs will contribute to conserving species and the scientific justification supporting the RPAs. Further, be informed as to why other proposed alternative actions that would have fewer adverse economic and water supply effects were not adequate as an RPA. The Secretaries are instructed to solicit input and consider recommendations from the Collaborative Adaptive Management Team and the Collaborative Science and Adaptive Management Program when developing biological assessments and BiOps. Further, the Secretaries are to have quarterly stakeholder meetings during any consultation or reconsultation period to provide updates on the development of biological assessments and BiOps. Discussion The goal of Section 4004 is to actively involve and inform stakeholders in the process of preparing biological assessments and BiOps. Stakeholders are to be kept informed about the process and are to be provided several opportunities to contribute. The law does not make stakeholders official permit applicants under Section 7 of ESA, but it affords them several opportunities to provide recommendations in the creation of the biological assessment and the BiOp. Some might contend that providing stakeholders an opportunity to be involved and aware of the process of creating BiOps will increase transparency for the stakeholders and give them opportunities to provide recommendations and learn about the components (e.g., RPAs) of the BiOp before it is finalized. Others might argue that these provisions give stakeholders a larger role in the BiOp process and could provide them with opportunities to advocate for provisions in the BiOp that fit their needs as opposed to the needs of the species. The additional steps in the BiOp process mandated in this law could extend the period for developing BiOps, which could delay the implementation of projects. Further, it is unclear what might happen if the action agencies (the agencies carrying out a project) do not incorporate the recommendations of the stakeholders in the BiOps. Section 4005: Water Rights Protections In previous debates, some California water users have raised concerns that proposals to increase water supplies for some users may affect the supplies of other users. In particular, during previous negotiations, some water rights holders in California have sought assurances that their priority access to water supplies will not be negatively affected by legislative changes that make additional water supplies available to selected users. For example, some water rights holders in Northern California that do not rely on pumping through the Delta to receive their water supplies have sought assurances that they would receive as much or more water as contractors in Central and Southern California. These same users also have sought assurances for more predictable water supplies, depending on the water-year type (i.e., dry, critically dry, etc.). Summary of Changes Section 4005 of the WIIN Act aims to provide protections to certain state water rights holders. Section 4005(b) provides assurances in case of a scenario in which, as a result of application of the act's provisions, (1) the state determines that it must reduce available SWP water supplies (relative to current BiOps) because SWP operations are inconsistent with the California Endangered Species Act and (2) the CVP yield is greater than it otherwise would have been. The statute states that if this scenario were to occur, then the additional CVP yield would be made available to SWP contractors, with reductions to CVP deliveries applied proportionate to the benefit of the increased yield. Section 4005(c) provides that existing state water rights laws shall not be affected, including "Area of Origin" water rights to water appropriated prior to 1914. Section 4005(d) states that no federal actions may be undertaken pursuant to the WIIN Act that result in "redirected adverse impacts" that would reduce water available to any SWP or CVP contractors. Finally, Section 4005(e) specifies that the Secretary of the Interior make "every reasonable effort" to adhere to specified minimum water allocations for Sacramento Valley water service contractors. The allocations are laid out in the act and correspond to different water-year types that are referred to in the Sacramento Valley Water Year Type (40-30-30) Index (e.g., not less than 100% of contract quantity in an "above normal" year). Discussion The water rights assurances in Section 4005 appear for the most part to maintain status quo protections and allocations for certain priority water rights holders under state law. They also appear to attempt to address concerns that any changes implemented under the WIIN Act could have negative repercussions for certain classes of users. Similar provisions were proposed in one form or another in several of the prior versions of House and Senate drought legislation. It is unclear the extent to which these sections may make it more difficult to implement changes to other sections of the act (in particular, §§4001-4003). Similarly, it is unclear how the Administration might be held accountable for any violations of the protections laid out in Section 4005, as there is no regular mechanism for reporting and/or complying with the section. Without regular reporting, some users could suspect that they have been harmed due to the implementation of other parts of the statute, but a final verdict on whether that was actually the case could be a matter of litigation. Section 4010: Actions to Benefit Threatened and Endangered Species and Other Wildlife A number of other provisions have been proposed in recent years to improve implementation of the BiOps. Among these proposals have been some that would provide for additional information about threatened and endangered species, including increased use of real-time monitoring, efforts to provide for habitat restoration, improvements to temperature conditions and models, and removal of nonnative predators and invasive species. Summary of Changes Section 4010 of the WIIN Act contains several provisions that call for increased real-time monitoring and the continuous integration of new science into the parameters of the BiOps. Under Section 4010(a), the director of FWS is to use the best scientific and commercial data to continuously update and amend the RPAs under the BiOps. Further, the law calls for additional surveys and real-time monitoring to support real-time decisionmaking to maximize fish and water supply benefits. Monitoring protocols are to be periodically reviewed to ensure that the data are sufficient to maximize fish and water supply benefits. Section 4010(a)(4) authorizes greater data collection on the Delta smelt population through a distribution study. The objectives of the study are to better understand the location and abundance of Delta smelt and to determine how to minimize the effects of the CVP and SWP on smelt. Section 4010(b) authorizes several actions to help increase listed species in the ecosystem. It authorizes the Secretary of Commerce to improve habitat for salmon rearing and conduct activities that improve real-time monitoring of conditions that benefit salmon. In addition, the section provides NOAA with broad authority to implement feasible projects that benefit the recovery and conservation of a fish population. Section 4010(b)(5) authorizes the use of conservation hatchery programs to augment salmon and smelt populations. The law authorizes programs to protect native anadromous fish in the Stanislaus River and authorize pilot projects to implement an invasive species control program authorized in the Water Supply, Reliability, and Environmental Improvement Act ( P.L. 108-361 ). Further, Section 4010 authorizes the Secretary of the Interior to acquire land, water, or interests from willing sellers to benefit listed or candidate species under ESA, meet water quality requirements under various laws, and broadly protect and enhance the environment as determined by the Secretary. The Secretary is authorized to hold these interests in joint ownership with the state of California. Discussion This section authorizes several actions to increase real-time monitoring and use the best scientific and commercial data available to implement, evaluate, refine, or amend the RPAs in the Delta smelt BiOp or a successor BiOp. This provision appears to set up an active adaptive management approach intended to collect data on smelt distribution in the Bay Delta and to inform managers how to minimize salvage and maximize pumping. This approach does not appear to alter implementation of the BiOp; rather, it calls for an increase in data collection that eventually could be used to justify modifications to RPAs under the BiOp. A question to consider is whether these modifications to the Delta smelt BiOp would trigger reconsultation under ESA regulations or if this process would be bypassed and changes implemented immediately. It is unclear if an increase in monitoring and additional surveys will increase or decrease water supplies for users. Greater monitoring and more surveys could uncover hidden populations of Delta smelt, for example, thereby increasing abundance estimates and possibly flows for users. In contrast, additional monitoring and surveys could show declines in species and put greater pressure to lower flow rates. Several provisions addressing monitoring have dual objectives of maximizing fish populations and maximizing water supply benefits. If these objectives are competing factors in real-time decisions, a question to consider is how the dual objectives will be balanced. Bureau of Reclamation/West-Wide Provisions In addition to the California/CVP provisions of the bill, three sections address Reclamation operations and programs more generally. Those sections are discussed below. Section 4007: Storage Projects Traditionally, Reclamation's role in water project development has been limited to federally authorized water storage projects. For most of these federal water storage projects, the federal government, via Reclamation, has initially funded 100% of the costs for construction and has been repaid by project beneficiaries (e.g., irrigation contractors, municipal governments) over a 40- to 50-year term. As a result of repayment relief and the portion of costs that are classified as nonreimbursable because they are federal in nature (e.g., fish and wildlife enhancements, recreation), the total amount repaid to the federal government for these projects is typically less than the full cost of construction. In recent years, some have called for alterations to the federal role in Reclamation project construction. They note that despite a need for new storage projects, limited federal funds and a congressional moratorium on geographically specific authorizations and appropriations, among other things, necessitate a new model for federal financing of western water projects. Summary of Changes Section 4007 of the WIIN Act makes significant changes to Reclamation's role in developing and supporting new and improved water resource infrastructure projects in the near term. Specifically, the act authorizes a total of $335 million for appropriation toward federal and nonfederal water storage projects. This funding is available for qualifying projects approved before January 1, 2021. The new funding for project construction is available for two primary project types: (1) federally authorized water storage projects (defined to be any project to which the United States holds title and which was authorized to be constructed pursuant to Reclamation laws), with the federal cost share for these projects limited to no more than 50%; or (2) "state-led" groundwater or surface water storage projects (defined to be any project constructed, operated, and maintained by states or political subdivisions), with the federal cost share for these projects limited to no more than 25%. For federal participation in a project under either designation, the Secretary of the Interior must find that the project is feasible in accordance with Reclamation laws, provides federal benefits, and is supported by project sponsors that agree to pay their portion of the cost share and are financially solvent (for state-led projects). Additionally, to receive appropriations, projects must be designated by name in enacted appropriations legislation. Discussion Section 4007 is notable for its contrast with traditional Reclamation financing. Instead of full, up-front federal financing for new federal projects as has traditionally been provided, it provides for partial federal funding for federal- and state-led projects in the amounts of 50% and 25%, respectively. Proponents of these changes argue that they will stretch scarce federal funds and provide increased incentive for local involvement in storage projects. However, in requiring initial cost shares from nonfederal users, those that cannot afford an up-front, lump-sum payment may be deterred from pursuing projects under this authority. The section also is significant for its provision of authority to move forward with construction without required involvement of the congressional authorizing committees. Although there is no statutory requirement for explicit approval of Reclamation construction projects by these committees, in practice these projects typically have received authorization for construction before obtaining appropriations for this purpose from Congress. Section 4007 moves the onus to the appropriators and increases the requirements that must be met at this stage. It mandates that any project slated for construction be approved by the Secretary of the Interior and receive appropriations designated to the project by name. Thus, although the WIIN Act allows for new project construction to bypass the authorizers, it adds more requirements for a project to receive appropriations. Although some criticized Section 4007 as decreasing congressional oversight of new project approval, others noted that Congress still has to approve new projects before they can move forward. Additionally, although the section represents a new authority for construction projects, only a limited pool of projects would be eligible for this support (i.e., projects approved before 2021) and "traditional" Reclamation project approval and finance would continue to be another option for construction of new projects. Section 4009: Other Water Supply Projects In addition to traditional surface water supply projects, Reclamation operates programs that support water desalination (the Desalination and Water Purification Research Program) and water reuse/recycling (commonly referred to as the Title XVI program). Reclamation also distributes funding via grants that provide cost-shared support for energy projects and water efficiency grants for projects in western states. Additional background on each of these programs, all of which were amended by Section 4009, is included below. Reclamation and other offices within DOI have supported desalination research since the early 1950s. In recent decades, Reclamation has worked to advance desalination through its Desalination and Water Purification Research Program by conducting research internally, providing research grants on specific topics of interest, and, at the direction of Congress, constructing and funding operations of a facility for testing brackish desalination technologies. Other federal agencies at times also have supported desalination research related to their missions. Reclamation's Title XVI program has provided federal support for the construction of selected municipal brackish water desalination facilities and related infrastructure (e.g., infrastructure to collect the high-salinity brine from these facilities). Other federal agencies have provided assistance to municipal desalination facilities as part of broad programs (e.g., loans from Environmental Protection Agency state revolving funds) or for specific projects as directed by Congress. Section 4009 of the WIIN Act expands the federal role in desalination facilities by authorizing support for brackish and seawater desalination facilities providing drinking water. Reclamation's Title XVI program provides cost-shared funding for studies and construction projects in the 17 western states in which Reclamation has projects that provide supplemental water supplies by recycling or reusing agricultural drainage water, wastewater, brackish surface water and groundwater, and other sources of contaminated water. Prior to the WIIN Act, Reclamation had the authority to undertake general appraisal investigations and feasibility studies without congressional authorization, but it generally interpreted the Title XVI language as requiring geographically specific congressional authorization for the construction of new projects. Similar to traditional Reclamation projects, geographically specific authorizations of Title XVI construction projects have the potential to violate current congressional earmark moratoriums. As a result, no new Title XVI construction projects have been authorized in recent years. Additionally, limited funds available for federal participation in Title XVI feasibility studies have caused some to advocate for allowing for full funding of studies by nonfederal entities, with the Secretary of the Interior's role reduced to a review and approval capacity for these studies. Section 9504 of the Omnibus Public Lands Act of 2009 ( P.L. 111-11 ; 42 U.S.C. §10364) authorized a program to provide grants to eligible nonfederal applicants (which are limited to entities in Reclamation states and territories) for water and energy efficiency improvements. According to Reclamation, projects generally focus on efforts to conserve and use water more efficiently, increase the use of renewable energy and improve energy efficiency, protect endangered and threatened species, or carry out other activities to address climate-related impacts on water or prevent any water-related crisis or conflict. Summary of Changes Section 4009 of the WIIN Act makes changes to Reclamation's water desalination activities, alters the Title XVI Water Reclamation and Reuse program, and increases the authorized funding level for DOI's WaterSMART grants program. Section 4009(a) expands the federal role in desalination facilities by authorizing the Secretary of the Interior to provide federal funding of up to 25% of the "total cost of the eligible desalination project"; the authority includes desalination of both seawater and brackish water and applies to facilities constructed, operated, or sponsored by an entity of a state. The authority is limited to the 17 Reclamation states. The section does not provide a per-project limit; the authorization of appropriations for all activities under Section 4009(a) is set at $30 million to remain available until expended. Section 4009(c) implements two changes related to the consideration of new (i.e., previously unauthorized) Title XVI studies and projects. The changes to the program are additive and do not appear to directly affect ongoing Title XVI projects that were authorized prior to the WIIN Act. First, Section 4009(c) authorizes the submission of feasibility studies by nonfederal entities (i.e., feasibility studies conducted at full nonfederal cost rather than studies cost shared through the Title XVI program) to the Secretary of the Interior for review and approval. This provision also requires that, within 60 days of enactment, the Secretary publish guidelines to provide sufficient information for the formulation of these studies by nonfederal entities. Under the WIIN Act, the Secretary is directed to send these nonfederal feasibility studies and related recommendations for action to Congress within 180 days of receiving them, but no further congressional action is required for these studies to receive construction funding under the new Title XVI competitive grant program authorized under the WIIN Act (see below). Reclamation transmitted to Congress an initial list of 38 qualifying studies under this authority on July 12, 2017. Second, as noted above, Section 4009(c) authorizes a new competitive grant program to fund planning, design, and construction of the projects that have been studied in nonfederal feasibility studies and approved by the Secretary for federal action. The legislation directs that in awarding funds, the program prioritize those areas that are experiencing severe, extreme, or exceptional drought or that have been designated as a disaster area at any time in the four-year period before such funds are made available. The new Title XVI competitive grant program is authorized at $50 million, to remain available until expended. The first federal funding announcement for the new grant program was posted on July 17, 2017. Section 4009(d) amends the funding authorization for DOI's WaterSMART grant program, increasing the authorization for this program from $350 million to $450 million. The legislation also requires that $50 million of the new authorization be reserved for a grant program providing funds to participate in projects on the Colorado River that increase storage in Lake Mead and the initial units of the Colorado River Storage Project. Discussion Section 4009(a) creates the first program specifically providing federal financial assistance for desalination facilities that augment water supplies for public entities in the 17 Reclamation states and any other areas subject to Reclamation authorities. The authority represents a continuation of a trend to authorize Reclamation assistance for augmenting water supplies in the West. Desalination is attractive because access to saline sources generally is less competitive than access to freshwater. Plus, desalination can create a new high-quality freshwater supply that is independent of drought and other weather conditions. Some policy topics that may arise with respect to Section 4009(a) implementation include interest in desalination in non-Reclamation states, cost-effectiveness of seawater desalination operations, and environmental and energy concerns associated with desalination, especially seawater desalination. Interest in desalination is not limited to the western states. Water-constrained inland areas with access to brackish waters and coastal and island communities across the United States are interested in investigating desalination as a means of augmenting water supplies. In fact, desalination adoption already is occurring. Adoption of the technology in states such as Florida, Texas, and California has made the United States a global leader in brackish desalination. In contrast, only a limited number of municipal seawater desalination facilities operate in the United States. Various factors have curtailed U.S. seawater desalination adoption to date (e.g., the availability of lower-cost water supply alternatives). For example, the operating costs of a seawater desalination facility can challenge the economic justification to adopt desalination as part of the regular water supply in areas that are affected by drought or low water availability only periodically. Seawater desalination also at times is subject to criticism due to the environmental impacts of intake facilities, brine disposal, and energy consumption. Implementation of the desalination authority in Section 4009(a) may help to identify whether the availability of some federal funding (up to 25%) may overcome any remaining barriers to the adoption of desalination for drinking water. The changes to Title XVI studies under Section 4009(c) appear to negate the previous requirements that preceded significant federal involvement in a Title XVI project, including those for a federally led appraisal-level study recommendation and federal funding for a feasibility study (both of which were necessary prior to federal feasibility study review and approval). Now, any project that meets the new feasibility study review guidelines under the WIIN Act and receives federal approval by the Secretary of the Interior theoretically can move forward and be eligible for federal construction funding via the new competitive grant program (see below discussion). Similar to some of the changes for new surface storage projects in Section 4007, this provision has the potential to remove one of the historic hurdles to authorization of these projects. It also could result in more projects being eligible for construction funding and more competition (and potentially demand) for Title XVI funds overall. The new competitive grant program for Title XVI that was authorized in Section 4009(c) also appears to represent a departure from past federal support for Title XVI construction projects, in which awards were made to a limited pool of projects. The competitive grants for newly approved Title XVI projects under this section appear to be contemplated for what some might describe as a parallel process, in which newly approved projects are selected for implementation out of a separate funding pool than traditional Title XVI projects (i.e., projects that were authorized for construction prior to enactment of the WIIN Act, on a geographically specific basis). How such a program would award funds competitively while adhering to the legislation's requirement that projects be mentioned by name in enacted appropriations legislation is unclear and likely will depend on Administration guidelines for the new program. Similarly, the relative priority of the two parallel Title XVI construction processes, and whether the competitive process is envisioned as the preferred long-term structure for the program, remains to be seen. Section 4011: Accelerated Repayment and Surface Storage Account Since the passage of the Reclamation Act of 1902, reclamation law has been based on the concept of project repayment—reimbursement of federal construction costs—by project water and power users. Agreements between the federal government (through Reclamation) and water users for delivering water generally are governed by one of two contract types: water service contracts or repayment contracts. The terms of repayment and water service contracts differ. Repayment contracts generally are made for terms of 40 years, with capital costs amortized over the long-term period and repaid in annual installments (without interest for irrigation investments and with interest for municipal and industrial [M&I] investments). Costs are repaid annually in fixed amounts to the U.S. Treasury by project beneficiaries (contractors), along with costs for project operations and maintenance. For water service contracts, contractors pay a combined capital repayment and operations and maintenance rate for each acre-foot of water actually delivered (i.e., water service). This water service payment is different from repayment contracts in that under repayment contracts, the annual repayment bill is due regardless of how much water is used in a given year. Congress has previously authorized contract conversion and repayment provisions for individual Reclamation project units. For instance, in the San Joaquin River Restoration Settlement Act of 2009 ( P.L. 111-11 , Title X), Congress authorized contract conversion and prepayment (also referred to as accelerated repayment) for a subset of CVP contractors in the Friant Division (the Hidden Unit and Buchanan Unit). It has authorized similar accelerated repayment provisions for other individual projects. However, prior to the WIIN Act, no such blanket authority for accelerated repayment existed for Reclamation projects in general. Generally speaking, one of the advantages to such conversion is that once they are repaid in full, contractors are not subject to certain acreage limitations and other requirements under the Reclamation Reform Act of 1982 (RRA; P.L. 97-293 ). Summary of Changes Section 4011 of the WIIN Act allows for the conversion of agricultural and municipal water service contracts to repayment contracts to allow for prepayment of allocable construction costs that otherwise would have been repaid to Reclamation over extended terms. The section authorizes prepayment of outstanding construction cost obligations through a lump sum or in installments. It allows repayment contractors to pay, upon request, their remaining construction repayment obligations, either in a single lump sum or over three years (i.e., in three equal payments). If contractors decide to take advantage of this authority, they are required to pay the current value of their remaining contract payments, discounted at one-half of the 20-year maturity rate for Treasury securities. The legislation reiterates that once contractors have satisfied their repayment obligations, they are no longer subject to the acreage limitations and full-cost pricing (as well as other associated requirements) of the RRA. In addition, the section authorizes M&I contractors to convert to repayment contractors and/or repay their outstanding balances through prepayment. Discussion The provisions of this section would apply to all Reclamation contractors; that is, all contractors would be eligible (either through optional conversion to repayment contracts and subsequent prepayment for water service contractors or through optional prepayment for existing repayment contractors) for prepayment of their obligations to the federal government. However, it is unclear how many contractors would take advantage of these provisions. In its estimate of similar provisions, the Congressional Budget Office previously estimated that approximately 35% of current users would convert to repayment contracts, and that a total of $639 million in receipts would be expected to accrue to the Treasury from accelerated repayment over the FY2015-FY2024 period. It is unclear what broader effects these payments (and the absence of RRA requirements on some contractors) might have. Savings Clauses, Duration The subtitle's savings clauses and sunset dates are key to understanding its potential impacts and limitations. The application of those provisions is discussed below. Sections 4012-4013: Savings Clauses and Duration The use (and contents) of savings clauses (i.e., exceptions and other exemptions from the bill's provisions) and the sunset/expiration of proposed provisions were contentious during consideration of the WIIN Act. Prior proposals included provisions aiming to protect California water rights priorities under existing law and confirming the obligations of the United States to honor state water rights laws and, more broadly, to operate the CVP in conformance with state law. In regard to a sunset date for the WIIN Act, some argued that legislation should make it clear that the act's provisions were temporary and should be limited to specific circumstances, whereas others contended that the drought merely brought to light broader problems with federal and state water delivery systems and that permanent changes were needed. Summary of Changes Section 4012(a) of the WIIN Act includes several general savings clauses that apply to all of Subtitle J. For instance, Section 4012(a), paragraph (1), prohibits interpretation or implementation in a manner that preempts or modifies any obligation to act in conformance with state law. Paragraph (2) prohibits any implementation that modifies or affects obligations under the Central Valley Project Improvement Act (CVPIA; P.L. 102-575 ). Paragraph (3) prevents implementation that would override, modify, or amend ESA, including the application of the current BiOps for the operation of the CVP or SWP. Paragraph (4) prohibits any implementation or interpretation that would cause "additional adverse effects" beyond the range of effects anticipated to occur for the duration of the BiOps. Paragraph (5) prevents changes that would alter the obligation of the Pacific Fisheries Management Council to manage fisheries off the coast of California, Oregon, or Washington under ESA or the Magnuson Stevens Fishery Conservation and Management Act. Similarly, Section 4012(b) provides that the same provisions shall apply to successor BiOps, to the extent the Secretaries of Commerce and the Interior determine that doing so is consistent with ESA. Section 4013 sets the expiration dates for the WIIN Act's authorities. Under this section, most of the act's changes are to expire after five years. The exceptions are Section 4004 (i.e., alterations to the consultation process), which will expire after 10 years; new projects under Section 4007 (groundwater and surface water storage projects); Section 4009(a) (water desalination projects); and Section 4009(c) (Title XVI water recycling/reuse projects). Each of these sections is authorized without a sunset date. Discussion The provisions in these sections, in particular Section 4012, arose because the WIIN Act contains specific directives to operate the CVP in certain ways. Some parties wanted to ensure that in maximizing water supplies to CVP and SWP water users south of the Delta—some of whom are junior in priority under state law and CVP allocation priorities—any unintended shortages do not affect other, more senior water users (or other water users in general). Relatedly, both sections include provisions addressing "existing obligations" of the United States to comply with state law, as well as language specific to obligations to avoid jeopardy and adverse modification of habitat of threatened and endangered species and to comply with provisions of the CVPIA. The act's savings clauses related to state law, the CVPIA, and ESA are particularly notable, because earlier bills (in particular those bills passed by the House) had proposed changes to those areas. Thus, although some parts of the WIIN Act could, absent additional guidance, be interpreted to have the potential to alter these laws, the addition of the savings clauses could complicate such a construal. The Obama Administration released a signing statement on the WIIN Act, most of which focused on the drought provisions under Subtitle J. Most notably, the signing statement stated that it was essential that the existing balance between state and federal law not be undermined by anyone "misstating or incorrectly reading the provisions of Subtitle J." The signing statement also noted President Obama's interpretation that Subtitle J would require continued application and implementation of ESA, consistent with work to ensure that state water quality standards are met. The duration—five-year window of effectiveness—for most of the WIIN Act provisions poses another set of questions for Congress. Although many saw the provisions of Subtitle J as a short-term response that would approximately track with the duration of the drought, the wet winter of 2016-2017 means that these provisions will remain in effect almost five years longer than the drought conditions that precipitated them. Some may view this as a positive development, because water users have been advocating for a more aggressive approach to Delta exports under any circumstance. However, others might argue that because a near-term end of the drought was not foreseen at the time of the WIIN Act's enactment, the provisions should be revisited before they expire. Implementation and Issues for Congress Subtitle J of the WIIN Act likely will continue to receive congressional attention. In its oversight capacity, Congress may be interested in the Trump Administration's implementation of Subtitle J, with particular focus on whether the interpretation of these provisions is in accordance with congressional intent in passing the WIIN Act. Of particular interest may be the WIIN Act's application to the operations of the CVP and federal support for the construction of new surface water storage projects, among other things. In addition to overseeing the implementation of the bill's provisions, Congress also may consider their amendment, extension, or repeal. According to Reclamation, the relatively wet hydrology that followed enactment of the WIIN Act has largely limited opportunities to implement some of the act's operational authorities since the bill's passage. At the same time, some federal operational changes pursuant to the WIIN Act reportedly were proposed but deemed incompatible with state requirements. However, some changes authorized under the act have been implemented. For example, Section 4004 consultation authorities have been used to allow for increased communication and transparency for some operational decisions, resulting in reduced or rescheduled pumping restrictions on some occasions. Additionally, in 2018 the WIIN Act's allowance for relaxed restrictions on inflow-to-export ratios (Section 4001) were used to transfer water, resulting in additional exports of 50,000-60,000 AF, and Section 4003 has been used to increase export pumping levels by 5,500 acre-feet during a temporary storm event in March 2018. Attention has focused on extending these and other water supply authorities under the WIIN Act, most of which are set to expire in December 2021. Extension of the WIIN Act is supported by a bipartisan coalition of some California lawmakers who believe the act provides the proper balance of support for water users and the environment. However, some other Members of Congress, as well as some environmental groups, oppose extending certain authorities under the act on the grounds that an extension will facilitate high levels of Delta pumping and other projects that could leave less water for fish and damage the environment. Congress has appropriated funding authorized for Reclamation (both for the CVP and for other projects) under the WIIN Act. CRS estimates that from FY2017 to FY2019, Congress appropriated approximately $576 million for Reclamation projects and programs authorized under the WIIN Act. Some of these authorities have met their appropriations ceilings; thus, they may be proposed for extension or amendment. Table 2 , below, provides additional information on appropriations received to date under several WIIN Act Subtitle J authorities.

Most of the provisions in the Water Infrastructure Improvements for the Nation Act (WIIN Act; P.L. 114-322), enacted on December 16, 2016, relate to the U.S. Army Corps of Engineers. However, the WIIN Act also includes a subtitle (Title II, Subtitle J, §§4001-4013) with the potential to affect western water infrastructure owned by the Bureau of Reclamation (Reclamation; part of the Department of the Interior). Three sections in Subtitle J (§4007, §4009, and §4011) made alterations that would apply throughout Reclamation's service area, the 17 states to the west of the Mississippi River. Most of the remaining sections of this subtitle include provisions specific to the Central Valley Project (CVP), a multipurpose water-conveyance system in California operated by Reclamation. Most of Subtitle J's provisions were derived from bills that received consideration in the 112th, 113th, and 114th Congresses. Although most parts of the WIIN Act had broad stakeholder support when enacted, some of Subtitle J's provisions were (and continue to be) debated. Particularly controversial provisions include those related to implementation of the federal Endangered Species Act (ESA; 16 U.S.C. §§1531-1544) as it relates to endangered salmon and threatened Delta smelt and to California water infrastructure, as well as authorities that alter Reclamation's approach to water resources project development. The controversy of these provisions was evidenced by President Obama's signing statement accompanying the bill, which focused on the Obama Administration's interpretation of Subtitle J, particularly the act's environmental provisions. The WIIN Act was debated and enacted at a time when California was enduring severe drought. However, by most metrics, the drought in California ended with the wet winter of 2016-2017, which occurred after enactment of the WIIN Act. Regardless of hydrologic status, most of the WIIN Act's drought provisions are to remain in effect until five years after its enactment, or December 2021. Due to the scarcity of water in the West and the importance of federal water infrastructure to the region, western water issues are regularly of interest to lawmakers. In addition to overseeing the implementation of CVP operational provisions in the WIIN Act, Congress also may consider their amendment, extension, or repeal. According to Reclamation, the relatively wet hydrology that followed enactment of the WIIN Act has largely limited opportunities to implement some of the act's operational authorities, and some federal operational changes pursuant to the WIIN Act reportedly were proposed but deemed incompatible with state requirements. However, some of the operational changes authorized under the act have been implemented. Congress also has appropriated funding authorized for Reclamation (both for the CVP and for other projects) under the bill. CRS estimates that from FY2017 to FY2019, Congress appropriated a total of approximately $575 million for Reclamation projects and programs authorized under the WIIN Act. Some of the bill's authorities have met their appropriations ceilings, prompting some in Congress to propose an increase in the ceiling and potentially an extension in authorizations for appropriations and other activities. Extensions have been proposed for many of the act's other authorities that expire at the end of 2021. This report discusses selected provisions enacted under Subtitle J of the WIIN Act. It provides background and context related to selected drought- and water-related provisions, summarizes the changes authorized in the WIIN Act, and discusses issues and questions that Congress may consider. For additional background on the CVP, see CRS Report R45342, Central Valley Project: Issues and Legislation, by Charles V. Stern and Pervaze A. Sheikh.

Background The Appointments Clause of the Constitution generally requires high-level "officers of the United States" to be appointed through nomination by the President, with the advice and consent of the Senate. However, appointment to these advice and consent positions can be a lengthy process, and officers sometimes unexpectedly vacate offices, whether by resignation, death, or other absence, leaving before a successor has been chosen. In particular, there are often a large number of vacancies during a presidential transition, when a new President seeks to install new officers in important executive positions. The most recent transition of Administrations was no exception, and reports have noted that a number of offices across the executive branch currently remain vacant. In the case of such a vacancy, Congress has long provided that individuals who were not appointed to that office may temporarily perform the functions of that office. Generally, to serve as an acting officer for an advice and consent position, a government officer or employee must be authorized to perform the duties of a vacant office by the Federal Vacancies Reform Act of 1998 (Vacancies Act). The Vacancies Act allows only certain classes of employees to serve as an acting officer for an advice and consent position, and specifies that they may serve for only a limited period. If a covered acting officer's service is not authorized by the Vacancies Act, any attempt by that officer to perform a "function or duty" of a vacant office has "no force or effect." This report first describes how the Vacancies Act operates and outlines its scope, identifying when the Vacancies Act applies to a given office, how it is enforced, and which offices are exempt from its provisions. The report then explains who may serve as an acting officer and for how long, focusing on the limitations the Vacancies Act places on acting service. Finally, the report turns to issues of particular relevance to Congress, primarily highlighting the Vacancies Act's enforcement mechanisms. Scope and Operation of the Vacancies Act The Vacancies Act generally provides "the exclusive means for temporarily authorizing an acting official to perform the functions and duties of any office of an Executive agency . . . for which appointment is required to be made by the President, by and with the advice and consent of the Senate." The Vacancies Act's requirements are triggered if an officer serving in an advice and consent position in the executive branch "dies, resigns, or is otherwise unable to perform the functions and duties of the office." Because the Vacancies Act is generally exclusive and subject to limited exceptions, a person may not temporarily perform "the functions and duties" of a vacant advice and consent position unless that service comports with the Vacancies Act. The Vacancies Act specifies that a "function or duty" is one that, by statute or regulation, must be performed by the officer in question. Section 3348 provides that, "unless an officer or employee is performing the functions and duties [of an office] in accordance with" the Act, "the office shall remain vacant." If there is no acting officer serving in compliance with the Vacancies Act, then generally "only the head of [an agency] may perform" the functions and duties of that vacant office. As a result, Section 3348 usually allows three types of people to perform the functions and duties of an advice and consent office when it is vacant: the agency head, a person complying with the Vacancies Act, or a person complying with another statute that allows acting service. Section 3348 further provides that "an action taken by any person who" is not complying with the Vacancies Act "in the performance of any function or duty of a vacant office . . . shall have no force or effect." The Supreme Court has suggested that the Vacancies Act renders any noncompliant actions "void ab initio ," meaning that the action was "null from the beginning." The consequences that flow from a determination that an action is "void" are more severe than if a court were to announce that the action was merely "voidable." A "voidable" action is one that may be judged invalid because of some legal defect, but that "is not incurable." For instance, before a court strikes down a voidable agency decision, it will often inquire into whether the legal defect created actual prejudice. If an error is harmless, the court may uphold the agency action. Critically, acts that are "void" may not be ratified or rendered harmless, meaning that another person who properly exercises legal authority on behalf of an agency may not subsequently approve or replicate the act, thereby rendering it valid. The Vacancies Act affirms this consequence by explicitly specifying that an agency may not ratify any acts taken in violation of the statute. As is discussed in more detail later in this report, the Vacancies Act has primarily been enforced through the courts, when a person with standing challenges an agency action on the basis that it was undertaken by an officer who was performing a function or duty of a vacant office in violation of the Vacancies Act. If such a challenge is successful, a court would be likely to vacate the challenged agency action. Which Offices? The Vacancies Act generally applies to advice and consent positions in executive agencies. The term "Executive agency" is defined broadly in Title 5 of the U.S. Code to mean "an Executive department, a Government corporation, [or] an independent establishment." However, the Vacancies Act explicitly excludes certain offices altogether. First, the Vacancies Act does not apply to officers of "the Government Accountability Office." Second, a distinct provision states that the Vacancies Act does not apply to (1) a member of a multimember board that "governs an independent establishment or Government corporation"; (2) a "commissioner of the Federal Energy Regulatory Commission"; (3) a "member of the Surface Transportation Board"; or (4) a federal judge serving in "a court constituted under article I of the United States Constitution." Additionally, while not excluded from the other requirements of the Vacancies Act, certain offices are exempt from the provision allowing only agency heads to perform the duties of a vacant office and the provision that renders noncompliant actions void. Specifically, Section 3348(e) states that "this section"—Section 3348—"shall not apply to" (1) the General Counsel of the National Labor Relations Board; (2) the General Counsel of the Federal Labor Relations Authority; (3) any Inspector General appointed by the President, by and with the advice and consent of the Senate; (4) any Chief Financial Officer appointed by the President, by and with the advice and consent of the Senate; or (5) an office of an Executive agency (including the Executive Office of the President, and other than the Government Accountability Office) if a statutory provision expressly prohibits the head of the Executive agency from performing the functions and duties of such office. The legislative history of the Vacancies Act sheds some light on the purpose of this exemption, suggesting that Congress sought to exclude these "unusual positions" from Section 3348 because these officials are meant to be "independent" of the commission or agency in which they serve. The Senate report accompanying the Act suggests that Congress intended "to separate the official who would investigate and charge potential violations of the underlying regulatory statute from the officials who would determine whether that statute had actually been violated." Allowing the head of the agency—or the commissioners—to perform the nondelegable duties of these positions would undermine the independence of these positions. It is not entirely clear what the consequences are if an acting officer in one of these exempt positions violates the Vacancies Act. Because Section 3348 does not apply to those positions, it appears that any noncompliant actions should not be rendered void. Instead, a court might conclude that any noncompliant acts are merely voidable—or could conclude that even if these officers violate the Vacancies Act, that law will not invalidate their actions. In NLRB v. SW General, Inc. , the Supreme Court held that the service of the Acting General Counsel of the National Labor Relations Board (NLRB) violated the Vacancies Act, but noted that this position was exempt "from the general rule that actions taken in violation of the [Vacancies Act] are void ab initio ." The Court affirmed the D.C. Circuit's ruling vacating the Acting General Counsel's noncompliant actions, but did not explicitly reconsider the issue of remedy. The D.C. Circuit in S.W. General, Inc. had itself clarified that it was not fully exploring the question of the appropriate remedy and was merely assuming , on the basis of the parties' arguments, "that section 3348(e)(1) renders the actions of an improperly serving Acting General Counsel voidable , not void." Because the D.C. Circuit assumed that the contested actions were voidable rather than void, the court considered but ultimately rejected two legal doctrines—the harmless error and de facto officer doctrine—that could have allowed the court to uphold the NLRB's action. If the Acting General Counsel were not exempt from Section 3348 and his noncompliance with the Vacancies Act had rendered his acts void ab initio , the court could not have considered whether any other legal doctrines cured the initial legal error with the Acting General Counsel's actions. Finally, the Vacancies Act contemplates that other statutes may, under limited circumstances, either supplement or supersede its provisions. Section 3347 provides that the Vacancies Act is exclusive unless "a statutory provision expressly" authorizes "an officer or employee to perform the functions and duties of a specified office temporarily in an acting capacity." However, Section 3347 states that a general statute authorizing the head of an executive agency "to delegate duties statutorily vested in that agency head to, or to reassign duties among, officers or employees of such Executive agency" will not supersede the limitations of the Vacancies Act on acting service. For instance, 28 U.S.C. § 510, which states generally that the Attorney General may authorize any other employee to perform any function of the Attorney General, likely would not render the Vacancies Act nonexclusive. To supplement or supersede the Vacancies Act, a statute must "expressly" authorize "acting" service. Under certain circumstances, it might be the case that more than one statute governs acting service in a given office, and that a person could lawfully serve as an acting officer under either statute. The Vacancies Act also makes certain exemptions for holdover provisions in other statutes: Section 3349b provides that the Vacancies Act "shall not be construed to affect any statute that authorizes a person to continue to serve in any office" after the expiration of that person's term. What Are the "Functions and Duties" of an Office? The Vacancies Act limits an officer or employee's ability to perform "the functions and duties" of a vacant advice and consent office. For the purposes of the Vacancies Act, a "function or duty" must be (1) established either by statute or regulation and (2) "required" by that statute or regulation "to be performed by the applicable officer (and only that officer)." If the function or duty is established by regulation, that regulation must have been in effect "at any time during the 180-day period preceding the date on which the vacancy occurs." Thus, the Vacancies Act appears to apply only to functions or duties that a statute or regulation has exclusively assigned to a specific officer, generally referred to as the nondelegable functions and duties of a vacant office. Conversely, the Vacancies Act likely does not prevent another person from performing any duties of an office that are delegable . So long as a statute or regulation does not require a specific officer to perform certain functions and duties, an agency could theoretically delegate all of the tasks that had previously been performed by an officer in a now-vacant advice and consent position to another officer or employee. That other employee would likely be able to perform all of those delegable tasks without violating the Vacancies Act because the Act is seemingly only concerned with nondelegable functions and duties. There is, however, very little case law clarifying how to determine what "functions and duties" are within the scope of the Vacancies Act. One federal district court noted that the Vacancies Act covered only "the 'functions and duties' . . . that are required by statute or regulation to be performed exclusively by the official occupying that position," and consequently held that a person lawfully serving in another role in an agency could perform certain job duties of a vacant office because those duties had been validly delegated to that person. Courts might analyze this issue under the general legal principles that normally govern an inquiry into whether a particular duty is delegable. Vacancies Act Limitations on Acting Service Section 3348 of the Vacancies Act allows only certain officers or employees to perform the "functions and duties" of a vacant advice and consent office. Unless an acting officer is serving in compliance with the Vacancies Act, only the agency head can perform a nondelegable duty of a vacant advice and consent office. The Vacancies Act creates two primary types of limitations on acting service: it limits (1) the classes of people who may serve as an acting officer, and (2) the time period for which they may serve. Who Can Serve as an Acting Officer? Section 3345 allows three classes of government officials or employees to temporarily perform the functions and duties of a vacant advice and consent office under the Vacancies Act. First, as a default and automatic rule, once an office becomes vacant, "the first assistant to the office" becomes the acting officer. The term "first assistant" is a unique term of art under the Vacancies Act. Nonetheless, the term is not defined by the Act and its meaning is not entirely clear. For many offices, a statute or regulation explicitly designates an office to be the "first assistant" to that position. However, this is not true for all offices, and in those cases, who qualifies as the "first assistant" to that office may be open to debate. Alternatively, the President "may direct" two other classes of people to serve as an acting officer of an agency instead of the "first assistant." First, the President may direct a person currently serving in a different advice and consent position to serve as acting officer. Second, the President can select a senior "officer or employee" of the same executive agency, if that employee served in that agency for at least 90 days during the year preceding the vacancy and is paid at a rate equivalent to at least a GS-15 on the federal pay scale. Ability to Serve If Nominated to Office Section 3345 places an additional limitation on the ability of these three classes of people to serve as acting officers for an advice and consent position. As a general rule, if the President nominates a person to the vacant position, that person "may not serve as an acting officer" for that position. Thus, if the President submits for nomination a person who is currently the acting officer for that position, that person usually may not continue to serve as acting officer without violating the Vacancies Act. The President can name another person to serve as an acting officer instead of the nominated person. The limitations of the Vacancies Act can create the need to shift government employees to different positions within the executive branch. For example, in January 2017, shortly after entering office, President Trump named Noel Francisco as Principal Deputy Solicitor General. Francisco then began to serve as Acting Solicitor General. In March, the President announced that he would be nominating Francisco to serve permanently as the Solicitor General. After this announcement, Francisco was moved to another role in the department and Jeffrey Wall, who was chosen by Francisco to be the new Principal Deputy Solicitor General, became the acting Solicitor General. This last shift may have been done to comply with the Vacancies Act. Ultimately, the Senate confirmed Francisco to the position of Solicitor General on September 19, 2017. There is an exception to this limitation: a person who is nominated to an office may serve as acting officer for that office if that person is in a "first assistant" position to that office and either (1) has served in that position for at least 90 days or (2) was appointed to that position through the advice and consent process. Returning to the example of the Solicitor General position, it appears that this exception would not have allowed Noel Francisco to continue to serve as the Acting Solicitor General, once nominated to that position. Although Francisco may have been in a first assistant position, as the Principal Deputy Solicitor General, he had not served in that position for 90 days, nor had he been appointed to that position through the advice and consent process. For How Long? The Vacancies Act generally limits the amount of time that a vacant advice and consent position may be filled by an acting officer. Section 3346 provides that a person may serve "for no longer than 210 days beginning on the date the vacancy occurs," or, "once a first or second nomination for the office is submitted to the Senate, from the date of such nomination for the period that the nomination is pending in the Senate." These two periods run independently and concurrently. Consequently, the submission and pendency of a nomination allows an acting officer to serve beyond the initial 210-day period. The 210-day time limitation is tied to the vacancy itself, rather than to any person serving in the office, and the period generally begins on the date that the vacancy occurs. This period does not begin on the date an acting officer is named, and because it runs continuously from the occurrence of the vacancy, the time limitation is unaffected by any changes in who is serving as acting officer. The period is extended during a presidential transition period when a new President takes office. If a vacancy exists on the new President's inauguration day or occurs within 60 days after the inauguration, then the 210-day period begins either 90 days after inauguration or 90 days after the date that the vacancy occurred, depending on which is later. If an acting officer attempts to perform a function or duty of an advice and consent office after the 210-day period has ended, and if the President has not nominated anyone to the office, that act will have no force or effect. Alternatively, Section 3346 allows an acting officer to serve while a nomination to that position "is pending in the Senate," regardless of how long that nomination is pending. The legislative history of the Vacancies Act suggests that an acting officer may serve during the pendency of a nomination even if that nomination is submitted after the 210-day period has run following the start of the vacancy. "If the first nomination for the office is rejected by the Senate, withdrawn, or returned to the President by the Senate," then an acting officer may continue to serve for another 210-day period beginning on the date of that rejection, withdrawal, or return. If the President submits a second nomination for the office, then an acting officer may continue to serve during the pendency of that nomination. If the second nomination is also "rejected, withdrawn, or returned," then an acting officer may continue for one last 210-day period. However, an acting officer may not serve beyond this final period—the Vacancies Act will not allow acting service during the pendency of a third nomination, or any subsequent nominations. Again, if the acting officer serves beyond the pendency of the first or second nomination and the subsequent 210-day periods, any action performing a function or duty of the office will have no force or effect. Potential Considerations for Congress Exclusivity of the Vacancies Act The Vacancies Act provides "the exclusive means" to authorize "an acting official to perform the functions and duties" of a vacant office—unless another statute "expressly" (A) authorizes the President, a court, or the head of an Executive department, to designate an officer or employee to perform the functions and duties of a specified office temporarily in an acting capacity; or (B) designates an officer or employee to perform the functions and duties of a specified office temporarily in an acting capacity[.] Across the executive branch, there are many statutes that expressly address who will temporarily act for specified officials in the case of a vacancy in the office. In fact, the Senate report on the Vacancies Act expressly identified 40 agency-specific provisions that "would be retained by" the Act. To take one example, the Senate report anticipated that the Vacancies Act would not disturb the provision governing a vacancy in the office of the Attorney General. That statute provides that "[i]n case of a vacancy in the office of Attorney General, or of his absence or disability, the Deputy Attorney General may exercise all the duties of that office . . . ." In the event that there is an agency-specific statute designating a specific government official to serve as acting officer, the Vacancies Act will no longer be exclusive. But even if the Vacancies Act does not ex clusively apply to a specific position, it will not necessarily be wholly inapplicable. It is possible that both the agency-specific statute and the Vacancies Act may be available to temporarily fill a vacancy. The Senate report can be read to support this view: it states that "even with respect to the specific positions in which temporary officers may serve under the specific statutes this bill retains, the Vacancies Act would continue to provide an alternative procedure for temporarily occupying the office." However, if two statutes simultaneously apply to authorize acting service, this raises the question of which statute governs in the case of a conflict. If there are inconsistences between the two statutes and an official's service complies with only one of the two statutes, such a situation may prompt challenges to the authority of that acting official. The Vacancies Act sets out a detailed scheme delineating three classes of governmental officials that may serve as acting officers and expressly limits the duration of an acting officer's service. By contrast, agency-specific statutes tend to designate only one official to serve as acting officer and often do not specify a time limit on that official's service. Accordingly, for example, if an acting officer is designated by the President to serve under the Vacancies Act but is not authorized to serve under the agency-specific statute, a potential conflict may exist between the two laws. Where two statutes encompass the same conduct, courts will, if possible, "read the statutes to give effect to each." Courts are generally reluctant to conclude that statutes conflict and will usually assume that two laws "are capable of co-existence, . . . absent a clearly expressed congressional intention to the contrary." With this principle in the background, judges have sometimes concluded that the Vacancies Act should operate concurrently with these agency-specific statutes, and that government officials should be able to temporarily serve under either statute. Accordingly, courts have resolved any potential conflict by holding that whichever statute is invoked is the controlling one. At times, however, this method of reconciling the relevant statutes could conflict with the general interpretive rule that more specific statutes should usually prevail over more general ones—even where the more general statutes were enacted after the more specific ones. For example, in Hooks ex rel. NLRB v. Kitsap Tenant Support Se rvices , one federal court of appeals rejected a litigant's contention that an agency-specific statute displaced the Vacancies Act and provided "the exclusive means" to temporarily fill a vacant position. The agency-specific statute at issue in that case provided that if the office of the NLRB's General Counsel is vacant, "the President is authorized to designate the officer or employee who shall act as General Counsel during such vacancy." It also provided for a shorter term of acting service than the Vacancies Act. The President, however, had invoked the Vacancies Act to designate an Acting General Counsel. The court concluded that "the President is permitted to elect between these two statutory alternatives to designate" an acting officer. Accordingly, the court rejected the argument that because the officer's designation did not comply with the agency-specific statute, "the appointment was necessarily invalid." But the two statutes governing a vacant office might not always be so readily reconciled. In Hooks , both the Vacancies Act and the agency-specific statute expressly authorized the President to select an acting officer. A more difficult question may be raised when an agency-specific statute instead seems to expressly limit succession to a particular official. The federal courts recently considered such a contention in a dispute over who was authorized to serve as the Acting Director of the Consumer Financial Protection Bureau (CFPB). The position of CFPB Director became vacant in late 2017, and the President invoked the Vacancies Act to designate Mick Mulvaney, the Director of the U.S. Office of Management and Budget, to serve as Acting Director of the CFPB. The Deputy Director of the CFPB, Leandra English, filed suit, arguing that she was the lawful Acting Director under an agency-specific statute that provided that the CFPB's Deputy Director "shall . . . serve as acting Director in the absence or unavailability of the Director." English argued that the agency-specific statute displaced the Vacancies Act under normal principles of statutory interpretation, as a later-enacted and more specific statute. The U.S. District Court for the District of Columbia rejected these arguments and held that the President had permissibly invoked the Vacancies Act to designate Mulvaney as Acting Director. In the trial court's view, both statutes were available: the agency-specific statute "requires that the Deputy Director 'shall' serve as acting Director, but . . . under the [Vacancies Act] the President 'may' override that default rule." The court invoked two interpretive canons, the rule that statutes should be read in harmony and the rule against implied repeals, and concluded that under the circumstances, an "express statement" was required to displace the Vacancies Act entirely. Accordingly, because the agency-specific statute was "silent regarding the President's ability to appoint an acting director," it did not render the Vacancies Act unavailable. English appealed this decision to the D.C. Circuit, but decided to discontinue her appeal before the appellate court issued its decision. In cases such as Hooks and English , courts are considering how to reconcile statutory provisions. Congressional silence on the relationship between agency-specific provisions and the Vacancies Act can raise difficult questions for courts trying to discern how to resolve any perceived inconsistencies between these statutes. Congress can itself resolve tensions between the Vacancies Act and agency-specific statutes by clarifying the conditions under which these statutes apply. For example, the statute governing vacancies in the office of Attorney General provides that "for the purpose of section 3345 of title 5 the Deputy Attorney General is the first assistant to the Attorney General." This statute expressly clarifies—in at least one respect—how the two statutes interact. Delegability of Duties The Vacancies Act only bars acting officials from performing the nondelegable functions and duties of a vacant advice and consent position. Unless a statute or regulation requires the holder of an office—and only that officer—to perform a function or duty, the Vacancies Act appears to permit an agency to delegate those duties to any other employee, who may then perform that duty without violating the Vacancies Act. Therefore, in many circumstances, an agency officer or employee who has not been appointed to a particular advice and consent position could perform many, if not all, of the responsibilities of that position. For example, the Government Accountability Office (GAO) considered in 2008 whether a senior official in the Department of Justice's Office of Legal Counsel (OLC), the Principal Deputy Assistant Attorney General, had violated the Vacancies Act by performing the responsibilities of an absent officer, the Assistant Attorney General for the OLC. The GAO concluded that the principal deputy had not violated the Vacancies Act because he had merely been performing the duties of his own position, which included the delegated duties of the vacant office. The GAO approved of this delegation after reviewing the relevant statutes and regulations and concluding that "there [were] no duties" that could be performed only by the Assistant Attorney General. While there are few cases considering what types of duties may be nondelegable for purposes of the Vacancies Act, the courts that have considered the issue have upheld the ability of government officials to perform the delegated duties of a vacant office, so long as the delegation is otherwise lawful. Outside the context of the Vacancies Act, courts often presume that delegation is permissible "absent affirmative evidence of a contrary congressional intent." However, if a statute expressly prohibited delegation of a duty, that would likely render that duty nondelegable for the purposes of the Vacancies Act. Courts have also recognized that some statutes may limit the class of officers to whom a duty is delegable, meaning by implication that the duties are not delegable outside of that specified class. As discussed above, the text and the legislative history of the Vacancies Act suggest that Congress intended the Act to bar the performance of only nondelegable functions or duties. This limitation on the scope of the Vacancies Act could potentially undermine one of the Act's primary purposes: to prevent the Executive from appointing "officers of the United States" without Senate advice and consent. Namely, Section 3347 provides that the Vacancies Act is "the exclusive means" to authorize a person to temporarily perform the duties of a vacant advice and consent office, and specifies that a statute that vests an agency head with the general authority to delegate duties will not suffice to override the Vacancies Act. At the same time, however, a general vesting and delegation statute could permit an agency head to delegate any delegable responsibilities of a vacant office to another officer or employee. As a result, if the responsibilities of a particular advice and consent position primarily consist of delegable duties, a general delegation statute could allow an agency employee to perform most of that position's responsibilities even though that employee was not appointed to that position through the advice and consent process—seemingly contrary to the goals of the Vacancies Act. If Congress were concerned about the ability of an acting officer to perform certain functions or duties of an advice and consent position, it could pass a statute specifying that those functions and duties must be performed by the officer in that position. Then, the Vacancies Act would limit the ability of other officers to perform those duties when the position is vacant. Congress could also enact other statutory limitations on the ability of certain officers to delegate their authority. Any such statute could place substantive limitations on the types of duties that are delegable or could create procedural limitations on the way in which duties may be delegated. Alternatively, if unsatisfied with the current language, Congress could amend the definition of "function or duty" in the Vacancies Act. Enforcement Mechanism The Vacancies Act may be enforced through both the political process and through litigation. Several provisions of the Vacancies Act are centrally enforced through political measures rather than through the courts. For example, while the Act provides that an "office shall remain vacant" unless an acting officer is serving "in accordance with" the Vacancies Act, the statute does not create a clear mechanism to directly implement this provision. Accordingly, the text of the Vacancies Act does not contemplate a means of removing any noncompliant acting officers from office. Similarly, if the Comptroller General determines that an officer has served "longer than the 210-day period," the Comptroller General must report this to the appropriate congressional committees. However, this provision itself does not require the Comptroller General to make any such determination and contains no additional enforcement mechanism. But if the Comptroller General does make such a report to Congress, this reporting mechanism may prompt congressional action pressuring the executive branch to comply with the Vacancies Act, exerted through normal channels of oversight. For instance, in March 2018, the House Committee on Ways and Means Subcommittee on Social Security held a hearing on a vacancy in the office of the Commissioner of Social Security. The day before the hearing, the Comptroller General issued a letter reporting that the Acting Commissioner, Nancy Berryhill, was violating the Vacancies Act. Shortly thereafter, Berryhill reportedly stepped down from the position of Acting Commissioner, serving instead in her position of record as Deputy Commissioner of Operations. Arguably, the most direct means to enforce the Vacancies Act is through private suits in which courts may nullify noncompliant agency actions. The Vacancies Act appears to render noncompliant actions void. As noted earlier, a determination that an action is void means that legally, it is as if the action had never been taken in the first place. But as a practical matter, not every act taken in violation of the Vacancy Act will necessarily be formally rendered void in a court of law. Although the Vacancies Act is, in a sense, self-executing, violations of the Vacancies Act are generally enforced only if a third party with standing (such as a regulated entity that has been injured by agency action) successfully challenges the action as void in court. The dearth of case law examining the Vacancies Act suggests that such cases are relatively rare. Even in the context of these lawsuits, it is not always entirely clear what relief a court may afford a regulated entity, if the court concludes that an acting officer has violated the Vacancies Act. There is little case law interpreting what it means for an agency action to have "no force or effect" in the context of the Vacancies Act. The Supreme Court has suggested that any such actions would be "void ab initio ." To determine the consequences of such a determination, courts might turn to cases interpreting the judicial review provision of the Administrative Procedure Act (APA). The APA directs courts to "hold unlawful and set aside" any agency action that is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." This standard has clear parallels to the statement in the Vacancies Act that any action not "in accordance with" the Vacancies Act has "no force or effect." However, it does not appear that any court has yet officially recognized this similarity or compared the two standards. As noted above, in NLRB v. SW General , Inc. , the Supreme Court explicitly left open the question of remedy with respect to those officials who are carved out of Section 3348. Certain offices are exempt from the provision that nullifies the noncompliant actions of an acting officer, and the statute does not otherwise specify what consequences follow, if any, if a person temporarily serving in one of those offices violates the Vacancies Act. The D.C. Circuit and the Supreme Court in SW General accepted the parties' apparent agreement that the actions of a noncompliant Acting General Counsel of the NLRB—one of the excepted offices—were voidable. The determination that an agency action is voidable, rather than void, might have important consequences for the outcome of any court challenge because it could allow a court to consider mitigating arguments such as the harmless error doctrine or the ratification doctrine. However, notwithstanding its decision to accept the parties' litigating postures in that case, the D.C. Circuit expressly left open the possibility that the Vacancies Act might "wholly insulate the Acting General Counsel's actions," so that the actions of an acting officer in one of these named offices are not even voidable. It is possible that the Vacancies Act does not undermine the legality of the actions of these specified officers, even if they violate the Act, and that, under this interpretation, these positions could be indefinitely filled by acting officers without consequence under the Vacancies Act. These questions may be clarified in future litigation, but Congress could, if it so chose, add statutory language more explicitly addressing or otherwise clarifying the consequences of violating the Vacancies Act, particularly with respect to those offices exempt from the enforcement mechanisms contained in Section 3348. Congress could also amend the existing enforcement mechanisms, possibly by altering the reporting requirements or by adding additional consequences for violations of the Vacancies Act.

The Federal Vacancies Reform Act of 1998 (Vacancies Act) generally provides the exclusive means by which a government employee may temporarily perform the nondelegable functions and duties of a vacant advice and consent position in an executive agency. Unless an acting officer is serving in compliance with the Vacancies Act, any attempt to perform the functions and duties of that office will have no force or effect. The Vacancies Act limits a government employee's ability to serve as an acting officer in two primary ways. First, the Vacancies Act provides that only three classes of people may serve temporarily in an advice and consent position. As a default rule, the first assistant to a position automatically becomes the acting officer. Alternatively, the President may direct either a senior official of that agency or a person serving in any other advice and consent position to serve as the acting officer. Second, the Vacancies Act limits the length of time a person may serve as acting officer: a person may serve either (1) for a limited time period running from the date that the vacancy occurred or (2) during the pendency of a nomination to that office. The Vacancies Act is primarily enforced when a person who has been injured by an agency's action challenges the action based on the theory that it was taken in contravention of the Act. There are, however, a few key limitations on the scope of the Vacancies Act. Notably, the Vacancies Act governs the ability of a person to perform only those functions and duties of an office that are nondelegable. Unless a statute or regulation expressly specifies that a duty must be performed by the absent officer, that duty may be delegated to another government employee. In other words, delegable job responsibilities are outside the purview of the Vacancies Act. In addition, if another statute expressly authorizes acting service, that other statute may render the Vacancies Act nonexclusive, or possibly even inapplicable. This report first describes how the Vacancies Act operates and outlines its scope, identifying when the Vacancies Act applies to a given office, how it is enforced, and which offices are exempt from its provisions. The report then explains who may serve as an acting officer and for how long, focusing on the limitations the Vacancies Act places on acting service. Finally, the report turns to issues of particular relevance to Congress, primarily highlighting the Vacancies Act's enforcement mechanisms.

Introduction The Higher Education Act of 1965 (HEA) as amended, authorizes the federal government's major federal student aid programs (Title IV), as well as other programs which provide institutional aid and support (Titles II, III and V). In addition, the HEA authorizes services and support to less-advantaged students (select Title IV programs), and to students pursuing international education and certain graduate and professional degrees (Titles VI and VII). The programs authorized by the HEA are administered by the U.S. Department of Education (ED), and made available an estimated 70% ($94 billion) of all federal, state, and institutional aid awarded to postsecondary students in 2005-2006 (excluding tax benefits). The HEA was last comprehensively reauthorized by the Higher Education Amendments of 1998 ( P.L. 105-244 ), which expired September 30, 2003. Since the initial expiration of the authorization, there have been several temporary extensions, which authorize the programs and activities of the HEA through March 31, 2008. Most recently, P.L. 110-198 , the Higher Education Extension Act of 2008, extends the HEA authorization to April 30, 2008. This report provides a brief overview of major provisions of the HEA. It is organized by title and part of the act. Other CRS reports provide much more detailed discussions and analyses of major HEA provisions. This report will be updated following reauthorization of the HEA. Overview The HEA was initially authorized in 1965 (P.L. 89-329). Since that time, comprehensive amendment and reauthorization of the HEA has occurred seven additional times. The principal objective of the HEA is to expand postsecondary education opportunity, particularly for low-income individuals, and to increase affordability for moderate income families as well. The heart of the legislation is its student aid programs authorized under Title IV, which provide student aid in the form of grants, loans, and work-study assistance. There are seven titles of the HEA that authorize numerous programs and provisions designed to provide assistance to postsecondary students and institutions. The seven titles of the HEA are: Title I—General Provisions Title II—Teacher Quality Enhancement Title III—Institutional Aid Title IV—Student Assistance Title V—Developing Institutions Title VI—International Education Programs; and Title VII—Graduate and Postsecondary Improvement Programs Each of these titles and the major programs under each are discussed in greater detail. Title I: General Provisions Title I of the HEA includes four parts, which establish the general provisions for the remainder of the HEA. Many of the provisions affect institutions' participation in the Title IV student aid programs. Part A: Definitions Title I, Part A of the HEA includes two definitions of an institution of higher education (IHE). The first definition, contained in Section 101, applies to institutional participation in non-Title IV programs. The second definition, contained in Section 102, applies only to institutions participating in Title IV programs. The Section 102 definition includes all institutions recognized as IHEs under Section 101 and expands the definition of IHEs for Title IV purposes to include for-profit (proprietary) institutions, postsecondary vocational institutions, and institutions outside of the United States (i.e., foreign institutions). While Section 102 includes requirements specific to proprietary institutions, postsecondary vocational institutions, and foreign institutions, it also includes requirements that all Title IV eligible institutions must meet regarding the course of study offered, student enrollment, and institutional management. Finally, Section 103 contains other definitions relevant to the HEA. Part B: General Provisions Title I, Part B of the HEA contains several general provisions that address issues such as anti-discrimination, student speech, recognition of accrediting agencies, and drug and alcohol abuse on college campuses. More specifically, IHEs receiving federal funds may not use the funds to conduct a study or project in which the terms of the contract prohibit an individual from performing the study or project based on the individual's race, religion, sex, or national origin. Part B also includes a Sense of Congress regarding the protection of student speech and association rights. It also provides the Secretary of Education (Secretary) with waiver authority related to program eligibility criteria and the circumstances of the outlying areas. Part B authorizes the National Advisory Committee on Institutional Quality and Integrity (NACIQI), which advises the Secretary on decisions related to recognition of accrediting agencies. Provisions are also included related to the disclosure of foreign gifts received by IHEs. The "Collegiate Initiative to Reduce Binge Drinking and Illegal Alcohol Consumption" is also included in Part B. The initiative, expressed in the form of a Sense of the Congress, is intended to change the culture of alcohol consumption on collegiate campuses. Also included in Part B is a requirement that an IHE must certify to ED that it has adopted and implemented a program to prevent the use of illicit drugs and alcohol abuse by students. An institution failing to provide this certification is not eligible to receive funds or any other form of financial assistance under any federal program. Part B also authorizes Alcohol and Drug Abuse Prevention Grants. Finally, Part B includes various provisions to meet long-term obligations related to previously funded programs supporting the construction of college housing and academic facilities. Part C: Cost of Higher Education Title I, Part C includes provisions focused on collecting data on college costs and prices. It requires the redesign of postsecondary education data systems to improve the usefulness and timeliness of the data collected, standard definitions to be developed for various postsecondary education data elements, a national study of expenditures at IHEs, and the development of a higher education market basket that includes items related to the costs of higher education. Part C also authorizes the National Postsecondary Student Aid Study (NPSAS). Part D: Administrative Provisions for Delivery of Student Financial Assistance Title I, Part D authorizes a performance-based organization (PBO) responsible for managing the information processing and delivery systems for the student assistance programs authorized under HEA Title IV. The PBO is known as the Office of Federal Student Aid. Title II: Teacher Quality Enhancement Title II authorizes grants for improving teacher education programs, strengthening teacher recruitment efforts, and training prospective teachers. This title also includes the reporting requirements for states and IHEs regarding the quality of teacher education programs. Part A: Teacher Quality Enhancement Grants for States and Partnerships Title II, Part A authorizes three competitive grants to improve the quality of K-12 teacher education—State, Partnership, and Recruitment grants. The authorization of appropriations provides that appropriated funds be divided as follows: 45% to State grants; 45% to Partnership grants; and 10% to Recruitment grants. These grants provide funding to states or to partnerships involving high-need school districts, higher education schools of education, and higher education schools of arts and sciences. Competitively awarded state grants support reform of teacher licensing, strengthening of accountability for high quality teacher preparation, and recruitment of high quality teachers for high-need schools. Partnership grants, also awarded competitively, are used to reform teacher preparation programs so they prepare high quality teachers, provide sustained pre-service clinical experiences to prospective teachers, and enhance the opportunities for professional development activities for current teachers. Further, states and partnerships are eligible for separate competitive grants that support teacher recruitment activities. These grants may be used for scholarships enabling students to complete teacher training programs, support services needed to complete postsecondary education, and support services during the initial three years of teaching. TEACH Grants Students preparing for a career in teaching and who agree to teach for at least four years in a high-poverty school may receive a TEACH Grant of $4,000 for each year of study (prospective mathematics and science teachers may also receive Bonus TEACH Grants of $500 for each year of study). Recipients who do not complete their service requirement would be required to repay the amount of the TEACH Grant as a loan under HEA, Title IV, Part D. Part B: Preparing Tomorrow's Teachers to Use Technology The Preparing Tomorrow's Teachers to Use Technology grant program has not been funded since FY2003 and therefore will not be discussed. Title III: Institutional Aid Title III is intended to provide support for less-advantaged institutions serving students from low-income or racial minority backgrounds. There are six parts authorizing programs for IHEs that serve select groups of students, including historically black colleges and universities (HBCUs), Alaska Native and Native Hawaiian-serving institutions, and tribally controlled colleges and universities (TCCUs). Additionally, Title III, Part A authorizes funding for less-advantaged institutions and those serving low-income students. Part A: Strengthening Institutions Title III, Part A authorizes development and planning grants for institutions that serve "needy" students. The grants are intended to assist eligible institutions with improving their academic quality, institutional management, and fiscal stability. In order for an institution to be eligible for a Part A grant, at least 50% of the enrolled degree seeking students must be recipients of need-based financial assistance under Title IV of the HEA (Federal Perkins Loan, Federal Work Study, Federal Pell Grant, or Federal Supplemental Educational Opportunity Grant), or the institution's Pell Grant recipients must exceed the median percentage for similar institutions receiving Pell Grants. In addition to serving needy students, the institution's average educational and general expenditures must be low in comparison with other comparable institutions. Further, Section 312(b) requires that the institution also be legally authorized by its state to award baccalaureate degrees or be a junior or community college (or be the College of the Marshall Islands, the College of Micronesia/Federated States of Micronesia, and Palau Community College); and be accredited or pre-accredited by a nationally recognized accreditation association or agency. Development grant recipients are authorized to utilize funds for the acquisition of scientific or laboratory equipment; construction or improvement of instructional facilities, including the integration of computer technology into institutional facilities to create smart buildings; faculty exchange and development, and faculty fellowships for attaining advanced degrees; and establishment or improvement of an endowment fund (the grant recipient must match the federal share of funds and up to 20% of a recipient's grant funds can be utilized for an endowment fund), among other things. American Indian Tribally Controlled Colleges and Universities Part A authorizes competitive grants for colleges and universities that are identified by Section 2 of the Tribally Controlled College or University Assistance Act of 1978 (25 U.S.C. § 1801) or are included in the Equity in Educational Land Grant Status Act of 1994 (7 U.S.C. § 301). TCCUs must satisfy the general eligibility requirements in Section 312(b) however, the grants are intended to provide and expand opportunities for Native American students. TCCUs are permitted to carry out similar activities to those authorized for Part A recipients. However, there are some additional allowable activities specifically designed for Native American students such as: academic instruction in disciplines in which the group is underrepresented; establishment or enhancement of a teacher education program that is designed to prepare individuals to teach in elementary and secondary schools; and community outreach programs that encourage Native American students to pursue postsecondary education. Alaska Native and Native Hawaiian-Serving Institutions Part A authorizes grants and assistance to Alaska Native and Native Hawaiian-serving institutions to enable them to improve and expand higher education opportunities afforded to these two groups. In addition to the general eligibility requirements of being accredited/pre-accredited and awarded baccalaureate degrees or being a community college, an institution is eligible for a grant under this section if at least 20% of the undergraduate students are Alaska Native or 10% are Native Hawaiian. In addition to the percentage requirement, these institutions must also satisfy the eligibility requirements set forth in Section 312(b) of Title III. Similar to TCCUs, Alaska Native and Native Hawaiian institutions are permitted to undertake some of the activities that are authorized for Part A institutions, and they are authorized to develop activities that specifically address the needs of Alaska Native and Native Hawaiian students. The delineated activities are more limited than those identified for Part A institutions, focusing on equipment acquisition, facilities' improvement, faculty development, curriculum and instruction, funds and administrative management, and student support services. Additionally, Alaska Native and Native Hawaiian institutions cannot utilize any of the grant money for the establishment of, or to increase, their institutional endowment. Part B: Strengthening Historically Black Colleges and Universities Title III, Part B is the only program in Title III that distributes funds according to a formula rather than the competitive process. These formula grants are for eligible historically black colleges and universities (HBCUs). To qualify as an HBCU the institution must have been established prior to 1964 and have as its principal mission the education of African Americans. HBCUs are not required to meet many of the eligibility requirements delineated for Part A institutions, except they must meet the general requirements of being authorized by their state to provide baccalaureate degrees or be a junior or community college and be either pre-accredited or accredited by an authorized agency or association. HBCUs are permitted to carry out activities similar to Part A institutions, however, there are some authorized activities specifically for African American students such as academic instruction in disciplines in which the group is underrepresented. Similar to TCCUs, HBCUs are permitted to establish or enhance a teacher education program and community outreach programs, however, the programs and activities do not have to specifically address African Americans. Historically Black Graduate and Professional Institutions Part B also authorizes grants to 18 graduate and professional institutions that significantly contribute to the number of blacks in the legal, medical, dental, veterinary, math, engineering and the physical and natural science fields. The federal government provides each institution $1 million in unmatched funds. Any funds in excess of the $1 million must be matched on a dollar for dollar basis by the institution. For example, if an institution requests $1.5 million, it must demonstrate that it is able to match $250,000 of the federal award with non-federal funds. Under this section, institutions are authorized to provide activities similar to those of undergraduate HBCUs, however, they are also able to provide scholarships and fellowships to assist students with the enrollment and completion of postbaccalaureate and professional degrees in the aforementioned disciplines. It is the sole discretion of the chancellor or president of each institution to determine which professional or graduate school(s) or program(s) at the institution receives the funds appropriated under this section. Part C: Endowment Challenge Grant Endowment Challenge grants have not been funded since FY1995 and therefore will not be discussed. Part D: HBCU Capital Financing Title III, Part D authorizes the HBCU Capital Financing program which provides federal insurance for bonds issued to support capital financing projects at HBCUs generally for the repair, renovation, and, in exceptional circumstances, the construction or acquisition of facilities used for instruction, research, or housing. A designated bonding authority is charged with raising funds in the bond market; in turn, these funds are lent to HBCUs. Repayments on these loans are used to make principal and interest payments on outstanding bonds. Borrowers deposit a portion of their loans into an escrow account to cover principal and interest payments on outstanding bonds in the event borrowers are delinquent in repaying their loans. Federal insurance is provided if this escrow account cannot cover all principal and interest payments due on outstanding bonds. The total outstanding principal and unpaid accrued interest on these loans cannot exceed $375 million (of this amount, $250 million is for private HBCUs and $125 million is for public HBCUs). Part E: Minority Science and Engineering Improvement Program Title III, Part E authorizes the Minority Science and Engineering Improvement Program which provides grants to predominantly minority institutions to improve science and engineering education and to increase the number of minorities and women in science and technology. Priority is given to institutions that have not previously received a grant under this section, prior grantees successful in increasing the number of women and minorities in science and technology, or projects that provide balance in one of the following ways: geographical, academic discipline or project type. Part F: General Provisions Title III, Part F contains the general provisions, including waiver authorities that apply to the administration of these programs, and specifies the various authorization funding levels for the Title III programs. Title IV: Student Assistance Title IV of the HEA contains eight parts which authorize a broad range of programs and provisions. As the most notable title of the HEA, the programs authorized under Title IV are the primary sources of federal aid to support postsecondary education. Part A: Grants to Students in Attendance at Institutions of Higher Education Title IV, Part A authorizes numerous grant programs—funds that do not have to be repaid—for students who attend eligible Title IV participating institutions. The largest of these programs is the federal Pell Grant program. Subpart 1: Federal Pell Grants The Federal Pell Grant program (Pell Grants) is the single largest source of grant aid for postsecondary education attendance funded by the federal government. The Pell Grant program provides grants to low-income, undergraduate students. The program is often defined as a quasi-entitlement program because in any year, federal funding is available to ensure that all eligible students attending eligible institutions receive Pell Grants. To receive a Pell Grant a student must satisfy the general eligibility criteria for all federal student aid programs, and the individual must be enrolled at an eligible IHE for the purpose of earning a degree or certificate. Generally, the recipient must also be enrolled in an undergraduate program. A recipients who attends less than full-time is eligible for a Pell Grant. However, the grant amount is adjusted in accordance with the recipient's enrollment status. Pell Grants are portable, that is, the grant aid follows students to the eligible postsecondary education institutions in which they enroll. The size of the grant is primarily based on the financial resources that students and their families are expected to contribute toward postsecondary education expenses, and the appropriated maximum grant award. The Pell Grant award is considered to be the foundation of the student aid package because all other federal aid (e.g., federal work study, student loans) is calculated after the amount of the Pell award has been determined. Academic Competitiveness and National Science and Mathematics Access to Retain Talent Grants Subpart 1 also authorizes the Academic Competitiveness grant (AC) and National Science and Mathematics Access to Retain Talent grant (SMART) programs. Both programs provide grants to Pell Grant-eligible students who are enrolled full time, at either a two-year or four-year degree-granting IHE. However, unlike Pell, to be eligible a student must be a U.S. citizen. AC grants are limited to students who are in either their first year or second year of undergraduate education, and have a completed a rigorous secondary program. SMART grants are for third and fourth year undergraduate students, who major in certain technical fields or foreign languages. Subpart 2: Federal Early Outreach and Student Services Programs Subpart 2 of Part A contains the authorization for the five TRIO programs and the Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR-UP). Under each of these programs, discretionary grants are awarded to postsecondary institutions and other eligible agencies to encourage and assist low-income, first-generation college students, individuals with disabilities, and select minorities, who have demonstrated potential to complete their secondary education and pursue postsecondary and postbaccalaureate education. Federal TRIO Programs Part A authorizes five separate discretionary grant programs—Talent Search, Upward Bound, Student Support Services, Education Opportunity Centers, and McNair Postbaccalaureate Achievement—collectively known as the TRIO programs. These programs are designed to assist qualified individuals from disadvantaged backgrounds with preparing for and completing secondary and postsecondary education. In addition to these programs, funding for TRIO also authorizes staff development activities and expenses for information dissemination and program evaluation. Talent Search . The Talent Search program encourages youth with college potential to complete high school and enter postsecondary education, and also encourages dropouts to reenter high school. To accomplish this, Talent Search programs disseminate information about available postsecondary student assistance, offer tutoring, and other support services. At least two-thirds of each project's participants must be low-income individual and potential first-generation college students. Participants must have also completed a minimum of five years of elementary education, and be between the ages of 11 and 27. Upward Bound . Upward Bound (UB) provides pre-college students and veterans with the skills and motivation needed to succeed in postsecondary education. UB programs offer services such as: counseling and workshops; tutoring; and exposure to cultural events. Most UB projects also provide six-week summer programs on college campuses. Participants may receive monthly stipends of up to $60 during the summer (work-study students may receive monthly stipends of $300 in the summer) and $40 during the rest of the year. ED also funds Upward Bound Math and Science Centers providing intensive instruction in math and science. At least two-thirds of each project's participants must be low-income, first-generation college goers; the remainder must be either low-income or a prospective first-generation college goer. Participants also must have completed at least eight years of elementary education, and be 13 to 19 years of age. Student Support Services . Student Support Services (SSS) projects are intended to improve retention and graduation rates, and improve the transfer rates of students from two-year to four-year colleges, by offering a broad range of support services such as academic counseling and guidance. SSS projects may provide such services as: instruction in reading, writing, study skills, math, and other subjects; academic counseling; exposure to cultural events; assistance in the graduate admission and financial aid processes; assistance in transferring from two-year to four-year colleges; and mentoring. At least two-thirds of SSS participants must be disabled or low-income and first-generation. The remaining participants must be either low-income, first-generation, or disabled. Not less than one-third of the disabled participants must also be low-income. McNair Postbaccalaureate Achievement Program . The McNair Postbaccalaureate Achievement Program prepares low-income and first-generation undergraduate students for doctoral study. Among the services that McNair programs may provide are: research opportunities, seminars, and other activities preparing students for doctoral study; summer internships; academic counseling; assistance in securing graduate admission and financial aid; mentoring; and exposure to cultural events and academic programs. Research participants may receive an annual award providing a stipend of up to $2,800; the award may cover the costs of summer tuition, room and board, and transportation as well. At least two-thirds of the participants must be low-income and first-generation undergraduates; the remainder must be from a group underrepresented in graduate education. Education Opportunity Centers . The Education Opportunity Centers (EOC) program is intended to provide information to prospective postsecondary students regarding available financial aid and academic assistance, and help them apply for college admission and financial aid. EOCs may provide information to communities about postsecondary education and training opportunities, assistance in completing admission and financial aid applications, assistance preparing for college entrance exams, and guidance on reentering secondary school, or entering a GED program or other program for high school dropouts. At least two-thirds of the participants must be low-income and would be first-generation college goers. The participants must also be at least 19 years old. Gaining Early Awareness and Readiness for Undergraduate Programs Part A also authorizes the Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP), which provides grants to states and partnerships to support early college preparation and awareness activities at the state and local levels, to ensure low-income elementary and secondary school students are prepared for and pursue postsecondary education. GEAR UP grantees serve an entire cohort of students beginning no later than the seventh grade and follow the cohort through high school. GEAR UP has two major components: (1) eligible projects provide early intervention services such as mentoring, career counseling, and college visits; and (2) college scholarships to eligible participating students. Subpart 3: Federal Supplemental Educational Opportunity Grants The Federal Supplemental Educational Opportunity Grants (FSEOG) is one of the three programs collectively referred to as the campus-based programs—Federal Work Study (FWS) and Perkins Loans are the other two—because their funds are allocated to postsecondary institutions to administer and award to students. In addition to institutions administering the funds for these programs the participating institution must match a portion of their allocation under each program. Institutions are required to award FSEOGs to students with exceptional financial need, with priority going to students receiving Pell Grants. The federal share of funds for FSEOG is allocated to IHEs according to a statutorily prescribed formula that is largely driven by the institution's initial year of participation in the program. Institutions first are allocated funds in proportion to the amount they received in previous years, with priority going to institutions that participated in the program in FY1999 or earlier. Funds are then allocated to those institutions that began participating after FY1999, but which are not first- or second-time participants. Following this, funds are allocated to institutions that are first- or second-year participants. Subpart 4: Leveraging Educational Assistance Partnership Program The Leveraging Educational Assistance Partnership (LEAP) program provides matching federal funds to states to encourage and assist them in providing eligible postsecondary students with need-based grants and work-study aid. Subpart 5: Special Programs for Students Whose Families Are Engaged in Migrant and Seasonal Farmwork There are two programs authorized under Subpart 5: the High School Equivalency Program (HEP) and the College Assistance Migrant Program (CAMP). HEP helps persons 16 years of age or older who are not currently enrolled in school to obtain the equivalent of a secondary school diploma and subsequently to gain employment or to begin postsecondary education or training. CAMP assists students enrolled in the first undergraduate year at an institution of higher education to complete their programs of study for that year. Subpart 6: Robert C. Byrd Honors Scholarship Program The Robert C. Byrd Honors Scholarship program is a federally funded, state-administered scholarship program, designed to recognize exceptionally able high school seniors who show promise for continued excellence in postsecondary education. ED awards funds to state education agencies, which make scholarship awards to eligible applicants. Subpart 7: Child Care Access Means Parents in School The Child Care Access Means Parents in School program is designed to support the participation of low-income parents in postsecondary education through campus-based child care services. The program awards competitive grants to IHEs to establish or support a campus-based child care program. Part B: Federal Family Education Loan The Federal Family Education Loan program (FFEL) is authorized under Title IV, Part B. Under the FFEL program, loan capital is provided by private lenders, and the federal government guarantees lenders against loss through borrower default, death, permanent disability, or in limited instances, bankruptcy. FFEL program loans are originated by private lenders. Private lenders also are responsible for billing borrowers and collecting loan payments. State and nonprofit guaranty agencies receive federal funds to play the lead role in administering the federal loan insurance and for providing other FFEL program administrative services. FFEL loans are an entitlement, meaning the funding for the program is mandatory and therefore not subject to the annual appropriations process. The following types of federally sponsored student loans are available through the FFEL program to support postsecondary student expenses: Stafford loans, subsidized or unsubsidized; PLUS loans; and Consolidation loans. Loan Limits, repayment plans, deferment and forbearance benefits, interest rates and other terms and conditions are determined by statutory provisions. Subsidized Stafford loans Subsidized Stafford loans are available to undergraduate and graduate students. The federal government "subsidizes" these loans by paying the interest on the loans while the student is enrolled in school on at least a half-time basis and during grace periods and deferment periods. To qualify for a subsidized Stafford loan a student must have financial need. Unsubsidized Stafford loans Unsubsidized Stafford loans are available to undergraduate and graduate students. The federal government does not pay the interest on these loans while the student is in school or during deferment and grace periods. Students can qualify for unsubsidized Stafford loans regardless of financial need. PLUS loans PLUS loans are available to parents of dependent undergraduate students and to graduate students. The federal government does not pay the interest on PLUS loans while students are in school or during deferment or grace periods. Borrowers can qualify for PLUS loans regardless of financial need. Consolidation loans Consolidation loans allow borrowers with existing federal student loans to combine their obligations and possibly extend their repayment period. Part C: Federal Work-Study Programs Title IV, Part C authorizes the Federal Work-Study Programs (FWS), one of the three campus-based programs previously described. The purpose of FWS is to provide part-time employment to undergraduate, graduate, and professional students in need of earnings to pursue their course of study; and to encourage student participation in community service activities. Students receive their awards as compensation for the hours they have worked Unlike the FSEOG where aid is required to be awarded first to students with exceptional financial need, FWS aid may be provided to any student demonstrating financial need. Awards typically are based on factors such as each student's financial need, the availability of FWS funds, and whether a student requests FWS employment and is willing to work. Part D: William D. Ford Federal Direct Loan Program The William D. Ford Federal Direct Student Loan program (DL), authorized under Title IV, Part D, was intended to streamline the student loan delivery system and achieve cost savings. The DL program provides the same set of loans as the FFEL program, but uses a different administrative structure and draws on a different source of capital. Under the DL program, the federal government essentially serves as the banker—the federal government provides the loans to students and their families, using federal capital (i.e., funds from the U.S. Treasury), and owns the loans. Under the DL program, schools may serve as direct loan originators or the loans may be originated by contractors working for ED. Similar to FFEL, DL loans include subsidized, unsubsidized, PLUS loans and consolidation loans. Part E: Federal Perkins Loans The final campus-based program, Federal Perkins loans, authorizes the allocation of federal funds to IHEs to assist them in capitalizing revolving loan funds for the purpose of making low-interest loans to students with exceptional financial need. Institutions capitalize revolving loan funds with a combination of federal and institutional capital contributions. IHEs apply to ED for funds which are allocated according to procedures similar to those previously discussed for the FSEOG program. Institutions are required to establish written selection procedures for awarding Perkins Loans to eligible students. Loans must be made reasonably available to all eligible students, to the extent that funds are available, and priority must be given to students with exceptional financial need. Undergraduate students and graduate and professional students are eligible to borrow under the Perkins Loan program. Interest on Perkins Loans is fixed at a rate of 5% per year; however, no interest accrues prior to a student beginning repayment. Part F: Need Analysis Title IV, Part F authorizes the federal need analysis system, which is used to allocate billions of dollars of federal student aid under Title IV of the HEA, and by states and many IHEs as well. The need analysis process entails gathering financial data, which are provided by the student via the free application for federal student aid (FAFSA); calculating the expected family contribution (EFC); and packaging of the applicant's financial aid award by the postsecondary institution's financial aid administrator. The EFC is the amount that the need analysis system determines a family has available to contribute toward postsecondary education expenses. In calculating the EFC, consideration is given to available income (a combination of taxable and untaxed income and benefits), and for some families, available assets. In addition, living expenses, retirement needs, and federal and state tax liability are considered. The income contribution is calculated by determining the total income of a student and his or her family (where applicable), and determining available income by subtracting a series of allowances from total income; a percentage of that available income is considered as an income contribution toward postsecondary education costs. A contribution from assets is similarly calculated. The combination of the available income and asset contribution divided by the number of individuals in the family enrolled in college constitutes the EFC. The calculation of the EFC varies depending upon the applicant's dependency status. There are three separate dependency classifications for individual applicants: dependent student, independent student with dependents, and independent student without dependents. These distinctions are important because parental financial information is not considered if the applicant meets the statutory definition of an independent student. Part G: General Provisions Relating to Student Assistance Programs Title IV, Part G establishes institutional requirements for Title IV participation and related provisions. It includes definitions of terms such as "academic year" and "eligible program" that affect an institution's participation in the federal student aid programs. Part G establishes a master calendar related to federal student aid programs that the Secretary is required to follow, and includes requirements related to forms and regulations, including the FAFSA. This part also contains student eligibility requirements to receive federal student aid, including the types of institutions and programs in which students must enroll, ability-to-benefit requirements for students who are not high school graduates, and penalties related to drug-related offenses. Provisions are also included that prescribe how Title IV funds will be returned to the federal government by IHEs and students in the event that a student withdraws from the institution. Part G also contains numerous requirements regarding institutional information dissemination activities for prospective and enrolled students. For example, IHEs are required to provide information related to available student financial assistance programs, exit counseling to borrowers, and data on athletically related student aid, campus security policies, and campus crime statistics. Additionally, Part G authorizes combined payment plans for borrowers, the National Student Loan Data System, loan simplification, the College Access Initiative, the Distance Education Demonstration Program, regulatory relief and improvement (e.g., Quality Assurance Program and streamlining experiments), wage garnishment requirements, administrative expenses, criminal penalties, administrative subpoenas, the Advisory Committee on Student Financial Assistance, and regional meetings and negotiated rulemaking. Finally, Part G includes the Program Participation Agreement (PPA), which all institutions must sign to participate in Title IV programs, and authorizes the Secretary to issue regulations regarding audits, financial responsibility, and penalties for IHEs failing to meet requirements. Part H: Program Integrity Title IV, Part H includes three subparts that specify the roles and responsibilities for the three aspects of the program integrity triad: state authorization, accreditation by an accrediting organization recognized by the Secretary, and eligibility and certification by ED. Subpart 1: State Role Subpart 1 requires states to provide the Secretary with various information about the licensing and authorization process used by the state, if the state has revoked the authority of an IHE to operate, and if the state has evidence that an IHE has committed fraud related to Title IV programs or substantially violated a Title IV provision. Subpart 2: Accrediting Agency Recognition Subpart 2 delineates the criteria the Secretary utilizes to recognize an accrediting agency as a reliable authority for determining the quality of education or training offered by an IHE for the purposes of participating in the federal student aid programs (Title IV) and other federal purposes. These criteria include, for example, requirements related to the structure of the accrediting agency, the agency's operating procedures (e.g., institutional review process), and due process requirements. Subpart 3: Eligibility and Certification Procedures Subpart 3 includes the eligibility and certification procedures administered by ED. In this capacity, ED is responsible for verifying the institution's legal authority to operate in a state and its accreditation status, and for evaluating its administrative capability and financial responsibility. Part I: Competitive Loan Auction Pilot Program Title IV, Part I authorizes the Secretary of Education to implement a student loan auction program for parent PLUS loans in the FFEL program to begin on July 1, 2009. Prior to implementation the Secretary would hold an auction in each state where lenders would bid on the minimum amount of subsidization they would accept to have exclusive rights to originate parent PLUS loans in that state. Part J: Strengthening Historically Black Colleges and Universities and Other Minority-Serving Institutions Title IV, Part J allocates funding for Hispanic-serving institutions, historically black colleges and universities, tribal colleges and universities, and Alaska Native and Native Hawaiian-serving institutions. It also authorizes new programs and allocates funding for Predominantly Black Institutions, Asian American and Pacific Islander-serving institutions and Native American Non-Tribal-serving institutions. Title V: Developing Institutions In 1998 Congress authorized the inclusion of grants to Hispanic-Serving Institutions (HSIs) under Title V of the HEA. Prior to 1998, the HSI program was a section of Title III, Part A. Title V of the HEA is solely dedicated to authorizing grants for HSIs. Part A: Hispanic-Serving Institutions Title V, Part A authorizes grants to institutions that provide and increase the number of educational opportunities available to Hispanic and other low-income students. To qualify as an Hispanic-serving institution (HSI) for the purposes of Title V, an institution must have a minimum 25% full-time, Hispanic undergraduate student enrollment. In addition, HSIs must also satisfy requirements similar to those for Title III, Part A institutions, including the following: they must serve needy students and have low general and education expenditures in comparison with other similar institutions. HSIs are authorized to use their funds for specific activities that parallel those delineated under Title III Part A. Additionally, HSIs can use their funds to establish or enhance teacher education programs; establish community outreach programs to provide elementary and secondary school students with the interest and skills to pursue postsecondary education; and expand courses and institutional resources in order to increase the number of Hispanic and other underrepresented graduate or professional students that the institution can serve. Part B: General Provisions Title V, Part B contains the general provisions, including waiver authorities that apply to the administration of these programs, and specifies the various authorization funding levels for the Title V programs. Title VI: International Education Programs Title VI contains four parts that authorize an array of international and foreign language studies programs and business and international education programs to strengthen domestic IHEs in foreign languages and in area and international studies. Part A: International and Foreign Language Studies Title VI, Part A authorizes a series of programs, centers, and fellowships related to international and foreign language studies. The National Language and Area Centers and Programs provide grants to IHEs to establish, strengthen, and operate (1) comprehensive foreign language and area or international studies centers and programs (National Resource Centers), (2) a network of undergraduate foreign language and area or international studies centers and programs (Undergraduate International Studies and Foreign Language Program). The Graduate Fellowships for Foreign Language and Area or International Studies program provides grants to IHEs to enable them to pay stipends to individuals participating in advanced training in the aforementioned centers and programs. Language Resource Centers , authorized by Part A, provides grants to IHEs to establish, strengthen, and operate national language resource and training centers and award grants to IHEs to establish, strengthen, and implement programs to improve undergraduate instruction in international studies and foreign languages. International Research and Studies Projects are grants or contracts to conduct research and studies focused on instruction and national needs in foreign languages and area or international studies. Technological Innovation and Cooperation for Foreign Information Access program authorizes grants to develop innovate techniques or programs using new electronic technologies to collect, organize, preserve, and disseminate information on world regions and countries that address U.S. teaching and research needs in foreign languages and international studies. Finally, the American Overseas Research Centers program makes grants to consortia of IHEs to enable the centers to promote postgraduate research, exchanges, and area studies. Part B: Business and International Education Programs Title VI, Part B authorizes grants to IHEs to pay the federal share of the cost of planning, establishing, and operating centers for international business education which will be national resources for the teaching of international business, provide instruction in critical foreign languages and international fields, and provide research and training in the international aspects of trade, commerce, and related areas (Centers for International Business Education). It also authorizes grants to IHEs to promote linkages between IHEs and the American business community engaged in international economic activity (Business and International Education Projects). Part C: Institute for International Public Policy Title VI, Part C authorizes the Institute for International Public Policy program. This program supports activities to increase the representation of African Americans and other underrepresented minorities in international service. Part D: General Provisions Title VI, Part D contains definitions relevant to Title VI. Title VII: Graduate and Postsecondary Improvement Programs Title VII authorizes several graduate education programs, as well as a grant program designed to support innovation and improvement in postsecondary education. It also authorizes grants for urban community service and demonstration programs to enable IHEs to better serve disabled students. Part A: Graduate Education Programs Title VII, Part A authorizes several graduate education programs. The Jacob K. Javits Fellowships program provides financial support to students of "superior ability" in the arts, humanities, and social sciences. The Graduate Assistance in Areas of National Need (GAAN) provides competitive grants to postbaccalaureate students in areas of national need. The Thurgood Marshall Legal Educational Opportunity program authorizes a grant or contract to the Council on Legal Education Opportunity for services and activities to help low-income, minority, or disadvantaged college students prepare for, gain access to, and complete law school. Part A also includes general provisions that affect the administration and evaluation of these programs and the provision of continuation awards. Part B: Fund for the Improvement of Postsecondary Education Title VII, Part B authorizes the Fund for the Improvement of Postsecondary Education (FIPSE) awards to IHEs and other nonprofit entities for projects that model innovative reform and improvement of postsecondary education. Also included are provisions establishing the National Board of the Fund for the Improvement of Postsecondary Education, which provides guidance on priorities for the improvement of postsecondary education. Part B also includes administrative provisions and the authority to make grants for special projects in areas of national need. Part C: Urban Community Service The Urban Community Service program has not been funded since FY1999 and therefore will not be discussed. Part D: Demonstration Projects to Ensure Students with Disabilities Receive a Quality Higher Education Title VII, Part D authorizes demonstration projects that support technical assistance and professional development for faculty and administrators at IHEs to enable them to better serve postsecondary education students with disabilities. Part E: College Access Challenge Program Title VII, Part E authorizes the College Access Challenge Grant Program, which makes funds available to states and philanthropic organizations to provide students and families with information about the benefits of college, outreach activities, career preparation and need-based grant aid among other things.

The Higher Education Act of 1965 (HEA) as amended, authorizes the federal government's major federal student aid programs (Title IV), as well as other programs which provide institutional aid and support (Titles II, III and V). In addition, the HEA authorizes services and support to less-advantaged students (select Title IV programs), and to students pursuing international education and certain graduate and professional degrees (Titles VI and VII). The programs authorized by the HEA are administered by the U.S. Department of Education (ED), and made available an estimated 70% ($94 billion) of all federal, state, and institutional aid awarded to postsecondary students in 2005-2006 (excluding tax benefits). The principal objective of the HEA is to expand postsecondary education opportunity, particularly for low-income individuals, and to increase affordability for moderate income families as well. The heart of the legislation is its student aid programs authorized under Title IV, which provide student aid in the form of grants, loans, and work-study assistance. There are seven titles of the HEA that authorize numerous programs and provisions designed to provide assistance to postsecondary students and institutions. This report provides a brief overview of major provisions of the HEA. It is organized by title and part of the act. This report will be updated following reauthorization of the HEA.

Introduction On December 21, 2011, EPA Administrator Lisa Jackson announced final standards for mercury and other air toxics emissions from electric generating units (EGUs). The rule, commonly referred to as the "Utility MACT" or the "Mercury and Air Toxics Standards" (MATS), has been a long time in the making: Congress authorized the standards in the 1990 Clean Air Act Amendments, and EPA made a preliminary determination and began developing actual standards in 2000. The rule is among the most expensive rules that EPA has ever promulgated: EPA estimates the annualized cost at $9.6 billion in 2015. Industry estimates have been higher, although most analyses were conducted before EPA proposed or promulgated the final rule. Industry and environmental groups have been keenly interested in both the substance of the rule and the schedule for its implementation, and the House has already passed legislation ( H.R. 2401 ) that would change both. This report describes the rule and its potential impact. The report begins with a background section that describes the statutory authority and history of the rule's development before discussing the specifics of the rule, its estimated costs and benefits, and legislation related to it that has been considered in the 112 th Congress. Background In 1990, when Congress enacted amendments to the Clean Air Act, one of the major changes to the act was a new set of requirements that EPA was to impose on sources of hazardous air pollutants. Unhappy with the slow pace at which EPA was regulating emissions of these pollutants, Congress removed most of the agency's discretion as it restructured the program: it listed 189 hazardous air pollutants (HAPs) in the statute and required EPA to identify sources that emitted more than 10 tons of any individual HAP or 25 tons of any combination. EPA was directed to impose the "Maximum Achievable Control Technology" on these sources, a term defined with great precision in the statute. Standards for all categories and subcategories of sources were to be promulgated no later than 10 years after the date of enactment (i.e., by November 15, 2000), and sources were to comply with the standards three years after their promulgation, with one additional year available in limited cases. Electric utilities lobbied hard for an exception to these requirements. What they got was a special subsection of the act (Section 112(n)(1)) that required EPA to undertake a study and report to Congress on the hazards to public health reasonably anticipated to occur as a result of emissions by EGUs and alternative control strategies for the emissions. The study was to be completed within three years of the date of enactment, and the EPA Administrator was directed to regulate EGUs if she found such regulation to be "appropriate and necessary after considering the results of the study." The study was completed in February 1998, and the Administrator published a finding that regulation was appropriate and necessary on December 20, 2000. Although EGUs emit numerous HAPs, the principal HAP of concern has been mercury. Mercury is a potent neurotoxin that can harm health at very low concentrations—the principal effects being delayed development, neurological defects, and lower IQ in fetuses and children. The principal route of exposure to mercury is through consumption of fish. Mercury enters water bodies, often through air emissions, and is taken up through the food chain, ultimately affecting humans as a result of fish consumption. All 50 states have issued fish consumption advisories due to mercury pollution, covering 16.8 million acres of lakes, 1.25 million river miles, and the coastal waters of 20 entire states. Coal-fired electric generating units account for about half of U.S. mercury emissions. Based largely on the concerns about mercury, the Administrator determined that regulation was appropriate and necessary in December 2000, and the agency proceeded to develop regulations for the EGU category. In 2005, however, upon completion of the process, EPA promulgated regulations establishing a cap-and-trade system to limit emissions of mercury from coal-fired power plants rather than the plant-specific Maximum Achievable Control Technology (MACT) standards required by Section 112 of the act. All previous sources of mercury subject to emission standards had been required to meet plant-specific MACT standards. Section 112 sets out very detailed requirements for MACT standards, including a list of the pollutants that need to be controlled (not just mercury, but any of 186 other HAPs) and the level of control that the standards must achieve. The 2005 cap-and-trade rules addressed only mercury, and would have allowed many power plants to avoid control provided they obtained allowances from others who achieved lower pollution levels than required, or reduced emissions sooner than required. The ability of plants to avoid emission control by purchasing allowances could lead to the continuation of "hot spots," areas where mercury concentrations in waterbodies are greater than elsewhere. By contrast, MACT standards are required by Section 112 of the act to be applicable at each existing plant and to be no less stringent than the average emission limitation achieved by the best performing 12% of existing sources in the industry subcategory. These statutory requirements are referred to as the "MACT floor," because the agency is not allowed to set less stringent standards, nor may it take economic factors into account in determining what the floor will be. Whether the agency could substitute cap-and-trade rules for the MACT requirements was challenged by the State of New Jersey and others, and, in a 3-0 decision, the D.C. Circuit Court of Appeals vacated the cap-and-trade rules in 2008. Rather than appeal the court's ruling to the Supreme Court or attempt to delist the category, EPA proposed the Utility MACT standards on March 16, 2011, and finalized them on December 21. In between those dates, the agency held three public hearings and provided a 90-day public comment period that resulted in 960,000 comments on the rule, of which the agency said approximately 20,000 were unique comments. As of early January 2012, the final rule had not appeared in the Federal Register , but a pre-publication copy is available at http://www.epa.gov/airquality/powerplanttoxics/pdfs/20111216MATSfinal.pdf . The Final Rule The final rule is similar to the March 2011 proposal. The rule will result in about a 90% reduction from uncontrolled power plant emissions of mercury, nine other toxic metals, and three acid gases, all of which were listed by Congress as hazardous air pollutants in the 1990 Clean Air Act Amendments. According to EPA, power plants are the largest emitters of many of these pollutants, accounting for about 50% of the nation's mercury emissions, 62% of arsenic emissions, and 82% of hydrochloric acid emissions, for example. The Utility MACT will also reduce emissions of sulfur dioxide and fine particulates (PM 2.5 ), which, although not categorized as hazardous air pollutants, are estimated to cause thousands of premature deaths annually. The rule affects about 1,100 coal-fired and 300 oil-fired units. Despite the fairly large number of oil-fired units, they account for only 1% of U.S. electricity generation, and they are mostly unaffected by the rule. EPA estimates that the total annualized costs for compliance by oil-fired units will be $56 million (less than 0.1% of the rule's cost), and that there will be no change in oil-fired capacity as a result of the rule. Thus, the remainder of this discussion focuses on coal-fired units, which will bear the brunt of the compliance cost. In proposing the standards, EPA noted that while the requirements are stringent for those facilities lacking controls, 56% of existing coal-fired power plants already have equipment in place needed to achieve compliance. Thus, when implemented in 2015 or 2016, the standards are expected to level the playing field, bringing older, poorly controlled plants up to the standards being achieved by a majority of the existing units. In this respect, the standards reflect the statute's requirement that existing sources of HAPs should meet standards based on the current emissions of the best performing similar sources. EPA's Analysis of Costs, Benefits, and Control Technology [Note: This discussion refers to the costs and benefits of the MATS rule only. EPA is also developing other rules for electric generating units, affecting air emissions, cooling water intake, and the management of coal combustion residuals, leading some stakeholders and policy-makers to question whether the cumulative impacts of these rules will have harmful impacts on electric generation capacity. For analysis of the cumulative impacts, see CRS Report R41914, EPA's Regulation of Coal-Fired Power: Is a "Train Wreck" Coming? ] Costs EPA projects the annualized cost of compliance with the final MATS rule at $9.6 billion in 2015, gradually declining to $7.4 billion annually in 2030. Total electric utility revenues from sales to ultimate customers equaled $369 billion in 2010, according to the Energy Information Administration (EIA). Thus, the annualized cost would be less than 3% of current industry revenues. For individual companies and plants, however, and for regions of the country, the percentage may be higher or lower depending on the type of units operated by the company (coal, gas, nuclear, etc.) and, for coal-fired units, whether they have already installed control equipment. The average consumer will see an increase of 3.1% ($3-$4 per month) in the cost of electricity in 2015 due to the rule, according to EPA, falling to less than 1% by 2030. As shown in Figure 1 , electricity prices have declined by about 20% since the early 1980s, after adjusting for inflation. Reflecting the range of cost increases experienced by utilities, EPA estimates that retail electricity price increases will also vary, from a low of 1.3% in California, to a high of 6.3% in the area served by the Southwest Power Pool (SPP)—Oklahoma, Kansas, and parts of five other states. The SPP region currently has the second lowest electricity prices in the country, and will continue to have the second lowest prices even after increases due to the MACT rule, according to EPA. Control Technology The cost of compliance with the Utility MACT/MATS rule results largely from the installation of scrubbers and fabric filters on coal-fired generation units. As a result of the rule, 20 gigawatts (GW) of coal-fired units, about 7% of total coal-fired capacity, are expected to install scrubbers. EPA estimates that by the time the rule requires compliance, 203 GW will already have installed scrubbers as a result of other regulations, so the new installations, while expensive, are more incremental rather than a major departure from current practice. About one-third of the already installed scrubbers (63 GW) will need to be upgraded to improve their ability to capture pollutants. One-third of the coal-fired EGU capacity (102 GW) are expected to add fabric filters because of the rule, while 90 GW would have them whether or not there were a rule. In most cases, the fabric filters will be coupled with activated carbon injection or dry sorbent injection. Mercury and other HAPs become attached to the carbon or sorbent after it is injected into the flue gas, and the fabric filter collects the particles, removing them from the plant's emissions. EPA estimates that 99 GW of coal-fired capacity (about one-third of the U.S. total) will add activated carbon injection by 2015 because of the rule. The rule also results in 44 GW of dry sorbent installations. This is not complicated or new technology. Other types of facilities (notably solid waste incinerators) have used this technology for the past 15 years to reduce their mercury and other HAP emissions by 95% or more. As a result of state-level pollution control regulations, a growing percentage of coal-fired power plants do the same. Benefits The benefits of the rule are estimated by EPA at $37 billion to $90 billion annually—4 to 9 times as great as the costs—due primarily to the avoidance of up to 11,000 premature deaths each year. Other benefits, only some of which were given dollar values, include the annual avoidance of 4,700 nonfatal heart attacks, 130,000 asthma attacks, and developmental effects on children, including effects on IQ, learning, and memory. Economic Impacts Of the dozens of recently proposed EPA rules, the Utility MACT is probably the most costly. It is likely to affect older coal-fired plants that have not yet installed current pollution control technology. The agency concluded that some of these plants, representing less than 5 GW of coal-fired capacity, would be retired by 2015, rather than invest in control technologies. In all, it said, coal-fired generation would decline 1.3% compared to estimated generation in the absence of the rule. Retirement of these older plants could lead to job losses at some specific locations, but overall, EPA's analysis concludes that the rule is likely to lead to an increase in employment. The agency finds that 46,000 job-years will be required for construction/installation of pollution control equipment and 8,000 long-term utility jobs will be created to operate and maintain the controls. Others challenge these conclusions: the Edison Electric Institute, the National Association of Manufacturers, and other industry groups maintain that increased costs of electricity will cause job losses in industries that rely heavily on electricity and are located in areas of the country that will be most affected by the rule. Although generally requiring controls on each individual source, the regulations do allow averaging of emissions from multiple units at a single location, which may allow some older units that are operated infrequently to remain in service. The absence of broader allowance trading provisions in the authorizing statute and the stringency of the emission requirements mean that most units will not be able to escape regulation. For a broader discussion of the EPA rules affecting coal-fired power plants, see CRS Report R41914, EPA's Regulation of Coal-Fired Power: Is a "Train Wreck" Coming? Industry Analyses of the Utility MACT Rule Electric power generators are split over EPA's rule. Companies that rely on nuclear power or natural gas for most of their power, and have fewer coal-fired plants, and companies that have already invested in controls due to state requirements or other federal regulations, generally support the rule. A number of these utilities, accounting for about 20% of U.S. electric generating capacity, have formed the Clean Energy Group. At an April hearing of the House Energy and Commerce Committee, Michael Bradley, the group's Director, stated: While not perfect, the proposal is reasonable and consistent with the requirements of the Clean Air Act.… While complying with these obligations will take planning and significant resources by the electric sector, many companies are well on their way toward compliance and, based on the proposed rule, we anticipate that the electric sector can comply with the Act's requirements. There is no reason to delay the implementation of the Utility Toxics Rule. Opponents of the rule have the support of the industry's main trade association, the Edison Electric Institute (EEI), as well as groups representing the coal industry. In a report written before EPA even proposed the Utility MACT, EEI concluded that, "All coal units [would be] required to install a scrubber (wet or dry), activated carbon injection (ACI) and a baghouse/fabric filter" for compliance with the MACT. This goes well beyond what EPA proposed and what it promulgated in the final rule. Compared to EPA's projections, EEI concluded that five times as much scrubber capacity, nearly three times as much ACI, and about one and one-half times as much baghouse capacity would need to be added, making the rule substantially more costly and far more difficult to comply with in the limited time provided by the statute. A report by the North American Electric Reliability Corporation (NERC), which was also written before EPA proposed the Utility MACT, also assumed that vastly more pollution control equipment would need to be added to coal-fired plants than EPA believes will be necessary. The NERC analysis assumed wet scrubbers would be added to all coal-fired plants that don't already have them, that selective catalytic reduction (SCR) will be added to all bituminous coal-powered facilities, and that activated carbon injection and baghouses/fabric filters would be added at all facilities burning other types of coal. These assumptions are similar to EEI's except that by assuming wet scrubbers (instead of EPA's general assumption that dry scrubbers will suffice) and by assuming SCR at bituminous facilities, the cost impacts would most likely be even greater than the costs in EEI's assessment. A November 2011 Reliability Assessment by NERC made minor adjustments to these assumptions, but still concluded that scrubbers would be required on all operating coal-fired facilities and that a much higher percentage of facilities would require baghouses and ACI than EPA projected. Despite these more costly assumptions, NERC found that generation capacity would decline only about 1% nationwide as a result of the Utility MACT. The 2011 report concludes that 6.5 to 9.9 GW of coal-fired capacity would be retired and 2.1 GW would be derated as a result of the MACT rule. Will the Lights Go Out? NERC also looked at reserve margins in 18 regions covering the 48 mainland U.S. states, and found that only two of the regions – ERCOT (the Texas electrical grid, which is not interconnected with other regional transmission organizations) and New England – would experience planning reserve margins below the NERC Reference Level of 15% in 2015. See Figure 2 . In both cases, the low reserve margins appear to have little to do with the Utility MACT or other EPA rules. In 2015, the ERCOT region will have 79,415 megawatts (MW) of anticipated generation capacity, giving it an anticipated reserve margin of 10.4%. Deratings and retirements due to EPA rules will have reduced that capacity by only 267 MW (0.34%), according to NERC. The NERC data suggest that ERCOT may experience reliability problems, but the emission standards will play a minor role. In New England, NERC reports conflicting information. It begins its analysis by stating: For this 2011 Long-Term Reliability Assessment , ISO New England Inc. (ISO-NE) forecasts no major reliability issues with respect to fuel supply, availability of both supply or demand-side resources, or the capability of the regional transmission system to serve the projected seasonal peak demands and energy requirements of the six-state New England subregion. Following this statement, however, the report shows reserve margins consistently below 15%. As with Texas, the low reserve margins would exist even in the absence of the Utility MACT. NERC finds that the new EPA regulations will cause 237 MW of retirements or deratings, 0.7% of the region's 32,649 MW of anticipated capacity. According to NERC, the EPA rule will have its biggest impact in three regions known as PJM, MISO, and SERC-SE. These areas cover 12 states in the Midwest and Mid-Atlantic, plus Alabama, Georgia, the District of Columbia, and small parts of four other states. In SERC-SE, the area that covers Georgia and Alabama, the retirements and deratings remove 2.7% of anticipated capacity. But none of these areas falls below a 17% reserve margin. Time Needed to Comply Following publication of the final standards in the Federal Register , existing power plants will have three years, with a possible one-year extension, to meet the standards. (The three-to-four-year timeframe is mandated by the statute.) Many in industry argue that three or four years is not enough time to complete installation of the required pollution control equipment, and as a result that the reliability of the nation's electric power supply could be harmed by the rule while construction is ongoing, even if ultimately the industry will have sufficient generating capacity. NERC did not say this directly, in part because its analysis combines the effects of four rules, making it difficult to disaggregate the Utility MACT's effect. What it did say was: To comply [with the MACT Rule], owners of the remaining capacity need to retrofit from 277 to 753 units with added environmental controls. The "hard stop" 2015 compliance deadline proposed by the MACT Rule makes retrofit timing a significant issue and potentially problematic. Whether or not there is sufficient time to implement the rule without threatening electric system reliability will depend, to some extent, on the number of units that require retrofits. Both the EEI and NERC analyses discussed above assumed requirements that appear to be substantially more stringent than what EPA has promulgated. If EPA is correct in its analysis of how EGUs can comply with the rule, the number of retrofits appears to be within the range of what the industry has accomplished in the past as a result of earlier regulations. For additional discussion, see CRS Report R41914, EPA's Regulation of Coal-Fired Power: Is a "Train Wreck" Coming? Although EPA believes that most units will be able to comply with the Utility MACT within the three-year statutory deadline, in response to industry comments on the proposed rule, EPA and the White House added provisions to the final rule that will make additional time available for compliance where necessary. The final rule was accompanied by a Presidential memorandum directing the agency to make full use of the Clean Air Act's authority to grant additional time to those facilities that need it. In general, this means that the agency will approve state permitting actions that provide an additional year (four years instead of three) for compliance if it is "necessary for the installation of controls." In the Preamble to the final rule, EPA discusses at some length its interpretation of the phrase "necessary for the installation of controls," making it clear that it intends to broadly interpret the phrase in order to make additional time available where needed. EPA also issued an enforcement policy that describes how units may obtain a fifth year for compliance under the agency's authority in Section 113 of the Clean Air Act. The policy states: The EPA generally does not speak publicly to the intended scope of its enforcement efforts, particularly years in advance of the date when a violation may occur. The Agency is doing so now with respect to the MATS to provide confidence with respect to electric reliability.… Some sources may take all steps necessary to comply with the MATS, but may nevertheless be needed to operate in noncompliance with the MATS to address concerns with electric reliability. In the event that such sources are interested in receiving a schedule to come into compliance while operating, the EPA intends, where necessary to avoid a serious risk to electric reliability, and provided the criteria set forth herein are met [these criteria essentially require timely notice to EPA and the appropriate planning authorities], to issue an expeditious case-specific AO [Administrative Order] to bring a source into compliance within one year. Legislation As noted earlier, the proposed Utility MACT drew an extraordinarily large number of public comments. While many of these were duplicative, the agency said that it received about 20,000 unique comments. Congress has also taken a keen interest in the proposal. H.R. 2401 , the Transparency in Regulatory Analysis of Impacts on the Nation (TRAIN) Act of 2011, which the House passed September 23, has been one congressional response. The bill would establish a panel of representatives from 11 federal agencies to report to Congress by August 2012 on the cumulative economic impact of the Utility MACT and a number of other listed EPA rules, guidelines, and actions concerning clean air and waste management. It would render the Utility MACT and another rule that EPA has promulgated to address power plant emissions (the Cross-State Air Pollution Rule) "of no force and effect"; it would delay promulgation of a replacement for the Utility MACT until at least one year after submission of the cumulative impacts report and delay compliance for at least five years after that date; and it would require that the replacement rule impose the least burdensome regulatory alternative from among the alternatives authorized under the Clean Air Act, among other provisions. The Senate has not acted on H.R. 2401 . A Senate bill, S. 609 , similar to an earlier version of H.R. 2401 , has also seen no action. For the Senate to act on either bill would generally require a favorable report from the committee of jurisdiction (the Senate Environment and Public Works Committee) and the votes of 60 Senators in order to get the bill considered on the floor. There is another route, however, that removes the main obstacles to Senate action on the regulations: the Congressional Review Act (CRA). Under the CRA, after a rule is final and is transmitted to Congress, the Congress can consider a resolution of disapproval under special procedures. If a CRA resolution disapproving a rule is enacted, the rule cannot take effect, and the agency may not reissue either that rule or any substantially similar one, except under authority of a subsequently enacted law. It is widely expected that CRA resolutions disapproving the Utility MACT will be introduced during the second session of the 112 th Congress. What is unique about CRA resolutions is that the act provides special procedures to make it easier to obtain a vote in the Senate. CRA resolutions come to the Senate floor if 30 Senators sign a discharge petition within a specified period of time. Once a disapproval resolution is on the Senate Calendar, a motion to proceed to consider it is in order; the motion is not debatable and cannot be filibustered through extended debate. Debate is limited to 10 hours and amendments are prohibited. (For additional information on Congressional Review Act procedures, see CRS Report RL31160, Disapproval of Regulations by Congress: Procedure Under the Congressional Review Act , by [author name scrubbed].) Although it may be easier to obtain congressional approval of a CRA resolution, the path to enactment of such a resolution is still a steep one. The Obama Administration has made a significant commitment to promulgation of the Utility MACT and considers it one of the Administration's major achievements. As a result, legislation restricting EPA's authority to act, if passed by Congress, would likely encounter a presidential veto. There are no special procedures for Senate consideration of a CRA veto override. Overriding a veto (whether for a resolution of disapproval or other legislation) requires a two-thirds majority in both the House and Senate, and is seen by many as unlikely. Unless the Presidency changes hands in the next election, that would leave the courts as the most likely venue for a successful challenge to the rule. A court challenge can take years. The challenge to EPA's 2005 utility mercury rule, for example, took nearly three years before the D.C. Circuit Court of Appeals overturned it. In the meantime, unless stayed by the court, the rule will be in effect, and power companies, facing a tight deadline, will need to begin the planning, design, and construction necessary to comply with the standards.

On December 21, 2011, EPA Administrator Lisa Jackson announced final standards aimed at reducing mercury and other air toxics emissions from electric generating units (EGUs) by about 90%. The rule, commonly referred to as the "Utility MACT" or the "Mercury and Air Toxics Standards" (MATS), has been more than a decade in the making (Congress authorized the standards in the 1990 Clean Air Act Amendments), and it is among the most expensive rules that EPA has ever promulgated. EPA estimates the annualized cost at $9.6 billion in 2015. Industry estimates have been higher. The benefits are also large, according to EPA, ranging from $37 billion to $90 billion annually. The benefits mostly reflect the monetized value of avoiding up to 11,000 premature deaths annually. The rule's costs will fall primarily on older coal-fired units that do not have state-of-the art pollution controls. EPA says that this is a minority of coal-fired plants and an even smaller share of all electric generation: the agency estimates that 56% of coal-fired units have already installed equipment that can be used to meet the standards. In addition, about 55% of the nation's electricity supply comes from natural gas, nuclear, and renewable sources that are not subject to the rule's requirements. This report describes the rule and its potential impact. The report discusses previous EPA efforts to regulate utility mercury emissions, the court decision overturning those regulations, the specifics of the new rule, its estimated costs and benefits, the impact of the rule on electric reliability, and legislation related to it that has been or may be considered in the 112th Congress. Industry and environmental groups have been keenly interested in both the substance of the rule and the schedule for its implementation, and the House has already passed legislation (H.R. 2401) that would change both. A particular issue has been whether the standards will lead to retirement of a significant number of electric generating units, with negative effects on the reliability of the power supply. EPA and many other analysts maintain that this will not be the case. To address this question, this report reviews industry data on planning reserve margins and potential retirement of units that do not currently meet the standards. Based on these data, it appears that, although the rule may lead to the retirement or derating of some facilities, almost all of the capacity reductions will occur in areas that have substantial reserve margins. Two areas that may have difficulty meeting reserve margins, Texas and New England, will experience few plant retirements and deratings, according to industry data. Furthermore, to address the reliability concerns expressed by industry, the final rule includes provisions aimed at providing additional time for compliance if it is needed to install pollution controls or add new capacity to ensure reliability in specific areas. As a result, it is unlikely that electric reliability will be harmed by the rule. Another potential concern, given the rule's cost, is what impact it may have on the price of electricity. EPA estimates that the average price of electricity nationally will increase by 3.1% by 2015, as a result of the rule. Electricity prices have declined more than 20% in real terms since 1980. The impact of price changes would be relatively small compared to this downward trend, and well within the normal range of historical price fluctuations.

Introduction The Protecting Americans From Tax Hikes (PATH) Act, considered as an amendment to the Military Construction and Veterans Affairs and Related Agencies Appropriations Act, 2016 ( P.L. 114-113 ), was signed into law on December 18, 2015. That legislation made some tax provisions that had expired at the end of 2014 permanent, and extended others through the 2016 tax year. This report briefly summarizes and discusses four items categorized as individual tax provisions. These and other temporary tax provisions that are regularly extended for one or two years are often referred to as tax extenders . In total, the extensions of tax provisions included PATH Act is estimated to increase the deficit by $628.8 billion from FY2016 to FY2025. Of this cost, $47.7 billion is attributable to the four individual provisions discussed in this report (not accounting for any potential macroeconomic effects). The three extender provisions discussed in this report that were made permanent by the PATH Act, along with their 10-year revenue costs, are Above-the-Line Deduction for Certain Expenses of Elementary and Secondary School Teachers ($2.9 billion over ten years), which was modified by the PATH Act, Deduction for State and Local Sales Taxes ($42.4 billion over 10 years), and Parity for Exclusion for Employer-Provided Mass Transit and Parking Benefits ($1.8 billion over 10 years). The PATH Act also extends one provision discussed in this report through 2016. That provision, along with its two-year revenue cost, is Above-the-Line Deduction for Qualified Tuition and Related Expenses ($0.6 billion over two years). Above-the-Line Deduction for Certain Expenses of Elementary and Secondary School Teachers4 The deduction for certain expenses of elementary and secondary school teachers was made permanent by the PATH Act. Teachers and other eligible educators are allowed a deduction for certain classroom expenses under this provision. The deduction is "above-the-line," that is, it is not restricted to tax filers who itemize deductions. The cap for this deduction was $250 in 2014; the PATH Act indexed that limit for inflation, rounded to the nearest $50, beginning in tax year 2016. Eligible educators include any elementary or secondary school teacher, instructor, counselor, principal, or aide in a school for a minimum of 900 hours in a school year. The PATH Act modified this provision to include professional development costs as qualifying expenses starting in 2016. Other qualified expenses already eligible for the deduction must be associated with the purchase of books, supplies (other than nonathletic supplies for health or physical education courses), computer equipment, software and services, other equipment, and supplementary materials. The tax code allows a deduction of expenses for trade or business in general, but that deduction is an itemized deduction (generally benefitting higher income individuals). Further, the trade and business deduction is allowed only when miscellaneous itemized deductions are above 2% of income. These miscellaneous itemized deductions include other employee expenses (such as union dues), as well as investment costs and tax preparation costs, which might permit a taxpayer who itemizes to exceed the 2% threshold and make this deduction more attractive. Teachers who donate to the school (for example, books for the school library) can take a charitable deduction if they itemize. According to a study by the National School Supply and Equipment Association, a trade association for educational product companies, teachers spent $1.6 billion on classroom supplies during the 2012-2013 school year. On average, unreimbursed spending on classroom supplies is estimated at $485 per teacher per year. The classroom deduction was enacted for two years (2002 and 2003) as part of the Job Creation and Worker Assistance Act of 2002 ( P.L. 107-147 ). It was extended several times, often retroactively. In the 114 th Congress, legislation has been introduced that would make the deduction permanent ( H.R. 2692 ), make the provision permanent and index it for inflation ( H.R. 2940 ), and allow a deduction for qualified home-school expenses ( S. 100 ). A deduction tends to benefit higher-income individuals more than lower-income individuals because its value depends on the marginal tax rate. For example, at the 15% tax rate, the value of a $250 deduction is $37.50. At the 10% rate, the value of the same $250 deduction is $25. Tax statistics indicate that more than 70% of taxpayers pay at the 15% rate or below. Even at a 35% tax rate, the value is less than $100 ($87.50). Also, as shown in Table 1 , deductions themselves are more concentrated in higher-income classes. Almost three-quarters of the total value of deductions are taken by tax filing units with adjusted gross incomes over $50,000. These tax units accounted for about a third of tax filing units. A third of the total value of the deductions are taken by those with incomes over $100,000, who represent less than 15% of total tax filing units. If intended as an incentive, the classroom expense deduction may encourage educators already purchasing supplies to increase such spending, and may encourage other educators to purchase supplies who otherwise would not have done so. However, a deduction that is capped at a small amount may not be very effective, because many teachers are already spending at least $250. Generally, benefits with caps are expected to be less effective, per dollar of revenue lost, in increasing the spending objective, because those whose contributions are above the cap without the deduction have no marginal incentive to change their behavior. Rather than being viewed as an incentive, the provision might, instead, be seen as increasing equity in the tax system. Teachers are providing a contribution to their students, and thereby reducing their own income. Under this view, capping the deduction will prevent teachers who spend above the cap from being fully refunded for the contribution. The provision adds to complexity, not only by requiring an additional line on the tax form, but also because a deduction for classroom expenses could potentially provide more benefit by including it in the itemized deduction for employee expenses, which is subject to a floor and conditional on the taxpayer itemizing deductions, but does not have a ceiling. Taxpayers might need to compute taxes twice to determine which deduction results in a lower tax liability. Deduction for State and Local Sales Taxes9 The PATH Act made permanent the option to deduct state and local sales taxes. Although state and local taxes have been deductible since the initiation of the income tax in 1913, deductions of certain taxes (such as excise taxes) have been disallowed over the years. Before the PATH Act only income and property taxes were deductible on a permanent basis. The deduction for general sales taxes was disallowed by the Tax Reform Act of 1986 ( P.L. 99-514 ). The deduction for sales taxes was temporarily reinstated in 2004 with enactment of the American Jobs Creation Act of 2004 ( P.L. 108-357 ). Unlike the pre-TRA 1986 deduction, the current version allows for a deduction for sales taxes in lieu of income taxes. It was extended several times. Under this provision, individuals who itemize deductions may take a deduction for state and local sales taxes in lieu of taking a deduction for state and local income taxes. Taxpayers may keep individual receipts or may use an Internal Revenue Service (IRS) look-up table. The IRS table amounts, however, do not include the sales taxes paid for cars, motorcycles, boats, aircraft, or a home, or local sales taxes, which are added. The value of a given dollar amount of deduction is higher for taxpayers with higher marginal tax rates. In addition, as an itemized deduction, the deduction tends to be concentrated in the higher-income classes that itemize deductions. As shown in Table 2 , about half of the deductions are taken by those in the $100,000 or more income class, who account for about 15% of returns. Itemizing taxpayers in the seven states without a general income tax but with a general sales tax typically benefit the most from the optional sales tax deduction. One reason to retain the sales tax option is to provide equity across the states, as it would offer filers in states that do not impose an income tax (or which have a low income tax rate) an alternative means of reducing their federal tax liability. Equity across states is an elusive concept in general, however. Benefits to states depend on the level as well as type of tax and on the level and distribution of income. For example, New Hampshire has neither an income nor a sales tax, and received a higher than average benefit from federal tax deductions in analysis of 2004 activity. One reason that the sales tax became a target for elimination in 1986 was that most taxpayers looked the tax up in a table and the deduction did not reflect their actual sales tax paid. Taxpayers could also rely on their own receipts but that was a burden on both taxpayers and tax administrators. There were also concerns that other selective sales taxes or taxes imposed at other than the retail level were not deductible. These concerns also apply to an optional sales tax deduction. Above-the-Line Deduction for Qualified Tuition and Related Expenses16 The PATH Act extended the above-the-line deduction for qualified tuition and related expenses through the 2016 tax year. This provision allows taxpayers to deduct qualified tuition and related expenses for postsecondary education from their adjusted gross income. Expenses that qualify for this deduction include tuition payments or any fees required for enrollment at an eligible institution. Payments made with borrowed funds are eligible for the deduction: the year of eligibility is determined by the date payment is made to the institution and not when the loan is repaid. The deduction is "above-the-line," that is, it is not restricted to itemizers. The deduction can be taken for qualified expenses paid for taxpayers and their spouses and dependents. Individuals who could be claimed as dependents, married persons filing separately, and nonresident aliens who do not elect to be treated as resident aliens do not qualify for the deduction, in part to avoid multiple claims on a single set of expenses. The deduction is reduced by any grants, scholarships, Pell Grants, employer-provided educational assistance, veterans' educational assistance, and any other nontaxable income (other than gifts and inheritances). Qualified expenses being deducted also must be reduced if paid with tax-free interest from Education Savings Bonds, tax-free distributions from Coverdell Education Savings Accounts, and tax-free earnings withdrawn from Qualified Tuition Plans. The maximum deduction per return is $4,000 for taxpayers with modified adjusted gross income that does not exceed $65,000 ($130,000 on joint returns). The deduction is phased out at higher income levels. Taxpayers with incomes above $65,000 ($130,000 for joint returns) but not above $80,000 ($160,000 for joint returns) can deduct some fraction of $2,000 in qualified expenses. Taxpayers with incomes above $80,000 ($160,000 for joint returns) cannot claim a deduction. These income limits are not adjusted for inflation. One criticism of education tax benefits is that the taxpayer is faced with a confusing choice of deductions and credits and tax favored education savings plans, and that these benefits should be consolidated. Tax reform proposals have consolidated these benefits into a single education credit in some cases. Taxpayers may use this deduction instead of education tax credits for the same student. These credits include permanent tax credits: the Hope Credit and Lifetime Learning Credit. The Hope Credit has been expanded into the American Opportunity Tax credit, a formerly temporary provision that was made permanent by the PATH Act. The American Opportunity Tax Credit (and the Hope Credit) are directed at undergraduate education and have a limited number of years of coverage (two for the Hope Credit and four for the American Opportunity Tax Credit). The Lifetime Learning Credit (20% of up to $10,000) is not limited in years of coverage. These credits are generally more advantageous than the deduction, except for higher-income taxpayers, in part because the credits are phased out at lower levels of income than the deduction. For example, for single taxpayers, the Lifetime Learning Credit begins phasing out at $55,000 for 2015. The deduction benefits taxpayers according to their marginal tax rate. Students usually have relatively low incomes, but they may be part of families in higher tax brackets. The maximum amount of deductible expenses limits the tax benefit's impact on individuals attending schools with comparatively high tuition and fees. Because the income limits are not adjusted for inflation, the deduction might be available to fewer taxpayers over time if extended in its current form. The distribution of the deduction in Table 3 indicates that some of the benefit is concentrated in the income range where the Lifetime Learning Credit has phased out, but also significant deductions are claimed at lower-income levels. Because the Lifetime Learning Credit is preferable to the deduction at lower-income levels, it seems likely that confusion about the education benefits may have caused taxpayers to fail to choose the optimal education benefit. Parity for Exclusion for Employer-Provided Mass Transit and Parking Benefits20 The exclusion for employer-provided mass transit and parking benefits was made permanent by the PATH Act. Qualified transportation benefits, such as transit passes, vanpools, and parking, provided by employers are excluded from income within limits. The dollar limit of the exclusion for employer-provided parking is $250 a month for 2015. The excludable amounts are adjusted for inflation. This provision would increase the limit for mass transit, currently $130, to the $250 allowed for parking. A statutory exclusion for the value of parking was introduced in 1984, along with exclusions for several other fringe benefits. Some employers had provided one or more of these fringe benefits for many years, and employers, employees, and the Internal Revenue Service had not considered those benefits to be taxable income. The Comprehensive Energy Policy Act of 1992 ( P.L. 102-486 ) placed a dollar ceiling on the exclusion from income of parking facilities and introduced the exclusions for mass transit facilities and van pools to encourage mass commuting. The American Recovery and Reinvestment Tax Act of 2009 ( P.L. 111-5 ) increased the exclusion limit on qualified transit benefits to match the level of the parking benefit limit, and the provision was subsequently extended. To the extent that this exemption induces employees to use mass transportation and to the extent that mass transportation reduces traffic congestion, this exemption lowers commuting costs to all commuters in urban areas. Higher-income individuals are more likely to benefit from the parking exclusion than the mass transit and vanpool subsidies to the extent that the propensity to drive to work is correlated with income. The effective value of the transit benefits rises with the marginal tax rate of a recipient. The value of the exclusion for transit benefits also depends on the location of the employer: the provision is targeted towards the taxpayers working in the highly urbanized areas or other places where transit is available or parking space is limited.

The Protecting Americans From Tax Hikes (PATH) Act, considered as an amendment to the Military Construction and Veterans Affairs and Related Agencies Appropriations Act, 2016 (P.L. 114-113), was signed into law on December 18, 2015. That legislation made some tax provisions that had expired at the end of 2014 permanent, and extended others through the 2016 tax year. This report briefly summarizes and discusses selected items categorized as individual tax provisions. These and other temporary tax provisions that have been regularly extended for one or two years are often referred to as "tax extenders." Other bills in the 114th Congress would make provisions discussed in this report permanent, including the deduction for state and local sales taxes (H.R. 622) and the deduction for teacher's expenses (H.R. 2692 and H.R. 2940), both discussed in this report. Additional information on other extender provisions may be found in other CRS reports. These reports include CRS Report R43517, Recently Expired Charitable Tax Provisions ("Tax Extenders"): In Brief, by [author name scrubbed] and [author name scrubbed]; CRS Report R43510, Selected Recently Expired Business Tax Provisions ("Tax Extenders"), by [author name scrubbed], [author name scrubbed], and [author name scrubbed]; CRS Report R43449, Recently Expired Housing Related Tax Provisions ("Tax Extenders"): In Brief, by [author name scrubbed]; and CRS Report R43541, Recently Expired Community Assistance-Related Tax Provisions ("Tax Extenders"): In Brief, by [author name scrubbed]. The four provisions discussed are Above-the-Line Deduction for Certain Expenses of Elementary and Secondary School Teachers, which the PATH Act modifies and makes permanent; Deduction for State and Local Sales Taxes, which the PATH act makes permanent; Above-the-Line Deduction for Qualified Tuition and Related Expenses, which the PATH Act extends through 2016; and Parity for Exclusion for Employer-Provided Mass Transit and Parking Benefits, which the PATH Act makes permanent. In terms of revenue, the most significant provision is the optional deduction for sales taxes, which is estimated to cost $42.4 billion over 10 years. The next largest is the classroom expense deduction at $2.9 billion, followed by the mass transit provision at $1.8 billion. The two-year extension for the deduction for tuition expenses is estimated to cost $0.6 billion.

Summary of the Foreign Intelligence Surveillance Act of 1978 As both programs make use of authorities provided under FISA, this section provides a brief description of that statute to help inform the subsequent discussion. FISA currently provides procedures for the approval of various types of investigative methods: (1) electronic surveillance, (2) physical searches, (3) pen register/trap and trace surveillance, and (4) the use of orders compelling the production of tangible things. The FISA Amendments Act (FAA) of 2008 added additional provisions for the foreign intelligence targeting of non-U.S. persons reasonably believed to be abroad and the targeting of U.S. persons reasonably believed to be located abroad. Although the requirements for each category of investigative tool differ significantly from one another, all make use of the Foreign Intelligence Surveillance Court (FISC), a specialized Article III court established under FISA to review and approve governmental applications seeking to use one of the aforementioned authorities. FISA also establishes a Foreign Intelligence Surveillance Court of Review (FISCR) to provide appellate review of decisions made by the FISC. Bulk Collection of Telephony Metadata Under Section 215 of the USA PATRIOT Act Following the terrorist attacks of September 11, 2001, the NSA began a program in which domestic telephony metadata was collected with the goal of helping to detect and identify individuals who were part of terrorist networks. This program is frequently described as collecting telephony metadata "in bulk" to distinguish it from the narrower collection of metadata pertaining to an identified individual or group of individuals that is commonplace in both law enforcement and national security investigations. Since 2006, the collection of telephony metadata in bulk has been sanctioned by orders of the FISC issued pursuant to Section 215 of the USA PATRIOT Act of 2001. Under Section 215, the FBI may apply to the FISC for an order compelling a person to produce "any tangible thing" if there are reasonable grounds to believe that the things sought are "relevant" to an authorized foreign intelligence, international terrorism, or counter-espionage investigation. An "authorized investigation" must be conducted under guidelines approved by the Attorney General under Executive Order 12333 and may not be conducted of a United States person solely upon the basis of activities protected by the First Amendment. Shortly after specific details about the NSA telephony metadata program were published in the media beginning in summer 2013, concerns about its constitutionality were quickly raised by commentators and lawmakers. In particular, it has been argued that the collection of telephony metadata in bulk is an "unreasonable search[]" prohibited by the Fourth Amendment. Before discussing these claims, this report will first provide a brief summary of the program's history and current status. Description of Telephony Metadata Program Generally, the telephony metadata program has operated by placing few limits on the government's ability to collect and retain large amounts of domestic and international telephone records while imposing more stringent restrictions on the government's capacity to search or make further use of the collected metadata. These restrictions are not explicitly required by the statutory text of Section 215. Instead, they are delineated as part of the orders the FISC issues pursuant to Section 215. The program collects "metadata"—a term used in this context to refer to data about a phone call, but not the audio contents of a phone conversation itself. Declassified FISC orders indicate that the data include the number that a call was dialed from; the number that a call was dialed to; and the date, time, and duration of the call. The data do not include cell site location information. Intelligence officials have committed to alerting Members of Congress before collecting that location information, suggesting they currently have the authority to do so. The operation of this program has been altered significantly since its existence became widely known in June 2013. Its current state of operations reflects changes to the program that were announced by President Obama on January 17, 2014. Although the President directed the Attorney General and the intelligence community to recommend alternatives to the collection and retention of such metadata by the government, the announced changes did not immediately affect the ability of the NSA to collect or retain telephone records under this program. However, the changes did place additional restrictions on the ability to search the dataset as discussed below. Metadata Queries Require Reasonable Articulable Suspicion Telephone service providers that are served with orders issued under Section 215 are required to provide the NSA with telephony metadata pertaining to all domestic and international calls made on their networks, on an "ongoing daily" basis. As this data is received by NSA, it is placed in a database referred to as the "Collection Store." The orders require metadata to be deleted no later than five years after they are initially collected. The FISC orders under which the telephony metadata program has operated have generally permitted searching the database for a particular number only if it can be demonstrated that there are facts giving rise to a reasonable articulable suspicion (RAS) that the telephone number in question, referred to as the "seed," is associated with one of the foreign intelligence targets referenced in the court order. These targets are most commonly described as international terrorist organizations, although those portions of the FISC orders have not been declassified. As used in other contexts, RAS is a less stringent standard than the "probable cause" standard that is required to be satisfied for criminal search warrants or traditional electronic surveillance under FISA. Although the RAS standard appears to have been a constant presence throughout the life of the program, the entity designated as responsible for making the RAS determination has varied over time. For most of the time between 2006 and 2014, a relatively small group of NSA personnel was charged with evaluating whether any particular query was supported by RAS. However, on January 17, 2014, President Obama announced that he was directing the Department of Justice to seek a modification to the program that would require RAS determinations to be approved by the FISC prior to performing a query, except in cases of emergencies. The FISC approved those modifications and assumed the RAS-determination role beginning on February 5, 2014. This arrangement was not unprecedented. Over the course of approximately six months in 2009, the FISC required RAS determinations to be made by the FISC on a case-by-case basis after instances of NSA non-compliance with the FISC's previous orders were discovered and reported to the FISC by the Department of Justice. This pre-approval requirement was subsequently lifted after the FISC was satisfied that sufficient changes had been made to correct the earlier compliance violations. Scope of Query Results Is Measured in "Hops" Once a telephone number has been RAS-approved, it may be used as the seed of a query to the Collection Store. The response to such a query will include a list of all telephone numbers in the Collection Store that either called or were called by the seed. These telephone numbers are frequently referred to as representing the first "hop" away from the seed, because they include only telephone numbers with which the seed was in direct contact. However, the response to an RAS-approved query is not necessarily limited to first-hop results. After the program's existence was made public during the summer 2013, intelligence officials stated that responses to queries could include telephone numbers up to three hops away from the initial seed. However, since the President's announcement on January 17, 2014, query results are limited to those telephone numbers that are within two hops of the initial seed. All of the results that are returned from a query of the Collection Store are placed in a second database known as the "Corporate Store." The FISC orders currently in effect do not require queries of the Corporate Store to satisfy the RAS standard. Fourth Amendment Challenges to Telephony Metadata Program Upon public revelation of the NSA's bulk telephony metadata program, several lawsuits were filed in federal district courts challenging the constitutionality of this program under the Fourth Amendment's prohibition against unreasonable searches and seizures. In addition to publicly released FISC rulings on this issue, four district courts have reached the merits of this Fourth Amendment question, and the U.S. Court of Appeals for the Second Circuit addressed, but did not resolve, the constitutional claims brought before it. The primary question presented to these courts is whether the bulk collection of telephone records constitutes a Fourth Amendment search, and if so, whether such a search is reasonable in light of the potential privacy interests involved and the federal government's interest in safeguarding the nation's security. This question turns, in large part, on the applicability of the 1979 case Smith v. Maryland to the bulk collection program and the persuasiveness of more recent Supreme Court discussions about the effect of new technologies and prolonged government surveillance on the privacy interests of Americans. The Fourth Amendment provides that the "right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated[.]" Central to the Fourth Amendment is determining whether the government has engaged in a "search," which occurs "when the government violates a subjective expectation of privacy that society recognizes as reasonable." Smith v. Maryland was the starting point for the FISC and the federal district courts in determining whether accessing a telephone customer's phone records is a Fourth Amendment search. In Smith , upon police request, the telephone company installed a pen register at its main office to determine whether Smith had called the victim of a recent robbery. A pen register is simply a device for recording the outgoing numbers dialed from a telephone and does not record the content of the call. The police had neither a warrant nor court order for installing this device. In a 5-3 decision, the Supreme Court held that Smith had no reasonable expectation of privacy in the telephone numbers he dialed, and, therefore, the installation of the pen register was not a Fourth Amendment search. The Court grounded its holding in the proposition that "a person has no legitimate expectation of privacy in information he voluntarily turns over to third parties." Because Smith "voluntarily conveyed" the numbers he dialed to the company, he should have understood that the company would record that information as a matter of course. This theory that individuals lose privacy protections when they share information with a third party (whether a private entity or the government) or where information is generated as part of a communication or transaction with a third party, has come to be known as "third-party doctrine." Its application pre-dates Smith to a line of cases holding that the Fourth Amendment does not protect individuals from statements made to another person, even if that person turns out to be a government agent or is equipped with an electronic listening device. In Hoffa v. United States , for example, the Court observed that the Fourth Amendment did not require the suppression of incriminating statements made by the defendant to a government informant while in a private hotel room. In addition to these undercover agent cases, the third-party doctrine has been applied in various other instances of government requests for transactional records from private companies. This theory has been applied to non-content data, such as the to/from address line in an email, but not to the content of communications, for example, the body of an email. Before the courts issued their rulings in ACLU v. Clapper and Klayman , the FISC was the first court to analyze the NSA's bulk metadata collection program under the Fourth Amendment. In conducting its review of one of the government's applications under Section 215, the FISC held that the Fourth Amendment provided no impediment to the proposed collection as Smith "squarely controlled" the "production of telephone service provider metadata." Noting that Fourth Amendment interests are analyzed on an individual, and not group, basis, the FISC explained that "where one individual does not have a Fourth Amendment interest, grouping together a large number of similarly-situated individuals cannot result in a Fourth Amendment interest springing into existence ex nihilo ." In ACLU v. Clapper , Judge Pauley of the S.D.N.Y. agreed with the FISC that a constitutional analysis of Section 215 was controlled by Smith , that the collection of bulk records was not a search, and thus the NSA's metadata collection program did not violate the Fourth Amendment. In its brief, the ACLU had argued that the bulk metadata collection amounted to the same type of privacy intrusion that led five Justices of the Supreme Court in United States v. Jones to suggest that long term location monitoring is a Fourth Amendment search. In Jones , the majority held that the physical attachment of a GPS device to an individual's car and the subsequent monitoring of information collected by that device was a Fourth Amendment search. In two separate concurring opinions, five justices opined that although short term government monitoring may not exceed a person's expectation of privacy, longer term monitoring may do so, as aggregating information about a person can reflect a "wealth of detail," or mosaic, about his "familial, political, professional, religious, and sexual associations." This is sometimes referred to as "mosaic theory" of the Fourth Amendment. Like the FISC, Judge Pauley reasoned that the "collection of breathtaking amounts of information unprotected by the Fourth Amendment does not transform that sweep into a Fourth Amendment search." He noted that lower courts are bound to apply Smith unless it has been explicitly overruled by the Supreme Court itself, Jones notwithstanding. The plaintiffs appealed this decision to the U.S. Court of Appeals for the Second Circuit. On May 7, 2015, the Second Circuit held that the bulk telephone metadata program exceeded congressional authorization under Section 215 of the PATRIOT Act. While the court refrained from ruling on the merits of the Fourth Amendment question raised by the plaintiffs, the opinion did note the "vexing issues" raised by such a challenge. First, Judge Gerald Lynch, writing for a unanimous three-judge panel, noted the turmoil in the Supreme Court's third-party doctrine jurisprudence prompted, in part, by the concerns raised in the two Jones concurrences: notably, the ability of modern technology to alter traditional expectations of privacy. The court acknowledged that an expectation of privacy in an era where individuals share increasing amounts of information with both corporations and government "may seem quaint," but at the same time may become more threatened as "the extent of such information grows." The court did not purport to resolve this dispute, but instead rested its decision solely on statutory grounds. Second, and perhaps, more importantly for a congressional audience, the court asserted that Congress, at least in the first instance, "is better positioned than the courts to understand and balance the intricacies and competing concerns involved in protecting our national security and to pass judgment on the value of the telephone metadata program as a counterterrorism tool." Interestingly, the Second Circuit panel observed that whether Congress has considered and authorized a program such as the telephone metadata program can be relevant to the judiciary's assessment of its constitutionality. Based on this brief discussion, it is unclear whether the court was focusing on the threshold Fourth Amendment question, whether such a program constitutes a Fourth Amendment search, or the secondary issue, whether such a search was reasonable under the Fourth Amendment's general reasonableness balancing test. In any event, it was clear from the opinion that the court had kept a close eye on the legislative process surrounding FISA reform and will potentially look to Congress's action in the future in assessing the constitutionality of different iterations of this intelligence gathering program. In a ruling on the merits mirroring that of the Southern District of New York, Chief Judge Winmill of the federal district court of Idaho upheld Section 215 against a Fourth Amendment challenge, noting that Smith and the third-party doctrine have not been overruled and continue to bind lower courts until the Supreme Court rules otherwise. This case is currently on appeal before the U.S. Court of Appeals for the Ninth Circuit. In a similar approach, but arising in a different procedural posture, the Southern District of California rejected several criminal defendants' motion for new trial after learning that data obtained under the bulk collection program may have been used in the federal government's investigation of them. The district court denied their motion, observing that the use of pen registers, which the Supreme Court upheld in Smith , have pre-dated the digital revolution by about 150 years, negating the argument that the Jones concurrences' discussion of new technologies compelled a different result. In Klayman , Judge Leon from the DC District Court was receptive to the argument that the aggregation of telephone records can result in a Fourth Amendment search. Judge Leon found that the bulk telephony metadata program was "so different from the simple pen register that Smith is of little value" in assessing whether the program resulted in a search. Instead, the DC District Court judge found more persuasive the mosaic theory articulated in the Jones concurrences. Acknowledging that "what metadata is has not changed over time," Judge Leon found that quantity of information collected and what that information can tell the government about people's lives required the court to look beyond Smith for its Fourth Amendment analysis. Finding that this aggregation invaded a person's reasonable expectation of privacy, the court held that a Fourth Amendment search had occurred. Finding that this metadata collection was a search, Judge Leon of the DC District Court then assessed whether that search was "reasonable" under the Fourth Amendment. Noting that searches must generally be accompanied by a warrant based upon probable cause, the court assessed whether the "special needs" exception to the warrant requirement might apply to the bulk metadata program, because, again, collection under Section 215 requires neither a warrant nor probable cause. The special needs exception applies "when special needs, beyond the normal need for law enforcement, make the warrant requirement and probable-cause requirement impracticable." Some examples of special needs cases include suspicionless drug testing of high school students and railroad personnel, automobile checkpoints for illegal immigrants and drunk drivers, and the search of airplane, subway, and train passengers' carry-on bags. In each, the government's interest went beyond a general interest in law enforcement to broader governmental needs. Even where the government can claim a special need beyond ordinary law enforcement interests, a reviewing court must balance the privacy interests of the individual with the government's interest to determine whether a warrant or individualized suspicion is required. In making this determination, a court must consider (1) "the nature of the privacy interest upon which the search [] at issue intrudes"; (2) "the character of the intrusion that is complained of"; and (3) "the nature and immediacy of the governmental concern, ... and the efficacy of this means for meeting it." Judge Leon accepted that the plaintiffs had significant privacy interests in the aggregation of their telephone data and that the government's interest in identifying unknown terrorists was of the "highest order." Turning to the efficacy of the program, the court questioned whether the program has "actually stopped an imminent attack, or otherwise aided the Government in achieving any objective that was time sensitive in nature." Doubting the metadata program has significantly aided the government in conducting time-sensitive terrorism investigations, and in light of the serious privacy intrusions found, the court concluded that the bulk metadata program was unreasonable under the Fourth Amendment. The government appealed this decision, which is currently pending before the U.S. Court of Appeals for the District of Columbia Circuit. Section 215 of the PATRIOT Act is set to expire on June 1, 2015. Depending on whether Section 215 lapses or is modified, pending cases challenging the telephone metadata program could be rendered moot. PRISM and Upstream Acquisition of Internet Communications Contemporaneously with the origination of the telephony metadata program in 2001, the NSA also began acquiring Internet-based communications of overseas targets without the use of a traditional law enforcement warrant or an electronic surveillance order under Title I of FISA. Ultimately, new statutory authority for this type of acquisition was provided, at first, temporarily under the Protect America Act (PAA) of 2007; and on a longer term basis by the FAA. According to a partially declassified 2011 opinion from the FISC, NSA collected 250 million Internet communications per year under this program. Of these communications, 91% were acquired "directly from Internet Service Providers," referred to as "PRISM collection." The other 9% were acquired through what NSA calls "upstream collection," meaning acquisition while Internet traffic is in transit from one unspecified location to another. NSA also has two methods for collecting information about a specific target: "to/from" communications collection, in which the target is the sender or receiver of the Internet communications; and "about" communications collection, in which the target is only mentioned in communications between non-targets. The Obama Administration also acknowledged to the FISC that technical limitations in the "upstream" collection result in the collection of some communications that are unrelated to the target or that may take place entirely between persons located in the United States. The PRISM and upstream collections differ from the telephony metadata program in two key respects. First, the PRISM and upstream collections acquire the contents of those communications. Second, as this program targets the "to/from" and "about" communications of foreigners who are abroad, the collection of Internet-based communications may be considered by some to be more discriminating than the bulk collection of telephony metadata. Overview of Section 702 Section 702 of FISA, as added by the FAA, permits the Attorney General (AG) and the DNI to jointly authorize targeting of non-U.S. persons reasonably believed to be located outside the United States. Once authorized, such acquisitions may last for periods of up to one year. Under Subsection 702(b) of FISA, such an acquisition is also subject to several limitations. Specifically, an acquisition may not intentionally target any person known at the time of acquisition to be located in the United States; may not intentionally target a person reasonably believed to be located outside the United States if the purpose of such acquisition is to target a particular, known person reasonably believed to be in the United States; may not intentionally target a U.S. person reasonably believed to be located outside the United States; may not intentionally acquire any communication as to which the sender and all intended recipients are known at the time of the acquisition to be located in the United States; and must be conducted in a manner consistent with the Fourth Amendment to the Constitution of the United States. Traditional FISA orders authorizing electronic surveillance generally require the FISC to find, inter alia , that probable cause exists to believe that the particular target of the proposed surveillance is a foreign power or an agent of a foreign power. In contrast, under Section 702, individual targets of surveillance are not necessarily reviewed by the FISC prior to acquisition of their communications. Instead, the FISC's role is largely limited to reviewing the targeting and minimization procedures that the government proposes to use to target and acquire communications prospectively. In order to be approved, Section 702 requires the targeting procedures be reasonably designed to ensure that an acquisition is limited to targeting persons reasonably believed to be located outside the United States and to prevent the intentional acquisition of any communication where the sender and all intended recipients are known at the time of the acquisition to be located in the United States. The court must also find that the minimization procedures are reasonably designed to minimize the retention, and prohibit the dissemination, of information that is about a U.S. person or that could identify a U.S. person. However, the minimization procedures may allow for the retention and dissemination of information, including U.S. person information, that is evidence of a crime. Constitutional Challenges to Acquisition of Internet Communications Constitutional challenges to the NSA's acquisition of Internet communications of overseas targets under FISA have arisen in a number of different contexts. First, such challenges have arisen in the FISC and FISCR as part of those courts' roles in approving the parameters of these collection activities. Secondly, constitutional challenges have been brought in traditional federal courts as civil actions by plaintiffs asserting an injury or in criminal proceedings by defendants who have been notified that evidence against them was obtained or derived from collection under Section 702. FISCR Protect America Act Litigation Prior to the enactment of Section 702, a similar joint authorization procedure created under the PAA was upheld by the FISCR in 2008. This suit arose out of the objection of an Internet service provider (ISP) to a directive the company had received ordering it to assist in surveillance activities under the PAA. Under a theory of third-party standing, the ISP was able to raise the Fourth Amendment privacy rights of its customers. Under Fourth Amendment case law, unless an exception applies, the government must obtain a warrant to conduct electronic surveillance, as this type of investigation invades an individual's reasonable expectation of privacy. Although the Supreme Court has declined to address whether there is a foreign intelligence exception to the Fourth Amendment that would permit the executive to engage in warrantless electronic surveillance, the FISCR had previously suggested that such an exception applied to surveillance conducted under traditional FISA authorities. When this question was presented to the FISCR in the context of the PAA, the court formally recognized a foreign intelligence exception based upon principles supporting the "special needs" exception that has been developed in other contexts. Generally, the special needs exception may excuse the warrant requirement when the purpose behind governmental action goes beyond routine law enforcement and insisting upon a warrant would materially interfere with the accomplishment of that purpose. As applied to the joint authorization procedure in the PAA, the court found that the acquisition of foreign intelligence information went "well beyond garden-variety law enforcement" purposes. Furthermore, the court found a high degree of probability that requiring a warrant would hinder the government's ability to collect time-sensitive information and that this would impede the vital national security interests at stake. Although no warrant was required by the Fourth Amendment, the court did hold that the Fourth Amendment still required the surveillance to be reasonable, based on the totality of the circumstances. Finding the government's interest in national security to be of the highest order, the court held that protections contained in the PAA, in light of this very important government interest, reasonably offset the lack of particularity or prior judicial review of the authorized surveillance. 2011 FISC Opinions In August 2013, the Obama Administration partially declassified several opinions of the FISC regarding collection activities under Section 702. The first of these opinions, dated October 3, 2011, evaluated the targeting and minimization procedures proposed by the government to deal with new information regarding the scope of upstream collection. Specifically, the government had recently discovered that its upstream collection activities had acquired unrelated international communications as well as wholly domestic communications due to technological limitations. After being presented with this new information, the FISC found the proposed minimization procedures to be deficient on statutory and constitutional grounds. With respect to the statutory requirements, the FISC noted that the government's proposed minimization procedures were focused "almost exclusively" on information that an analyst wished to use and not on the larger set of information that had been acquired. Consequently, communications that were known to be unrelated to a target, including those that were potentially wholly domestic, could be retained for up to five years so long as the government was not seeking to use that information. The court found that this had the effect of maximizing the retention of such information, and was not consistent with FISA's mandate to minimize the retention of U.S. person information. The FISC also held that the proposed minimization procedures did not satisfy the Fourth Amendment. Notably, it applied the same analysis used by the FISCR in the PAA litigation, but found that, under the facts before it, the balance required under the Fourth Amendment's reasonableness test did not favor the government, particularly in light of the statutory deficiencies. Following the FISC's determination that the Fourth Amendment had been violated, the government presented revised minimization procedures to the FISC, and the court approved those procedures on November 30, 2011. The revised minimization procedures addressed the court's concerns by requiring the segregation of those communications most likely to involve unrelated or wholly domestic communications; requiring special handling and markings for those communications which could not be segregated; and reducing the retention period of upstream collection from five years to two. With these modifications, the court found that the balancing test required under the Fourth Amendment supported the conclusion that the search was constitutionally permissible. Clapper v. Amnesty International125 Upon enactment of Section 702, a number of non-profit organizations brought suit challenging the joint authorization procedure for surveillance of non-U.S. persons reasonably believed to be abroad. The suit centrally alleged that this authority violated the Fourth Amendment's prohibition against unreasonable searches. In order to establish legal standing to challenge Title VII, the plaintiffs had argued that the financial costs they incurred in order to avoid their fear of being subject to surveillance constituted a legally cognizable injury. However, on February 26, 2013, in Clapper v. Amnesty International , the U.S. Supreme Court held that the plaintiffs had not suffered a sufficiently concrete injury to have legal standing to challenge Title VII. Specifically, the Court held that in order to obtain injunctive relief from a federal court a plaintiff must prove with "specific facts" that he had been injured or that his injury would be "certainly impending" because of the challenged action. The High Court reasoned that because the non-profit organizations could not prove with specificity that it was "certainly impending" that the United States would utilize Section 702 to intercept the plaintiffs' conversations, the plaintiffs lacked standing to bring their case. Because the Court did not have jurisdiction to proceed to the merits of the plaintiffs' claims, the Court did not decide the Fourth Amendment question. Criminal Defendants The litigation in Clapper , while preventing a facial challenge to Section 702 by a group of non-profit organizations that allegedly worked with clients who could have been subject to surveillance done pursuant to Title VII, may have resulted in a new series of challenges to the FAA by certain criminal defendants. In October 2012, during oral argument before the High Court in Clapper , the Solicitor General, in responding to a question posed by Justice Sotomayor, stated that the government was providing notice to criminal defendants that evidence derived from Section 702 surveillance would be used in the criminal case, allowing the defendant to challenge the lawfulness of that provision. The Solicitor General's response appears to have been prompted by a provision in FISA requiring the government, whenever it "intends to enter into evidence or otherwise use or disclose ... any information obtained or derived from an electronic surveillance ... [done] pursuant to" FISA, to "notify the aggrieved person and the court" "that the Government intends to so disclose or use such information." In turn, once a criminal defendant is provided with such a notification, the defendant has the opportunity to ask a court to suppress the evidence that was "unlawfully acquired." While the Clapper Court dismissed the case on standing grounds, the Supreme Court did so in part relying on the fact that a criminal defendant could potentially have standing to challenge Section 702 because of the notification provision. In the wake of Clapper , the Solicitor General reportedly examined the Justice Department's notification policy and discovered that the policy required telling criminal defendants that incriminating evidence was gathered pursuant to surveillance conducted under FISA, but did not specifically mention that the surveillance was conducted under Title VII. As a result of this discovery, the Department of Justice reportedly altered its disclosure policy, resulting in the filing of several notifications to criminal defendants that the government intends to utilize inculpatory evidence that was obtained or derived pursuant to the authority provided under Section 702. In three cases, a criminal defendant has responded to the government's notification, utilizing FISA's provision allowing the suppression of any evidence "unlawfully acquired" under statute, by challenging the constitutionality of Section 702. Unlike the litigation in the FISA Courts over the constitutionality of the PAA and the FAA, the litigation resulting over the suppression of evidence derived from Section 702 authorities is not isolated to the Fourth Amendment issue. In addition to the question of whether Section 702 violates the Fourth Amendment's prohibition on unreasonable searches and seizures, criminal litigation over Title VII also challenges whether Section 702 violates Article III of the Constitution. Article III of the Constitution vests the "judicial power" of the United States in the Supreme Court and any inferior courts established by Congress, including the FISC. The Constitution limits the exercise of the "judicial power" to the adjudication of "cases" or "controversies," and the case-or-controversy limitation has been the impetus of several rules of justiciability that restrict the court's power and curb Congress's ability to regulate federal courts. With respect to an Article III challenge to Section 702, relying on case law holding that the constitutional case-or-controversy requirement restricts a federal court to adjudicating live disputes that are "definite and concrete" and prevents an Article III court from issuing "advisory opinions," critics of Section 702 argue that Title VII requires a federal court to "evaluat[e] in a vacuum" the legal propriety of the government's targeting and minimization procedures without regard to how the government would be utilizing their FAA authorities in a specific surveillance action. Whether such an abstract assessment of the government's surveillance procedures is a constitutionally appropriate role for a federal court may largely depend on how broadly Supreme Court decisions allowing Article III courts to "perform a variety of functions not necessarily or directly connected to adversarial proceedings in a trial or appellate court" are read. Moreover, while case law rejecting an Article III case-or-controversy challenge with respect to traditional FISA electronic surveillance orders did so because the ex parte review of a foreign surveillance application was viewed as presenting the court with "concrete questions" in a form that a judge was "capable of acting on," it remains to be seen whether the Supreme Court would find judicial review of the government's targeting and minimization procedures under the FAA equally untroubling. To date, one federal court has issued a written opinion with respect to a suppression motion challenging the constitutionality of the FAA. Specifically, in United States v. Mohamud, a district court denied the suppression motion of a criminal defendant against whom the government intended to use evidence obtained under the FAA in a prosecution for violating 18 U.S.C. §2332a(a)(2)(A), attempting to use a weapon of mass destruction. With regard to the constitutionality of Section 702 vis-à-vis Article III, the Oregon court concluded that Congress, in the FAA, provided an "intelligible principle" by which the FISA court could evaluate the legality of the government's targeting and minimization procedures, making Article III review procedures under the FAA akin to other traditional non-adjudicative functions of federal courts, like the review of wiretap applications, where a "neutral and detached" federal judge evaluates whether the government's conduct comports with the Constitution. With regard to the defendant's Fourth Amendment challenge, the district court held that the warrant requirement does not apply to the incidental interception of U.S. persons' communications as part of electronic surveillance targeting non-U.S. persons overseas to obtain foreign intelligence information. Alternatively, the court held, like the FISCR in its 2008 decision, that the foreign intelligence exception permitted the government to conduct surveillance under the FAA without a warrant. Applying a similar balancing test as the FISCR, the district court found that the privacy interests implicated by the incidental collection of U.S. persons' communications did not outweigh the government's interest in protecting the nation's security. Further, the court observed that the "numerous safeguards built into the statute," most importantly the minimization and targeting procedures required by the FAA, bolstered the reasonableness of the surveillance program. The defendant in Mohamud appealed his judgment in October 2014, and the appeal is currently pending before the Ninth Circuit Court of Appeals.

Beginning in summer 2013, media reports of foreign intelligence activities conducted by the National Security Agency (NSA) have been widely published. The reports have focused on two main NSA collection activities approved by the Foreign Intelligence Surveillance Court (FISC) established under the Foreign Intelligence Surveillance Act (FISA) of 1978. The first is the bulk collection of telephony metadata for domestic and international telephone calls. The second involves the interception of Internet-based communications and is targeted at foreigners who are not within the United States, but may also inadvertently acquire the communications of U.S. persons. As public awareness of these programs grew, questions about the constitutionality of these programs were increasingly raised by Members of Congress and others. This report provides a brief overview of these two programs and the various constitutional challenges that have arisen in judicial forums with respect to each. A handful of federal courts have addressed the Fourth Amendment issues raised by the NSA telephony metadata program. FISC opinions declassified in the wake of the public's awareness of the NSA telephony metadata program have found that the program does not violate the Fourth Amendment. Similarly, in ACLU v. Clapper, the federal District Court for the Southern District of New York held that a constitutional challenge to the telephony metadata program was not likely to be successful on the merits. On appeal, the U.S. Court of Appeals for the Second Circuit refrained from reaching the merits of this Fourth Amendment challenge, but instead resolved the case on statutory grounds, holding that the metadata program exceeded statutory authorization under Section 215 of the PATRIOT Act. However, the panel did engage in a general discussion about the Fourth Amendment principles implicated by this program, including the effect of modern technology on American's expectations of privacy. Both the district courts for the Southern District of California and the District of Idaho have found the bulk metadata program constitutional under existing Supreme Court precedent. In Klayman v. Obama, the federal District Court for the District of Columbia held that there is a significant likelihood that a challenge to the constitutionality of the NSA telephony metadata program would be successful. Constitutional challenges to the NSA's acquisition of Internet communications of overseas targets under FISA have arisen in a number of different contexts. First, such challenges have arisen in both the FISC and the Foreign Intelligence Surveillance Court of Review as part of those courts' roles in approving the parameters of these collection activities. Secondly, constitutional challenges have been brought in traditional federal courts as civil actions by plaintiffs asserting an injury or in criminal proceedings by defendants who have been notified that evidence against them was obtained or derived from collection under Section 702. While the FISA courts have at times curbed the government's ability to engage in surveillance activity to ensure compliance with the Fourth Amendment, the one federal court to address the issue has upheld the program against constitutional challenge.

Introduction Recent disclosures of various National Security Agency (NSA) surveillance and data collection programs have prompted increased attention on the government's collection of foreign intelligence. Pursuant to the Foreign Intelligence Surveillance Act (FISA) of 1978, the Foreign Intelligence Surveillance Court (FISC) reviews government applications to conduct electronic surveillance for foreign intelligence purposes and the Foreign Intelligence Surveillance Court of Review (FISA Court of Review) reviews decisions of the FISC. Due to concerns about the size and scope of the foreign intelligence collection programs authorized by orders of the FISC, many have suggested substantive changes to the underlying legal authorities relied on by the government to collect foreign intelligence, while others have proposed altering the practices and procedures of the FISA Courts. After a short overview of the FISA judicial review process, this report will briefly analyze the latter set of proposals. First, this report examines proposals to introduce a public advocate into FISA Court proceedings, a third party who would argue against the government's application to the FISC. Second, the report explores various other proposals that would alter the procedural and operational mechanisms of the FISA Courts, such as appointing an amicus curiae , or friend of the court, to assist the court in addressing novel legal issues. Third, the report will consider measures designed to displace the authority to designate judges to the FISA Court. Finally, the last section discusses the legal implications of proposals that would require the executive branch to release FISA Court opinions. A Brief Overview of the FISA Courts The FISC is an Article III court composed of 11 district court judges selected by the Chief Justice of the Supreme Court from at least seven of the regional judicial circuits. While judges of traditional Article III courts are selected via presidential appointment and Senate confirmation, FISC and FISA Court of Review judges are "designated" to the court by the Chief Justice. The FISC's jurisdiction is limited to hearing applications and granting orders for "the collection of foreign intelligence by the federal government." This includes four types of investigative methods: (1) electronic surveillance; (2) physical searches; (3) pen register/trap and trace surveillance; and (4) orders to compel the production of tangible things. The government may appeal a denial of an application to the FISA Court of Review. The FISC is also authorized to review the government's certifications, minimization, and targeting procedures concerning targeting of non-U.S. persons reasonably believed to be abroad. The FISA Court of Review has jurisdiction to review FISC decisions to modify or set aside directives and decisions to compel compliance with them. Additionally, the FISC may, on its own initiative, or upon the request of the government in any proceeding, or a party in any proceeding under Section 215 of the USA PATRIOT Act or Section 702 of FISA, hold a hearing or rehearing en banc . An en banc panel consists of all the judges who constitute the FISC. In light of the sensitive national security concerns respecting its docket, the FISA Courts operate largely in secret and in a non-adversarial fashion. Court sessions are conducted in secret, are generally held ex parte with the government as the only party presenting arguments to the court, and the court's opinions are rarely released. As noted by the FISC, whereas "[o]ther courts operate primarily in public, with secrecy the exception[,] the FISC operates primarily in secret, with public access the exception." However, recipients of production orders under Section 215 of the USA PATRIOT Act and directives under Section 702 of FISA may challenge the legality of orders by petitioning the court. In the event of a contested hearing, FISA permits in camera review—private review by a court without the challenging party receiving access—of classified information upon motion by the government. The executive branch classifies most filings made to the FISC as Secret or Top Secret before they are sent to the court, and the FISC's opinions and orders in the possession of the executive branch are similarly classified. The executive branch can choose to declassify portions of opinions, or entire opinions and release them to the public. It has done so a number of times since the disclosure of the NSA data collection programs. Introducing a Public Advocate into the FISA Courts Some critics of the FISA process have noted the infrequency of FISC rejections of the government's surveillance requests and suggested that the lack of an adversarial process prevents the court from adequately scrutinizing the government's position. Accordingly, a number of legislative proposals seek to allow another attorney to challenge the government's FISA requests in order to protect civil liberty interests. These proposals have varied according to nomenclature, the structural placement of a potential advocate, and the appointing authority. Nonetheless, most proposals embody three unifying themes. First, an advocate would oppose the government's request for FISA orders on behalf of the privacy and civil liberties interests of the public. Second, an advocate would take on a robust role in FISA Court proceedings. While the various proposals differ at the margins, public advocate measures generally envision the advocate having a range of responsibilities, such as being able to intervene in ongoing cases, brief the FISC on relevant matters, conduct some forms of discovery, file motions seeking discrete forms of relief from the court, move the court to reconsider past orders, or even appeal an adverse ruling. Finally, proposals envision giving the advocate a measure of independence from the President so as to enjoy unfettered discretion to oppose the government's applications. Role of a Public Advocate Before examining the constitutional implications of the establishment of a public advocate, a threshold matter is whether an advocate is a government actor subject to the constraints of the Constitution. The determination ultimately depends on whether the advocate is a permanently constituted entity. At the onset, Congress's labeling of an entity as non-governmental is not determinative. Instead, courts will examine a number of factors, including whether establishing a public advocate furthers a government objective. A permanently constituted advocate seeking injunctive relief based on a violation of law in the interest of the general public might be viewed as engaging in a government function; while a private party appointed temporarily to litigate on behalf of the public might not be considered an arm of the government. Appointment of a Public Advocate Assuming a public advocate who is permanently constituted is an arm of the government and subject to constitutional constraints, the proposed agency must comply with the Appointments Clause of Article II of the Constitution. Under its terms, principal officers must be appointed by the President subject to Senate confirmation; Congress may vest the appointment of inferior officers in the President, the courts, or in department heads. In contrast, employees are not subject to the Appointments Clause, as they are "lesser functionaries subordinate to the officers of the United States." Accordingly, the first relevant issue is whether a public advocate would be an officer of the United States. The Supreme Court has held that the term officer encompasses "any appointee exercising significant authority pursuant to the laws of the United States." The Court did not extensively analyze what constitutes significant authority, although the Department of Justice's (DOJ's) Office of Legal Counsel (OLC) has argued that this definition includes (1) the "delegation of a sovereign authority" that includes "a legal power which may be rightfully exercised, and in its effects will bind the rights of others" and (2) a "continuing" position. Accordingly, a permanent public advocate could be viewed as an officer, especially if he has the power to seek judicial relief on behalf of the public. The Supreme Court has found that an entity with "primary responsibility" to conduct "civil litigation in the courts of the United States for vindicating public rights ... may be discharged only by ... 'Officers of the United States' within the language of [the Appointments Clause.]" In contrast, proposals that permit private attorneys to be appointed for a single case or permit amici to offer advisory briefs to the court would likely not require adherence to the requirements of the Appointments Clause. Assuming a public advocate is an officer, the next question would be whether an advocate is a principal or inferior officer, because principal officers must be appointed by the President with the Senate's confirmation. The relevant test for distinguishing an inferior officer is the ability of a principal officer—appointed by the President and confirmed by the Senate—to control the officer's conduct. The proposals that create an advocate largely do not establish an advocate who would be "directed and supervised at some level by" another principal officer, and thus appear to create an office headed by a principal officer. Article III Issues Raised by a FISA Public Advocate Leaving aside Appointments Clause concerns, utilizing a public advocate in FISA proceedings might also raise Article III issues. Federal courts are limited to adjudicating cases and controversies, which requires a live dispute that is "definite and concrete." Some commentators have questioned whether allowing the government—through DOJ and the public advocate—to "literally argue both sides of a legal case" satisfies the requirement that courts adjudicate live cases and controversies. There are two possible answers to this question, which largely depend on (1) a determination of what the FISC's role is in approving FISA applications and (2) what the role of the FISA advocate is. Morrison and Mistretta "Incidental" Argument One might argue that the role of the judiciary in FISA proceedings is incidental to the exercise of the judicial function and therefore FISA proceedings need not satisfy the case or controversy requirement. This reasoning derives from Morrison v. Olson and Mistretta v. United States , where the Supreme Court suggested that federal courts may engage in certain non-adjudicatory, non-adversarial activities without violating Article III's restrictions. Specifically, these opinions indicate that Article III courts may perform a variety of non-adversarial tasks, such as approving search warrants and wiretaps, because they are incidental to an adversarial proceeding that does meet Article III requirements. The FISA Court of Review may have adopted this line of reasoning in rejecting an Article III challenge to FISA proceedings. If this line of argumentation is controlling, there is at least some authority for the notion that FISA proceedings are incidental to the judiciary's powers. In incidental matters, none of the usual Article III restrictions, such as standing, mootness, and ripeness, would seem to apply. Therefore, if FISA proceedings are a non-adjudicatory function of the FISC and do not have to abide by Article III's restrictions, then permitting a public advocate to appear before the FISC would not raise constitutional issues. However, the argument that FISA proceedings are incidental to the judicial power assumes that such proceedings are analogous to traditional warrant applications. Whereas the proceedings typically considered to be incidental such as an ordinary warrant are usually connected to a clear case or controversy, that might not be the case within FISA proceedings—which rarely result in later contested cases. The Traditional Argument and the Role of a Public Advocate A second argument for allowing a public advocate in FISA proceedings derives from a more traditional understanding of Article III. According to this argument, a public advocate can participate in FISA proceedings as long he satisfies the necessary requirements to seek relief from a court, such as standing. During the debates over passage of FISA in the 1970s, the Department of Justice argued that two parties are not required in every case; instead, there need only be "adversity in fact" or "possible adverse parties." Accordingly, the adverse interests of the potential target and the United States were sufficient to satisfy Article III's requirements. It appears that at least two district courts and the FISA Court of Review have accepted this argument. Assuming that FISA proceedings require adherence to Article III's case or controversy requirement, the remaining concern is whether a public advocate may participate in the proceedings. In general, whenever a party "invo[kes] ... [a] federal court['s] jurisdiction" and requests an Article III court to exercise its "remedial powers on his behalf," the Supreme Court requires a party to show that he has personally suffered an "actual or threatened injury." This injury must be "concrete and particularized" and "actual or imminent, not conjectural or hypothetical." Further, standing also requires a "causal connection" between the injury and the conduct in question—in other words, the injury must be "fairly traceable" to the challenged action. In addition, it must be likely that the injury will be redressed by a favorable decision by the court. Nevertheless, if one party already has met Article III's standing requirements, a third party may sometimes seek identical relief. In addition, an amicu s , or friend of the court, may brief the court on a legal issue without needing to satisfy standing requirements. In order for a public advocate to engage in proceedings beyond the traditional role of a third party amicus and seek judicial relief, an advocate would likely need to satisfy the constitutional requirements of standing. For example, in a recent FISC opinion, the court granted the motion of a public interest group to submit an amicus brief, but denied its motions to (1) reconsider a previous order; (2) establish a docket pertaining to the collection of bulk telephony metadata; (3) require the government to release information about the bulk metadata program; and (4) order an en banc hearing to reconsider the government's application for metadata collection. The court ruled that the interest group had "no standing" to motion for such relief. In short, in order for a public advocate to be able to seek judicial relief, such as move for a judgment, move for the reconsideration of past orders, or file an appeal, the advocate would most likely need to satisfy the standing requirements of Article III. It is at least questionable whether a public advocate would have personally suffered a non-generalized injury as a result of the government's surveillance activity in order to seek relief from a FISA Court. Unless the advocate himself is the subject of the order and can demonstrate with specificity that a future injury to him as a result of the application was certainly impending, the advocate would not appear to have standing in his individual capacity. Moreover, no proposal envisions an advocate challenging an application in his individual capacity; instead, he would be litigating on behalf of the general public. There are, however, doctrines of standing that allow parties without standing to seek judicial relief on behalf of others. The doctrine of "representational standing" allows "particular relationships" to sometimes "rebut the background presumption ... that litigants may not assert the rights of absent third parties." For example, next friend standing and its legal analogues incorporate the notion that in certain situations a party may assert claims as a "next friend" on behalf of a party with standing. In order to invoke the doctrine, a next friend must demonstrate that the actual party cannot appear on his own behalf, generally for reasons such as inaccessibility, incompetence, or some other disability; as well as be dedicated to their interests, typically by showing a "significant relationship." This doctrine may prove difficult to provide standing for a public advocate because the real party in interest must still suffer injury-in-fact. Moreover, the real parties the public advocate would be representing might be capable of asserting their own rights in the first place. In addition, it is unclear how a public advocate would show a "significant relationship" between the parties in interest—the general public—and himself. Finally, the types of parties determined to have next friend standing usually maintain some traditional legal obligation to the party in interest, while a public advocate does not appear to owe any such obligation to members of the public. Of course, one might argue that statutory authorization compelling a public advocate to represent the public bestows him with the necessary legal obligation to vindicate their rights in court. However, the Supreme Court has explained that limits on the doctrine of next friend standing are necessary to prevent a "litigant asserting only a generalized interest in constitutional governance [from] circumvent[ing] the jurisdictional limits of [Article] III by simply assuming the mantle of 'next friend.'" The reference to a "generalized interest" draws a comparison to FISA reform proposals that direct a public advocate to represent the rights of the public at large, and allowing a statute to override core constitutional standing requirements could allow Congress to make an end run around Article III's limitations. In addition to next friend standing, there is also some authority indicating that an advocate may seek relief in federal court if he is authorized to appear as the agent of a party with standing. To do so, an advocate must be authorized by a third party such that the litigant's interest is not divorced from the principal. In order for a litigant to seek relief for an absent party he must be officially authorized to do so and the advocate's relationship with the third party must exhibit some of the "most basic features of an agency relationship." In the context of a FISA proceeding, it does not appear that an advocate would be "authorized" in any official sense by those targeted by the government. In addition, the typical elements of an agency relationship that the Supreme Court has identified as necessary—namely, the ability to control litigation and remove the advocate —would not appear to be present. On the other hand, these agency cases may be distinguished as relating to the rights of private parties, whereas in the FISA context, an argument could be made that an advocate could be seen as an agent of the government . When federal officials seek relief pursuant to statute, the government's standing to litigate on behalf of the general public is "easily recognized." However, such an argument may be inappropriate given that most FISA proposals envision a substantially independent advocate litigating against the government, rather than acting as its agent. In addition, there may be a distinction between the government litigating to enforce public rights and the ability of a government agent to seek judicial relief on behalf of the personal rights of someone outside the government. Even if a public advocate can be viewed as an agent of the government, separate constitutional concerns could arise. For example, the constitutional requirement of a case or controversy prevents a party, including the government, from litigating against itself. The Supreme Court has taken a functional approach to this principle, however, and looked beyond the mere labels of litigating parties. For example, the Supreme Court has found certain apparently intra-branch conflicts to be justiciable—including when a government agency is acting as a market participant, cases arising out of a criminal prosecution, and when the government is representing a real party in interest. While no formal test to determine when such litigation is permitted has been delineated by the Court, a dispute between a public advocate and the DOJ might be distinguishable from these limited situations. Such litigation appears to be centered on a dispute with respect to the relative importance of two conflicting sovereign interests—the need to engage in foreign surveillance to protect national security versus the need to protect the privacy rights of the public. Having a federal court serve as the arbiter of such a dispute may ultimately run afoul of the principle that an Article III court does not adjudicate a dispute between a solitary legal entity. Moreover, allowing two entities within the executive branch to come two opposite conclusions on how the law should be executed might raise issues under Article II's vesting clause of the Executive power in the President. While the Supreme Court has upheld "for cause" removal restrictions on independent agencies headed by principal officers, the relevant case law relies on a distinction between when Congress may direct "quasi-legislative and quasi-judicial" bodies, as opposed to "purely executive" agencies, "to act ... independently of executive control." Empowering an independent agency to seek judicial relief that would functionally override or prevent a particular foreign intelligence operation sought by the President could be viewed as an impermissible interference with a core Executive power. Housing the Advocate in the Judicial Branch In contrast to proposals placing a public advocate in the executive branch, other measures would house the public advocate within the judiciary. These proposals might also raise a distinct separation of powers question. The Supreme Court has explained that creating an independent agency in the judicial branch would raise constitutional concerns in two situations: if the agency united the judicial branch with a political power; or if it "undermin[ed] the integrity of the Judicial Branch." Granting a judicial agency power to exercise typical executive branch functions—such as seeking relief in aid of the United States' legal interests—might run afoul of these restrictions. In addition, requiring an agency in the judicial branch to litigate against the government risks casting the judicial branch as an advocate, rather than a neutral arbiter. Increasing Appeals of FISA Court Decisions Another suggestion for the FISA Courts is to require that final decisions of the FISC be reviewed automatically by the FISA Court of Review or the Supreme Court. While such a proposal seems relatively novel, it appears questionable whether a federal court can hear an appeal in a case in which no party has requested review. Further, if the effect of such an appeal would be to stay the FISC's ruling until affirmed by a higher court, this might conflict with an Article III court's power to decide cases via "dispositive judgments." Other proposals would allow the FISC to certify, upon a request from the public advocate, questions of law or an entire case to the FISA Court of Review or the Supreme Court. Aside from concerns that such a practice could result in federal courts issuing advisory opinions, such a proposal appears to provide a means to grant judicial relief to a party without standing. Procedural and Operational Changes Amicus Curiae One alternative to creating a permanent public advocate is to establish a formal mechanism through which the FISC could solicit the views of an amicus curiae who could brief the court on a discrete legal issue in a given case. Pursuant to Congress's broad power to regulate the federal courts, authorizing the FISC to hear from amici via statute does not appear to raise any serious constitutional questions. In fact, Congress has enacted similar legislation in the past. Indeed, such a provision might not be needed as a legal matter. Courts have long exercised the power to appoint amici independent of congressional authorization, and both the FISC and the FISA Court of Review have done so already in several cases. While there does not appear to be a constitutional issue with permitting the FISC to appoint amici who would provide views on civil liberties to the court, several proposals require the FISA Courts to appoint an amicus curiae , possibly implicating constitutional concerns. On the one hand, such a requirement could conflict with the principle that Article III courts must maintain independence to control their own internal processes. Further, mandating an amicus may be seen as elevating the traditional status of amici —individuals heard at the discretion of the court—to a party who has an absolute right to be heard. One might argue that this forces the judiciary to rule in a matter outside of a true case or controversy. On the other hand, requiring the court to hear from amici does not force the judiciary to rule in a particular manner, nor does it establish a right to seek relief from the court in violation of standing requirements. En Banc Panels The FISC is currently permitted via statute to hold a hearing or rehearing en banc —a panel that includes all of the FISC judges. At least one commentator has suggested requiring the FISC to sit en banc during certain proceedings. Legislation requiring a federal court to sit en banc in specific situations does not appear to raise major constitutional questions. In the past, Congress has mandated that three-judge panels adjudicate a variety of cases. Certain claims under the Civil Rights Act of 1964, for example, are still adjudicated in this manner. Voting Rules Another proposal aims to change the voting rules of the FISA Courts in order to encourage further scrutiny of the FISC's orders. One bill would require that in order for an en banc panel to act, it must have the concurrence of 60% of the judges; and any decision made by FISA Court of Review in favor of the government must be made unanimously. Congress has never directly set the voting rules of federal courts, but has extensively regulated the lower federal courts and has established the number of Supreme Court justices and the number required for a quorum. Because of the dearth of past legislation on this precise matter, it is unclear exactly whether Congress has the power to set judicial voting rules. The constitutionality of such a measure may turn on the degree of interference any rule would have on the judicial function. In United States v. Klein , the Supreme Court refused to allow a statute to "prescribe rules of decision" to the judiciary. A generally accepted interpretation of this case is that Congress may not dictate substantive outcomes of the federal courts. Accordingly, requiring a 60% concurrence in en banc proceedings, for example, might not improperly intrude on the judicial function. It does not appear to favor a particular result and permits judges to independently adjudicate the matter before them. In contrast, a unanimity requirement for the FISA Court of Review seems more likely to interfere with the court's independence, as it might prevent the court from issuing a ruling. Selection of FISA Court Judges Aside from altering the procedures of the FISA Courts, some have suggested modifying how its judges are chosen. Currently, the FISC is composed of 11 district court judges from at least seven of the regional judicial circuits. While judges of traditional Article III courts are "appointed" by the President with Senate confirmation, FISA Court judges are "designated" to their position by the Chief Justice. The Chief Justice also designates 3 district court or court of appeals judges to the FISA Court of Review. FISA Court judges serve terms of seven years and are not eligible for a second term. In response to concerns that allowing the Chief Justice to select all the FISA Court judges improperly concentrates an important power in one unelected official, some have proposed to disperse this authority among the chief judges of the circuit courts. Other measures would authorize the President to choose FISA Court judges with Senate confirmation, and some would leave this choice with the congressional leadership. These proposals appear to raise several novel legal issues. The Chief Justice's authority to designate federal judges to temporarily sit on other federal courts, including specialized Article III tribunals such as the FISA Court, and circuit court judges' authority to designate district judges within their circuit, have been upheld against legal challenge. However, extending similar designating authority to the President or to a lower federal court over a court it does not oversee has never been resolved as a constitutional matter. The issue has not come up, in large part, because Congress has apparently never vested similar designating authority over federal judges beyond the Chief Justice and the chief judge of each judicial circuit. Beyond historical precedent, Supreme Court case law provides little guidance in this area. However, proposals that vest the designation authority in Congress may raise a separate constitutional question. The Supreme Court has made clear that legislative acts which "alter[] the legal rights, duties, and relations of persons" outside the Legislative Branch must satisfy the constitutional requirements of bicameralism and presentment. Vesting the authority to designate Article III judges to serve on a FISA Court solely with Congress would appear to violate this principle. Disclosure of FISA Court Opinions Several other FISA proposals seek to reduce the secretive nature of the FISA Courts by requiring the public disclosure of FISA opinions. Such legislation might raise separation of powers questions because both Congress and the executive branch claim some power in this area. The central question to resolve is the extent to which Congress may regulate control over national security information, including requiring the executive branch to disclose specific documents—a question not definitively resolved by the courts. Legislation compelling the executive branch to release FISA opinions directs the President to release information he may intend to keep secret and thus implicates the President's power under Article II of the Constitution. On the one hand, the Supreme Court has explicitly recognized Congress's power to require the "mandatory disclosure of documents in the possession of the Executive Branch." However, the executive branch has argued that the Commander-in-Chief Clause of Article II bestows upon the President independent power to control access to national security information. As such, according to this line of reasoning, Congress's generally broad ability to require disclosure of agency documents may be constrained when it implicates national security. The executive branch has typically exercised discretion to determine what particular information should be classified; and the Supreme Court has observed in dicta that the President is Commander in Chief, and his "authority to classify and control access to information bearing on national security ... flows primarily from this Constitutional investment of power in the President and exists quite apart from any explicit congressional grant." In addition, courts have crafted common law privileges that protect the executive branch from revealing certain military secrets. Nonetheless, Supreme Court jurisprudence does not establish absolute power by any branch over classified information and recognizes room for Congress to impose classification procedures. Moreover, Congress, pursuant to its oversight function, requires consistent disclosure of sensitive national security information to the relevant intelligence and defense committees and has regulated control over access to national security information. Pursuant to these statutes, courts have required the executive branch to disclose information to the public and the judiciary. Consequently, proposals that allow the executive branch to first redact classified information from FISA opinions before public release appear to be on firm constitutional ground; while a proposal that mandated all past FISA opinions be released in their entirety—without any redactions by the executive branch—might raise a separation of powers issue.

In the wake of recent disclosures concerning various National Security Agency (NSA) surveillance and data collection programs, several legislative changes to the government's intelligence operations authority have been suggested. Under the Foreign Intelligence Surveillance Act of 1978 (FISA), the Foreign Intelligence Surveillance Court (FISC) reviews government applications to conduct surveillance and engage in data collection for foreign intelligence purposes, and the FISA Court of Review reviews rulings of the FISC. Some have proposed altering the underlying legal authorities relied on by the government when applying to the FISC, while others have suggested changes to the practices and procedures of the FISA Courts. This report provides a brief overview of the legal implications of the latter group of proposals. Some have proposed establishing an office led by a "public advocate" who would represent the civil liberties interests of the general public and oppose the government's applications for foreign surveillance. This proposal raises several constitutional issues. For example, assuming the advocate is an agent of the government, depending on the scope of the authority provided and the amount of supervision placed over the FISA advocate's office, the lawyer who leads such an office may be a principal or inferior officer of the United States whose appointment must abide by the Appointments Clause's restrictions. Moreover, an advocate might not satisfy Article III of the Constitution's requirements for parties seeking relief. In contrast, proposals that would allow an advocate to generally share its views of the law as a friend of the court or amicus curiae are far less likely to run afoul of the Constitution's restrictions. In addition, Article III generally prevents the government from litigating against itself, making it potentially constitutionally problematic to have an intra-branch dispute over foreign surveillance resolved by a federal court. Likewise, Article III might be an impediment to efforts to make appeals of FISA Court decisions more frequent. In addition, one might argue that allowing a public advocate protected by "for cause" removal restrictions to seek judicial relief on an issue of national security could invade core executive branch prerogatives. Proposals to house an advocate in the judicial branch might implicate the separation of powers principle that no branch may aggrandize itself at the expense of a co-equal branch. Another proposal seeks to increase the amount of judicial review given to FISA applications by requiring that the FISC sit en banc. This does not appear to raise major constitutional questions as such a proposal would likely not hinder the FISC from performing its core constitutional functions. There have also been calls to alter the voting rules of the FISA Courts, although the legal implications of such proposals are less clear. Aside from altering the procedures of the FISA Courts, other proposals focus on how judges are chosen. Some have suggested permitting the chief judges of the circuit courts, the President with Senate confirmation, or the congressional leadership to designate judges to the FISA Courts. Due to the novelty of these proposals, the legal implications of extending delegation authority to the President or lower federal courts are unclear. However, proposals that allow congressional leadership to appoint FISA Court judges are likely to raise constitutional questions. Finally, because most FISA opinions are classified by the executive branch, some have raised concerns that this practice permits the government to rely upon "secret law" to justify its activities, and have proposed requiring the public release of FISA opinions. Proposals that allow the executive branch to first redact classified information from FISA opinions before public release appear to be on firm constitutional ground, while a proposal that mandated all past FISA opinions be released in their entirety—without any redactions by the executive branch—might raise a separation of powers issue.

What Is SCAAP? The State Criminal Alien Assistance Program (SCAAP) was created by §20301 of the Violent Crime Control and Law Enforcement Act of 1994, and it is currently codified in §241(I) of the Immigration and Nationality Act (INA). The program is administered by the Bureau of Justice Assistance (BJA), which is part of the Department of Justice's (DOJ) Office of Justice Programs (OJP). The Department of Homeland Security (DHS) aids BJA in administering the program. SCAAP is designed to reimburse states and localities for correctional officers' salary costs incurred for incarcerating "undocumented criminal aliens." The INA defines the term "undocumented criminal alien" in the context of SCAAP to mean an alien who (3)(A) has been convicted of a felony or two or more misdemeanors; and (I) entered the United States without inspection or at any time or place other than as designated by the Attorney General; (ii) was the subject of exclusion or deportation proceedings at the time he or she was taken into custody by the State or a political subdivision of the State; or (iii) was admitted as a nonimmigrant and at the time he or she was taken into custody by the State or a political subdivision of the State has failed to maintain the nonimmigrant status in which the alien was admitted or to which it was changed under Section 248, or to comply with the conditions of any such status. Who Is Eligible to Receive SCAAP Payments? Any state or locality that incurred costs for incarcerating "undocumented criminal aliens" is eligible to apply for SCAAP funding. Currently, this includes all 50 states, the District of Columbia, Guam, Puerto Rico, the U.S. Virgin Islands, and more than 3,000 counties and cities. For states and localities to qualify for SCAAP reimbursement, aliens under their jurisdiction must have at least one felony or two misdemeanor convictions under state or local law and be incarcerated for at least four consecutive days. Although the program is intended to compensate states and localities for correctional officers' salary costs, funds provided through SCAAP payments until recently have been unrestricted and could be used for any lawful purpose. In some instances, SCAAP funds were used for projects such as interoperable communications systems, inmate medical care, and construction. In many instances, funds were used for the jurisdiction's criminal justice system or jails. What Are the Award Criteria? The criteria for the amount of SCAAP funds received have evolved over time. Prior to FY2003, the criteria were based on factors such as average cost per inmate multiplied by the number of eligible inmates and the total number of foreign-born inmates claimed. In many cases, this resulted in reimbursement for ineligible aliens such as naturalized citizens and legal permanent residents (LPRs). The formula is determined administratively by DOJ. In FY2007, the SCAAP reimbursement formula was determined through a multi-step process, as follows. DOJ determined a per diem rate per inmate, using a combination of correctional officers' annual salary costs and the total number of all inmate days. (The average inmate per diem for FY2007 was $30.30); Immigration and Customs Enforcement (ICE) in DHS analyzed applicant inmate records submitted by the applicants, and provided BJA with a report reflecting the number of eligible, ineligible, unknown, and invalid inmates; The number of inmate days and a percentage of unknown days were totaled, then multiplied by the applicant's per diem rate; The value of each applicant's correctional officers' salary costs associated with its eligible and credited unknown inmate days was totaled. (This value reflected the maximum allowable reimbursement); and The values were compared with the annual appropriation and a percentage factor was developed, and the percentage factor was applied uniformly to all jurisdictions. The reimbursement factor for FY2007 SCAAP awards was approximately 42%. What Is the Funding Level for SCAAP? Funding for SCAAP has been appropriated by Congress annually since 1995. Levels of funding for the program have fluctuated from $130 million in FY1995 to $565 million in FY2002 and have remained relatively consistent between $400 and $410 million for FY2006 through FY2009. The Administration's FY2010 budget did not request funding for this program. How Much Money Have the States Received in SCAAP Awards? From FY2000 to FY2008, SCAAP reimbursements totaled approximately $4 billion. As Table 1 illustrates, California historically has received the largest annual awards, having received more than $1.7 billion since the program's inception. Florida, Illinois, New York, and Texas have consistently received larger awards as well, with smaller awards going to states such as West Virginia, Vermont, North Dakota, and the U.S. territories. Recent Legislation In 2005, SCAAP was reauthorized through FY2011, and a provision was added that required SCAAP reimbursement funds be used for correctional purposes only. Legislation had been introduced in previous Congresses that would have modified the program to include covering costs for indigent defense, translators, criminal aliens charged with two misdemeanors or a felony, and limited reimbursement to border states and states with large numbers of unauthorized aliens. In the 111 th Congress, legislation has been introduced to reauthorize the program until FY2014 ( H.R. 2282 ), and to allow costs related to criminal aliens charged with specified crimes to be considered for SCAAP reimbursement ( S. 168 ). The Administration's FY2010 budget request did not include funding for SCAAP; however, funding for the program was included in the Commerce, Justice, Science and Related Agencies Appropriations Act of 2010 ( H.R. 2847 ). H.R. 2847 as passed by the House on June 18, 2009, would appropriate $300 million for SCAAP, and the Senate reported version would appropriate $228 million for the program.

The State Criminal Alien Assistance Program (SCAAP) is a formula grant program that provides financial assistance to states and localities for correctional officer salary costs incurred for incarcerating "undocumented criminal aliens." Currently, SCAAP funds do not cover all of the costs for incarcerating immigrants or foreign nationals. The program is administered by the Office of Justice Programs' Bureau of Justice Assistance, located in the U.S. Department of Justice, in conjunction with the U.S. Department of Homeland Security. Between FY1995 and FY2009, a total of more than $5 billion has been distributed to states in SCAAP funding. Recent changes to SCAAP include reauthorization through FY2011 and the requirement that SCAAP reimbursements be used for correctional purposes only. Legislation introduced in the 111th Congress includes provisions that would extend the program through FY2014 and authorize appropriations at $1 billion annually for FY2011-FY2014 (H.R. 2282); and would change SCAAP eligibility guidelines to reimburse states not only for criminal aliens convicted of two misdemeanors or a felony, but also for those charged with these crimes as well (S. 168). Funding for the program has also been included in the Commerce, Justice, Science and Related Agencies Appropriations Act of 2010 (H.R. 2847). H.R. 2847 as passed by the House on June 18, 2009, would appropriate $300 million for SCAAP, and the Senate reported version would appropriate $228 million for the program. This report will be updated as warranted by legislative, funding, or policy developments.

Procedural Adjustments The Reauthorization Act changes procedures associated with federal capital cases including those relating to air piracy cases arising before 1994 and habeas procedures for state capital petitioners. Pre-1994 Capital Air Piracy Cases In the early 1970s, the U.S. Supreme Court held unconstitutional the imposition of capital punishment under the procedures then employed by the federal government and most of the states. In 1974, Congress established a revised procedure for imposition of the death penalty in certain air piracy cases. In 1994, when Congress made the procedural adjustments necessary to revive the death penalty as a sentencing option for other federal capital offenses, it replaced the air piracy procedures with those of the new regime. At least one court, however, held that the new procedures could not be applied retroactively to air piracy cases occurring after the 1974 fix but before the 1994 legislation, in the absence of an explicit statutory provision. The Reauthorization Act adds an explicit provision to the end of the 1994 legislation. H.R. 1763 and H.R. 3060 contain comparable provisions. Habeas Corpus in State Capital Cases Federal law provides expedited habeas corpus procedures for state death row inmates in those states that qualify for application of the procedures and have opted to take advantage of them. As of enactment of the Reauthorization Act apparently, few if any states had sought and been found qualified to opt in. Under the Reauthorization Act, states opt-in or have opted-in as of the date, past or present, upon which the Attorney General determines they established or have established qualifying assistance of counsel mechanism. The earlier provision required that the mechanism include competency standards for appointed counsel. The Reauthorization Act removed the requirement, but granted the Attorney General regulatory authority sufficient to establish such standards. The act establishes a de novo standard of review for the Attorney General's determination before the D.C. Circuit. The Streamlined Procedures Acts in the House and Senate, H.R. 3035 and S. 1088 , would make similar changes in the opt in procedure. S. 956 , H.R. 2388 , and H.R. 3132 (House-passed legislation is noted in italics), contain a common amendment governing federal habeas cases of an individual convicted under state law of killing a child, proposed 28 U.S.C. 2254. Habeas under section 2254 would have been unavailable in such cases except for claims that both (1) relied on a new constitutional interpretation made retroactively applicable by the Supreme Court or on evidence that the petitioner could not reasonable have been previously discovered and (2) were predicated upon facts in the face of which no reasonable judge or jury would have found the petitioner guilty but for the constitutional error, proposed 28 U.S.C. 2254(j)(1), (2). Under the bills, judicial consideration of claims that meet the dual criterion would have been expedited. Additional Procedural Proposals: Venue Several anti-gang bills purport to change the place where capital cases may be tried. S. 155 , H.R. 970 , H.R. 1279 , and H.R. 4472 contain the same provision that would have rewritten 18 U.S.C. 3235. Section 3235 provides that where possible capital cases should be tried in the county in which the crime occurred. The proposal would have repealed the "county trial" language of section 3235 and replaced it with language reminiscent of the multi-district terms of section 3237(a): "(a) the trial of any offense punishable by death shall be held in the district where the offense was committed or in any district in which the offense began, continued, or was completed. (b) If the offense, or related conduct, under subsection (a) involves activities which affect interstate or foreign commerce, or the importation of an object or person into the United States, such offense may be prosecuted in any district in which those activities occurred," proposed 18 U.S.C. 3235. The proposal would have operated subject to two constitutional provisions and two Supreme Court cases which construe them. Mitigating and Aggravating Factors The death penalty may be imposed in a federal capital case only after consideration of the mitigating and aggravating factors listed in 18 U.S.C. 3592 and only if at least one aggravating factor is found. Several bills would have adjusted the factors. One of the aggravating factors in homicide cases consists of the fact that the death resulted from the commission of a list of designated felonies. The Adam Walsh Child Protection and Safety Act adds 18 U.S.C. 2245 to the list, 18 U.S.C. 3591(c)(1). Among the proposals that failed to secure final passage, H.R. 3860 would have added 18 U.S.C. 2245 (sexual abuse resulting in death) to the list, proposed 18 U.S.C. 3591(c)(1). H.R. 3060 would have placed 18 U.S.C. 2339D (receipt of military training from a foreign terrorist organization) on the list, and H.R. 5040 would have done the same and also added 18 U.S.C. 241 (civil rights conspiracy), 245 (deprivation of federally protected activities), 247 (interference with religious exercise), 1512 (tampering with federal witnesses), and 1513 (retaliating against federal witnesses), proposed 18 U.S.C. 3592(c)(1). Both H.R. 3060 and H.R. 5040 would have made obstruction of justice an aggravating factor in homicide cases, proposed 18 U.S.C. 3592(c)(17). Other Procedural Proposals H.R. 3060 would have allowed the court upon a finding of good cause or agreement of the parties to proceed with a capital sentencing jury of fewer than 12 members, proposed 18 U.S.C. 3593(b). Existing law requires agreement of the parties. The bill also amends Rule 24(c) of the Federal Rules of Criminal Procedure to allow for the selection of a maximum of 9 alternate jurors and allows each side 4 peremptory alternate juror challenges when either 7, 8, or 9 alternates are to be selected, proposed F.R.Crim.P. 24(c). The present Rule calls for a maximum of 6 alternates and affords the parties 3 alternate juror peremptory challenges. These and other similar proposals passed the House initially as part of H.R. 3199 , but were dropped in conference and were not part of the Reauthorization Act as passed. H.R. 5040 would have struck the provision which outlaws the execution of the mentally retarded, proposed 18 U.S.C. 3596(c). The omission, although perhaps surprising to some, appeared inconsequential since execution of the mentally retarded is constitutionally proscribed. The bill also would have required notice to the government and would have permitted the government to request an independent mental health examination when a defendant intends to enter mental retardation as a mitigating factor for capital sentencing purposes, proposed 18 U.S.C. 3593(b). The existing statute mentions no such requirements. Presumably recourse to the proposed procedure would have been more infrequent in those cases where the district court conducted a pre-trial evidentiary hearing to determine whether the mental retardation of the accused precluded imposition of the death penalty following any conviction. Present law permits a capital jury to unanimously recommend a sentence of death or of imprisonment without possibility of release; if they do not, the court is to sentence the defendant to any lesser sentence authorized by law, i.e., imprisonment for life or a term of years. H.R. 5040 would have provided that if the jury cannot agree on a capital recommendation, a new sentencing jury would have been empanelled and the issue retried, proposed 18 U.S.C. 3594. Existing law specifically contemplates that the execution of federal capital sentences will be carried out in state facilities. H.R. 5040 would have granted the Attorney General regulatory implementing authority without exclusive reference to state facilities, proposed 18 U.S.C. 3596, 3597. The bill also would have rewritten 18 U.S.C. 3005 which assures defendants two assigned counsel in capital cases. The proposal would have made it clear that the statute only applied when the government sought the death penalty and not in capital cases where it had elected not to do so, proposed 18 U.S.C. 3005(a). The federal appellate courts are divided on the question over whether section 3005 now entitles a defendant to the assistance of two attorneys in all capital cases or only in those in which the government actively seeks the death penalty. The proposal also would have explicitly authorized the government to strike for cause potential jurors in capital cases whose opposition to the death penalty "would prevent or substantially impair the performance" of their duties as jurors, proposed 18 U.S.C. 3005(b). The proposal borrowed language from Supreme Court cases indicating that a potential juror may be struck if his views on capital punishment "would prevent or substantially impair the performance of his duties as a juror in accordance with his instructions and his oath." New Federal Capital Offenses Title III of the Reauthorization Act, designated the Reducing Crime and Terrorism at America's Seaports Act, creates three new federal capital offenses: (1) 18 U.S.C. 2282A (devices or dangerous substances in waters of the United States likely to destroy or damage ships or to interfere with maritime; causing a death); (2) 18 U.S.C. 2283 (transportation of explosive, biological, chemical, or radioactive or nuclear materials; causing a death); and 18 U.S.C. 2291 (destruction of vessel or maritime facility; intentionally causing a death). Two other port security bills would have suggested similar new death penalty offenses, H.R. 2651 and S. 378 (as reported) (proposed 18 U.S.C. 2282A, 2283, and 2291), and a third would have offered three slightly less comparable offenses, H.R. 173 (proposed 18 U.S.C. 1372 (destruction of vessel or maritime facility; if death results), 2280A (devices or substances in waters of the United States likely to destroy or damage ships; if death results), and 2282 (malicious dumping; if death results)). The bills drafted to counter gang violence— H.R. 4472 , H.R. 1279 , H.R. 970 , and S. 155 —frequently include two new federal death penalty offenses. One of the proposed offenses would have proscribed the use of interstate facilities with the intent to commit multiple murders and would have been a capital offense where death results. The other, modeled after the provision that condemns the use of a firearm during or in relation to a crime of violence or a drug offense, would have outlawed crimes of violence committed during or in relation to a drug trafficking offense and makes the offense punishable by death if a death results. A few other bills would have made it a federal capital offense to kill a police officer under various circumstances. For example, H.R. 2363 would have outlawed killing a peace officer and fleeing the country, proposed 18 U.S.C. 1121(c). H.R. 1751 and H.R. 2194 would have prohibited murdering federally funded state or local law enforcement officers, proposed 18 U.S.C. 1123. Other proposed new federal capital offenses would have included (1) agroterrorism when death results, proposed 18 U.S.C. 2339D ( S. 1532 ); (2) interference with federal disaster relief efforts if death results, proposed 18 U.S.C. 1370 ( H.R. 3728 ); (3) death resulting from a violation of 18 U.S.C. 1590 (trafficking in persons) that involves raping or kidnapping more than one person, proposed 18 U.S.C. 1590 ( S. 2437 ); (4) death resulting from a violation of proposed 18 U.S.C. 555 ( S. 2611 ) that would have proscribed evading immigration, customs or agricultural inspection at the border; and (5) death resulting from the commission of federal crimes of terrorism, violations of 18 U.S.C. 175 (biological weapons), 175b (biological materials), 229 (chemical weapons), 831 (nuclear materials), or of 42 U.S.C. 2284 (atomic weapons), or conspiracies or attempts to commit such crimes or violations, proposed 18 U.S.C. 2339E ( H.R. 3060 , H.R. 5939 , S. 3882 , S. 3848 ). Capital Punishment for Violation of Existing Crimes Section 110 of the Reauthorization Act merges 18 U.S.C. 1992 (2000 ed.) (wrecking trains) and 18 U.S.C. 1993 (2000 ed.) (attacks on mass transit) into a new 18 U.S.C. 1992. The train wreck offense was a capital offense; the mass transit offense was not; under the new section both are now capital offenses, 18 U.S.C. 1992. The most common example of a proposed death penalty sentencing option for an existing crime comes from some of the child safety bills, many of which would have made the death penalty available where a child dies as a result the commission of a federal crime of violence or some other federal crime: (1) S. 956 (crime of violence, proposed 18 U.S.C. 3559(d)); (2) H.R. 2388 (same); (3) H.R. 3132 (same); (4) H.R. 4472 (same); and (5) H.R. 3860 (violations of 18 U.S.C. ch.110 (sexual exploitation of children), ch. 117 transportation of illegal sexual activity), or 1591 (sex trafficking in children), proposed 18 U.S.C. 2245(b)). Congress adopted a variation of this theme in the Adam Walsh Child Protection and Safety Act when it amended 18 U.S.C. 2245 to make murder a federal capital offense when committed in the course of a wider range of federal child sexual abuse offenses. The gang bills generally would have rewritten the federal criminal gang statute (18 U.S.C. 521) to permit imposition of capital punishment for a death-resulting violation of the newly crafted provisions or of the Travel Act (18 U.S.C. 1952): H.R. 1279 , proposed 18 U.S.C. 521, 1952; S. 155 , proposed 18 U.S.C. 523, 1952; H.R. 4472 , proposed 18 U.S.C. 521, 1952; see also, H.R. 970 , proposed 18 U.S.C. 523. H.R. 3060 , H.R. 5939 , S. 2883 , and S. 3848 would have made capital offenses of several death-resulting terrorism-related offenses that are now punishable by no more than life imprisonment, specifically, proposed 18 U.S.C. 832 (participating in foreign nuclear or other weapon of mass destruction programs), proposed 18 U.S.C. 2332g (anti-aircraft missiles), proposed 18 U.S.C. 2332h (radiological dispersal devices), proposed 18 U.S.C. 175c (smallpox virus), and proposed 18 U.S.C. 42 U.S.C. 2272 (atomic weapons). It is possible that the drafters of H.R. 3060 also intended to treat receipt of military training from a foreign terrorist organization, 18 U.S.C. 2339D, like treason and espionage; that is, to make it a capital offense even if no death results from commission of the offense. The statutes that outlaw treason and espionage make them punishable by death or a term of imprisonment, 18 U.S.C. 2381, 794. Section 3591(a)(1) of the federal capital punishment procedures provides that treason or espionage are punishable by death if execution is found justified after considering the mitigating and aggravating factors listed in section 3592. Section 3592(b) lists three aggravating factors for treason and espionage cases, i.e., (1) the offender has a prior espionage or treason conviction, (2) the offense involved a grave risk to national security, and (3) the offense involved a grave risk of death. Violation of section 2339D is punishable by imprisonment for not more than 10 years, 18 U.S.C. 2339D(a). H.R. 3060 would have made no change in section 2339D, but it would have amended section 3591(a)(1) of the capital procedures provisions to say that violations of sections 2381 (treason), 794 (espionage), or 2339D (terrorist training) may be punished by death if execution is found justified after considering the mitigating and aggravating factors listed in section 3592, proposed 18 U.S.C. 3591(a)(1). It also would have amended the list of 3592(c) aggravating factors to add a fourth factor, i.e., the defense involved substantial planning by the defendant, proposed 18 U.S.C. 3592(c)(4). Assuming the conforming amendment to section 2339D—making it a capital offense—was an oversight and in spite of the proposal's caption ("addition of terrorism to death penalty offenses not resulting death"), it is not clear that the courts would permit imposition of the death penalty for a violation of section 2339D unless the offense also involved a first degree murder. The Eighth Amendment's cruel and unusual punishment clause precludes imposing the death penalty for the rape of an adult woman by an individual already under a sentence of life imprisonment at the time of the rape; it precludes imposition of the death penalty even in the case of murder unless the defendant at least acted intentionally or acted with reckless indifference to human life while participating in a felony involving a murder; and since the Court's decision in Furman v. Georgia , it has never been called upon to approve, and consequently has never approved, imposition of the death penalty for a crime that did not involve murder. Moratorium H.R. 4923 / S. 122 would have repealed federal death penalty provisions and barred imposition or execution of any capital sentence for violation of federal law. It made no mention of capital punishment imposed for violation of state law. H.R. 379 , on the other hand, would have set a ten year moratorium on imposition and execution of capital sentences in any state in which an individual originally sentenced to death had subsequently been judicially found innocent. It said nothing of capital punishment imposed or executed under federal law.

The USA PATRIOT Improvement and Reauthorization Act (Reauthorization Act), P.L. 109-177 , 120 Stat. 192 (2006) contains a number of death penalty related provisions. Some create new federal capital offenses making certain death-resulting maritime offenses punishable by death. Some add the death penalty as a sentencing option in the case of pre-existing federal crimes such those outlawing attacks on mass transit. Some make procedural alterations such as those governing federal habeas corpus provisions for state death row petitioners. Other proposals offered during the 109 th Congress followed the same pattern: some new crimes; some new penalties for old crimes; and some procedural adjustments. Other than the Adam Walsh Child Protection and Safety Act, P.L. 109-248 , 120 Stat. 587 (2006), none of the other proposals were enacted, although one House or the other approved several. Among these, H.R. 1279 would have amended the venue provision for capital cases and made it a federal capital offense to use the facilities of interstate commerce to commit multiple murders and another to commit murder during and in relation to a drug trafficking offense. As would have H.R. 4472 . H.R. 1751 and H.R. 4472 would have made it a federal capital offense to murder a federally funded public safety officer. H.R. 3132 would have created special expedited habeas review of state child murder cases. And S. 2611 would have made murder committed during the course of certain federal offenses a capital offense. Of the capital proposals pending at adjournment, H.R. 4923 and S. 122 would have abolished the death penalty as a federal sentencing alternative and H.R. 379 would have imposed a moratorium barring the states from imposing or carrying out the death penalty. This is an abridged version of CRS Report RL33395, The Death Penalty: Capital Punishment Legislation in the 109 th Congress , by [author name scrubbed] (pdf), without the footnotes, appendices, or most of the citations to authority found in the longer report.

Background Federally funded research and development centers (FFRDCs) are a special type of government-owned, contractor-operated research centers—commonly referred to as "GOCOs"—that conduct research and development (R&D) and related activities in support of a federal agency's mission. FFRDCs operate under the framework of the Federal Acquisition Regulation. They differ from other performers of federal R&D—such as federal laboratories, universities, non-profit organizations, and private firms—in that they are designed to meet a "special long-term research or development need which cannot be met as effectively by existing in-house or contractor resources" and that they have "access, beyond that which is common to the normal contractual relationship, to Government and supplier data, including sensitive and proprietary data, and to employees and installations equipment and real property. " Over the years, Congress has been concerned with the oversight and management of FFRDCs, lack of competition in contracting, and mission creep. More recently, some Members of Congress have focused on the need to balance responsible oversight with improved efficiency, effectiveness, and innovation. The appropriate role of FFRDCs in the federal R&D enterprise may remain an issue in the 115 th Congress. Origins of FFRDCs FFRDCs have their origin in World War II. During that time, the federal government sought to mobilize the country's scientific and engineering talent and apply it to the development of technologies that would aid U.S. war efforts. For example, the Department of Defense's (DOD's) Lincoln Laboratory was created to develop radar for identifying aircraft and ships and the Los Alamos and Oak Ridge National Laboratories (now under the auspices of the Department of Energy [DOE]) were established to support the development of the atomic bomb. The purpose of FFRDCs—to bring scientific and technical expertise to bear on pressing R&D challenges—remains. Then, as now, it was widely believed that a lack of flexibility in the federal government made it difficult to recruit and maintain scientific and technical talent. Since FFRDCs are operated by contractors, many federal restrictions, including restrictions on pay and hiring, do not apply, in effect increasing the flexibility of FFRDCs compared to the federal government. FFRDCs were called "Federal Contract Research Centers" until 1967. In November 1967, the chairman of the Federal Council for Science and Technology, a predecessor to the National Science and Technology Council, sent a memorandum to federal science agencies formally changing the name of Federal Contract Research Centers to FFRDCs and detailing criteria for the establishment of an FFRDC. Accordingly, an FFRDC was required to: conduct basic research, applied research, or development, or perform R&D management; be independently incorporated or constitute a separate organizational unit within the parent organization; perform R&D under the direction of the federal government; receive 70% or more of its funding from one agency; have a long-term relationship with its sponsoring agency (five years or more); be government-owned; and have an average annual budget of at least $500,000. In 1984, the Office of Federal Procurement Policy (OFPP) issued a policy letter revising and updating the governance of FFRDCs. The OFPP issued regulations in 1990 that incorporated the principles articulated in the policy letter as part of the Federal Acquisition Regulation (FAR). The FAR now defines the purposes of an FFRDC in addition to the policies that direct an FFRDC's establishment, use, review, and termination. The " Characteristics of FFRDCs " as defined by the FAR are discussed in more detail later in this report. Current FFRDCs Currently, 12 federal agencies sponsor a total of 42 FFRDCs. These FFRDCs provide R&D capabilities in a broad range of areas—from energy and cybersecurity to cancer and astronomy. DOE and DOD sponsor a majority of the FFRDCs, 16 and 10 respectively. The National Science Foundation (NSF) sponsors 5 centers, the Department of Homeland Security (DHS) sponsors 3, and the Department of Health and Human Services (HHS) sponsors 2. The National Aeronautics and Space Administration (NASA), the National Institute of Standards and Technology (NIST), the Department of Transportation (DOT), the Nuclear Regulatory Commission (NRC), the Department of the Treasury (Treasury), the Department of Veterans Affairs (VA), and the United States Courts each sponsor a single FFRDC. FFRDCs are classified in three "activity type" categories under a system established by DOD and used by NSF: R&D laboratory, study and analysis center, or system engineering and integration center. R&D laboratories maintain long-term competencies in technology areas that cannot be effectively met by the federal government or the private sector alone. Study and analysis centers deliver independent and objective analysis and advice to federal agencies in support of policy development, decisionmaking, alternative approaches, and new concepts. System engineering and integration centers provide technical and engineering capabilities not available in a federal agency to ensure complex systems meet operational requirements. NSF has the responsibility of maintaining a master list of FFRDCs across the federal government. According to NSF and as shown in Appendix A , 26 of the 42 current FFRDCs are R&D laboratories, 10 are study and analysis centers, and 6 are system engineering and integration centers. Characteristics of FFRDCs The Federal Acquisition Regulation governs the establishment, use, review, and termination of FFRDCs. According to the FAR, FFRDCs are intended to address an R&D need that cannot be met as effectively by the federal government or the private sector alone. Essentially, FFRDCs are intended to only perform work that cannot be done by other contractors. FFRDCs accomplish their R&D through a strategic relationship with their sponsoring agency. Two overarching characteristics—special access and longevity—define this strategic relationship. An FFRDC may be given special access to government and supplier data, employees, and facilities. This access is beyond what is typical in a normal contractual relationship and may include access to sensitive and proprietary information. Accordingly, the FAR requires that FFRDCs (1) operate in the public interest with objectivity and independence, (2) be free from organizational conflicts of interest, and (3) fully disclose their activities to their sponsoring agency. Additionally, FFRDCs are not allowed to use their special access to privileged information, equipment, or property to compete with the private sector for federal R&D contracts. However, an FFRDC is allowed to perform work for other agencies when the capabilities of the FFRDC are not available in the private sector. Finally, the prohibition against competing with the private sector for federal R&D contracts does not apply to the parent organization or any subsidiary of the parent organization associated with an FFRDC. The other defining characteristic is the long-term relationship between an FFRDC and its sponsoring agency. Under the FAR, the initial contract period of an FFRDC may be up to five years, but these contracts may be renewed, following a review, in increments of up to five years. For example, one DOE FFRDC—the Pacific Northwest National Laboratory—has been operating under the same contract since 1964. The FAR encourages long-term contracts to provide stability and continuity that are intended to allow an FFRDC to attract high-quality personnel. Additionally, under the FAR, a long relationship is required to enable the FFRDC to maintain in-depth expertise, stay familiar with the needs of the agency, provide a quick response capability, and maintain objectivity and independence. In addition to the described characteristics and requirements, prior to establishing an FFRDC, a sponsoring agency must make sure that there are no existing alternatives for addressing the agency's R&D needs (i.e., the research cannot be done effectively by the federal government or the private sector) and that the agency has the expertise necessary to review the performance of the FFRDC. The sponsoring agency must also ensure that cost controls are in place and that the purpose and mission of the FFRDC are clearly defined. Other organizations, such as University Affiliated Research Centers (UARCs), have characteristics and requirements similar to those of FFRDCs. A brief description of UARCs is provided in the following box. Federal Funding of FFRDCs According to NSF, the federal government spent $128.6 billion on R&D in FY2015. Of this amount, $11.1 billion or 8.6% of the total was spent on R&D performed by FFRDCs, compared to $47.5 billion (36.9%) performed by industry, $34.9 billion (27.2%) performed by federal agencies (intramural), and $27.4 billion (21.3%) performed by universities and colleges ( Figure 1 , see box below for definitions of R&D performers). According to NSF, in FY2015, FFRDCs spent 22% of their R&D expenditures on basic research, 38% on applied research, and 39% in support of development activities. The distribution of R&D expenditures by character of work performed, i.e., basic research, applied research, and development, has remained stable for the past three years. Prior to FY2013, the proportion of R&D spending on basic research was consistently more than one-third of total R&D expenditures and spending on applied research was closer to one-quarter of total R&D expenditures. Figure 2 and Figure 3 illustrate federal R&D spending trends for FFRDCs from FY1967 to FY2015. Figure 2 shows that the proportion of total federal R&D spending obligated to FFRDCs has varied over time, ranging from a high of 11.6% in FY1983 to a low of 6.4% in FY2008. On average, between FY1967 and FY2015, the federal government has obligated 9.1% of its federal R&D spending to FFRDCs. In constant dollars, federal funding for FFRDCs grew from $7.24 billion to $11.25 billion from FY1967 to FY2015 ( Figure 3 ). This increase represents a compound annual growth rate (CAGR) of 0.90% compared to the CAGR of 0.67% for total federal R&D spending over the same period. Federal funding for FFRDCs in FY2015 was 4% higher than in FY2014. FFRDC funding peaked in FY2004 at $13 billion. As shown in Appendix B , the number of FFRDCs has fluctuated over time, from a high of 74 in FY1969 to a low of 34 in FY1982. Table 1 shows the amount of FFRDC funding in FY2015, the share of total FFRDC funding provided by each agency, and the share of each agency's R&D budget spent at FFRDCs. DOE accounted for nearly $7 billion (60.5%) of the total $11.1 billion in FFRDC funding for FY2015. This represented 60.5% of DOE's total R&D budget, indicating the central role FFRDCs play in fulfilling the agency's research needs. By comparison, DOD spent $1.9 billion on R&D at FFRDCs in FY2015, representing 3.1% of its R&D budget, NASA spent $1.4 billion or 12.2% of its R&D budget, NSF spent $225.6 million or 3.9% of its R&D budget, and DHS spent $120.1 million or 16.2% of its R&D budget at FFRDCs ( Table 1 ). Issues for Congress FFRDCs have attracted the attention of Congress for decades. Historically, congressional concern focused on the growth of FFRDCs and their cost to the government. In more recent years, Congress has focused on the management and oversight of FFRDCs and their insulation from competition. Many of these concerns remain. The following sections describe some of these issues. Effectiveness of Oversight and Management The adequacy of agency oversight and management of FFRDCs is a long-standing congressional concern. Some Members of Congress have repeatedly expressed concern about the ability of federal agencies to control costs and address perceived mismanagement at FFRDCs. For example, in 1992, a Senate subcommittee report indicated "that FFRDCs today operate under an inadequate, inconsistent patchwork of federal cost, accounting and auditing controls, whose deficiencies have contributed to the wasteful or inappropriate use of millions of federal dollars." More recently, in a 2016 hearing examining the mission and management of DOE's FFRDCs, Representative Fred Upton, Chairman of the House Committee on Energy and Commerce, stated, DOE's safety, security, and contract management problems span administrations, span Congresses. From my experience, and as our witnesses will explain, improving DOE's performance requires long, sustained attention to ensure sustained improvement in agency performance. Congressional scrutiny is driven, in part, by a number of high-profile incidents. For example, in 2000, two Los Alamos National Laboratory (LANL) computer hard drives went missing and an employee was accused of planning to sell nuclear information to China. In 2004, the mishandling of classified data and the partial blinding of a student from a laser accident closed LANL for seven months, costing $370 million. More recently, an investigation found that LANL mishandled hazardous waste, and nine LANL workers were injured during routine maintenance of an electrical substation. Since the early 1990s, the Government Accountability Office (GAO) has designated DOE's contract management as a high-risk area for fraud, waste, abuse, and mismanagement. In 2013, GAO narrowed its high-risk designation to major contracts and projects within DOE's Office of Environmental Management and the National Nuclear Security Administration, which manages three DOE FFRDCs. In 2015, while noting some of the progress made by DOE in addressing its oversight and management challenges, GAO indicated that "more work is needed." Since 2002, DOE has been shifting its FFRDC oversight from a transactional model to a systems-based approach that assesses analytical information collected by the FFRDCs through what is known as contractor assurance systems (CAS). Many stakeholders recognize the use of CAS as a positive step to improving DOE oversight. However, in 2013, the National Academy of Public Administration (NAPA) called on DOE to exercise caution as it transitioned to this oversight model. NAPA indicated that the maturity of CAS varies and that DOE needs to verify the ability of an FFRDC's CAS to identify problems before they occur. In contrast, others view DOE's overall oversight and management activities as burdensome, counterproductive, and a distortion of the FFRDC model. Critics assert that the original benefit of the FFRDC model—flexibility—has been substantially diminished because DOE now micromanages its FFRDCs. According to a 2013 report by the Information Technology and Innovation Foundation, the Center for American Progress, and the Heritage Foundation, Decisions that should be made by research teams and lab managers are instead preapproved and double checked by a long and growing chain of command at DOE. There is no better example of this oversight than the hundreds of DOE site-office employees staffed to regulate lab managers and research by proxy. This adds considerable delay and introduces additional costs to routine business decisions. Some of those concerned about the detrimental effects of increased micromanagement would like to see a return to the original intent of the FFRDC model: a model where the government sets the overall strategic direction and provides the necessary funding and the FFRDC is given the flexibility to determine how to address the identified challenges. Critics indicate that a lack of trust currently exists between DOE and its laboratories and that in order to return to the partnership envisioned by the FFRDC model, this trust needs to be restored. They recommend that DOE provide its FFRDCs with more authority and flexibility, and then hold each FFRDC to a high standard of transparency and accountability. According to the Information Technology and Innovation Foundation, the Center for American Progress, and the Heritage Foundation, if an individual FFRDC does not meet its obligations, corrective actions, including punitive restrictions and possibly the firing of the FFRDC contractor, are valid options, but they assert that the mistakes of one FFRDC should not result in new regulations and additional oversight for all DOE FFRDCs. More recently, the committee report accompanying the Senate version of the National Defense Authorization Act for Fiscal Year 2017 ( S. 2943 ) expressed a desire by the committee to "undertake comprehensive defense lab governance reform," and called on GAO to complete a study of the governance models used by defense and non-defense federal laboratories, including FFRDCs. According to the committee report, This study should identify all different governance models used across the government, the benefits and drawbacks of each model, and how successful each governance model has been at fostering efficiency and innovation. The study should also compare the relative autonomy given to each of the different lab directors, and conclude with recommendations on best governance practices. Competition with the Private Sector Congress and the executive branch have been interested in promoting competition in federal procurement, including the procurement of R&D, for decades. However, federal law explicitly exempts FFRDCs from competitive practices. Historically, critics of this exemption have asserted that it prohibits the federal government from receiving the best possible R&D at the most competitive price. For example, in a 1997 report, the Defense Science Board stated, "the lack of competition for much of the work being done in the FFRDCs is not justified, nor in the long run is it in the best interests of the DOD." Additionally, some critics have pointed out that the R&D capabilities of the private sector have increased dramatically since World War II and the continued use of FFRDCs is in direct opposition to their original intent—to conduct R&D that cannot be done as effectively by the private sector or the federal government. More recently, critics have focused on the use of FFRDCs for systems engineering and integration (SE&I) services. The Professional Services Council (PSC), the national trade association of the government professional and technical services industry, has asserted that the SE&I capabilities of the private sector are as good as or better than those of FFRDCs. According to PSC, "prior to the 1990s, FFRDCs were often favored over for-profit systems engineering companies on grounds of avoiding potential conflicts of interest." However, PSC also suggested that congressionally initiated reforms through the Weapon System Acquisition Reform Act of 2009 ( P.L. 111-23 ) have resulted in a sizable number of private sector SE&I companies that are conflict free, independent, and capable of performing the SE&I work currently going to FFRDCs. In the National Defense Authorization Act for Fiscal Year 2016 (Section 895 of P.L. 114-92 ), Congress included a provision to address concerns about conflicts of interest and unfair competitive advantages associated with SE&I services. Specifically, the provision requires DOD to review and, if necessary, issue policy guidance related to the identification, mitigation, and prevention of potential unfair competitive advantages conferred to technical advisors to acquisition programs. As detailed in the joint explanatory statement accompanying the bill, technical advisors are contractors, FFRDCs, university-affiliated research centers, non-profit entities, and federal laboratories that provide, among other services, systems engineering and technical direction. In carrying out the provision, the joint explanatory statement directs DOD To review the efficacy of current conflict-of-interest policies, the use of non-disclosure agreements, the application of appropriate regulations, and decisions to allocate resources through direct award of funds to intramural programs or sole-source task orders to entities that provide technical advice on defense programs versus open and competitive extramural solicitations. However, it is less clear if the private sector could fully address the work being performed by FFRDCs categorized as R&D laboratories. According to PSC, FFRDCs "maintain laboratories and specialized test and evaluation facilities beyond those available to the government and its for-profit contractors." Additionally, proponents assert that FFRDCs "occupy a key role in the nation's S&T [science and technology] community that cannot be carried out solely by academic institutions or the business sector." FFRDCs are widely seen as contributing to U.S. technological and economic leadership. Mission Creep The diversification of FFDRC activities or "mission creep" is an issue closely related to concerns about competition with the private sector. A poorly defined mission or scope may make it more difficult to determine what R&D tasks are appropriate for an FFRDC to perform and what tasks are better left to the private sector. Concerns over mission creep are associated not only with the broadening of FFRDC activities into new fields, but also with the broadening of FFRDC clients (e.g., work for other agencies). Some analysts have asserted that diversification of FFRDC activities is contrary to the intent of FFRDCs—to serve a special R&D need—and an ineffective means for accomplishing the federal agency's mission. In 1995, a task force examining the future of the DOE national laboratories stated that applying the technical competencies of the national laboratories to new problem areas needed to be carefully managed. Specifically, the task force said such activities should not be a license to expand into areas of science and technology which already are being addressed effectively or more appropriately by other Research and Development (R&D) performers in government, academia and the private sector. Agencies have approached mission creep concerns in different ways. DOE has placed limits on the amount of work its FFRDCs can perform for other agencies. Specifically, if the work for other agencies and non-governmental entities in a DOE Office of Science FFRDC is 20% above the FFRDC's operating budget, then DOE requires an in-depth review prior to approving the work. Such a review is intended to ensure the work that DOE FFRDCs are performing for other entities will not impede its ability to meet DOE's research needs. However, in a 2013 report, GAO indicated that DOE is not consistently fulfilling agency requirements—project approval, cost recovery, or program review—to ensure its work for others program is not negatively affecting the laboratories' mission. In regards to DOD, Congress has included language each year since 1993 in the defense appropriations bill that prohibits DOD from establishing new FFRDCs. Congress has also placed an annual limit on the number of Staff Years of Technical Effort (STE) that DOD FFRDCs can use to perform work for the agency. STE is a cap on personnel time which translates into a cap on funding levels for each FFRDC. DOD allocates a portion of STE to each of its FFRDCs. Limiting the personnel time available to each DOD FFRDC is believed to drive prioritization of needs and provide greater assurance that the work being performed by FFRDCs is appropriate in scope. The STE limitation, however, does not apply to work that DOD FFRDCs perform for other agencies. In general, according to GAO, federal agency approval of annual FFRDC R&D plans should ensure activities remain within the scope, mission, and purpose of the FFRDC. Competition of FFRDC Contracts A hallmark of FFRDCs is the long-term relationship each has with its sponsoring agency. A long-term relationship is believed to provide stability and continuity and is considered central to attracting and retaining scientific and technical expertise. Many FFRDCs have been managed by the same contractor since they were created. For example, Associated Universities, Inc. has operated NSF's National Radio Astronomy Observatory since 1956; RAND Corporation has operated DOD's Project Air Force since 1946; and MITRE Corporation has operated FAA's Center for Aviation System Development since 1990. However, some Members of Congress, GAO, and others have criticized the use of noncompetitive procedures for FFRDC contracts. These critics view competition as the best way to decrease costs and increase quality. For example, in 2003, a report by the Blue Ribbon Commission on the Use of Competitive Procedures for the Department of Energy Labs found that "competition imposes discipline and can elicit quality performance and efficient operation in ways simply not inspired by oversight alone." DOE has shifted from a position of not regularly conducting full and open competitions for its FFRDCs to routinely subjecting its FFRDCs to competition. Congressional action spurred this shift. Specifically, between FY1998 and FY2009 congressional appropriations acts mandated the use of competition for all DOE FFRDC contracts unless the Secretary of Energy granted a waiver to competition and provided the appropriations committees with a detailed justification for the waiver. Annual appropriations language was not included after FY2009 because on December 22, 2009, the Secretary of Energy released a policy on the agency's use of competition for the management and operation of its FFRDCs. The policy states, DOE does not default to a posture of determining a priori either that the Department will conduct competitions for all its M&O contracts, or that it will extend all these contracts. DOE recognizes a preference for full and open competition, and exercises, on a case-by-case basis, the authorities available to the Secretary. According to DOE, the agency generally uses full and open competition under the following circumstances: when the performance of an FFRDC operator is viewed as unsatisfactory; when the potential for improved costs or technical performance has been identified; when viable alternatives exist in the marketplace; or when the agency decides to change the focus or mission of an FFRDC. According to a 2014 GAO report, DOE has competed 6 of its 16 FFRDCs since 2004. Although competition is widely seen as an important tool for increasing performance and efficiency, some experts have asserted that there are downsides associated with the competition of FFRDC contracts. Specifically, critics view competition of existing FFRDCs as disruptive, costly, and harmful to FFRDC productivity. According to DOE, the time to conduct an FFRDC competition is approximately 18 months and it is estimated to cost a contractor preparing a bid between $3 million and $5 million. In describing its experiences with increased competition, DOE has stated, although some efficiencies or improved contractual agreements have been made possible as a result of the new contracts the overall performance of the new contractors has in most cases not surpassed that of the old, and it is arguable that what improvements have been observed could have been achieved even in the absence of competition. In 2008, GAO found that while most agencies required full and open competition for their FFRDC contracts, DOD continued to award noncompetitive or sole-source contracts to its FFRDCs. However, GAO also found that in response to criticism DOD began conducting more detailed and comprehensive reviews before renewing its FFRDC contracts. Additionally, a 2009 report by NASA's Office of Inspector General (OIG) found that the agency did not conduct an assessment of possible competitors, as required by the FAR, for operation of the Jet Propulsion Laboratory. According to the NASA OIG, without performing the assessment NASA could not determine if it was getting the best value for the operation of its FFRDC. Appendix A. List of Federally Funded Research and Development Centers, FY2017 Appendix B. Number of FFRDCs, FY1967–FY2017

The federal government supports research and development (R&D) that is conducted by a wide variety of performers, including federally owned and operated laboratories, universities, private companies, and other research institutions. A special class of research institutions referred to as federally funded research and development centers, or FFRDCs, are owned by the federal government, but operated by contractors, including universities, other non-profit organizations, and industrial firms. FFRDCs are intended to provide federal agencies with R&D capabilities that cannot be effectively met by the federal government or the private sector alone. FFRDCs are required to have a long-term strategic relationship with the federal agency that supports them. This relationship is presumed to convey a number of benefits, including the ability of an FFRDC to recruit and retain scientific and technical expertise; an in-depth knowledge of, and the capability to rapidly respond to, the R&D needs of the federal agency; and the capacity to offer independent and objective scientific and technical advice. Currently, 12 federal agencies sponsor a total of 42 FFRDCs. These FFRDCs provide R&D capabilities in support of federal agency missions in a broad range of areas—from energy and cybersecurity to cancer and astronomy. In FY2015, the federal government obligated $11.1 billion or 8.6% of its total R&D spending to FFRDCs. Congress maintains a continuing interest in FFRDCs due to their contributions to U.S. technological and economic leadership. However, some Members of Congress have questioned the appropriate role of FFRDCs in the federal R&D enterprise and the ability of FFRDCs to effectively address federal agency R&D needs. The following issues have been of particular interest: (1) the effectiveness of federal agency oversight and management of FFRDCs; (2) competition between FFRDCs and the private sector for federal R&D funding; (3) the diversification of FFDRC activities or "mission creep"; and (4) the award of noncompetitive FFRDC management and operation contracts.

Background on Extension and Expiration Congress periodically establishes agricultural and food policy in a multiyear omnibus farm bill. Provisions in the Food, Conservation, and Energy Act of 2008 (2008 farm bill; P.L. 110-246 ) generally expired beginning on September 30, 2012. But the American Taxpayer Relief Act ( P.L. 112-240 ; January 2, 2013) extended all 2008 farm bill provisions that were in effect on September 30, 2012, for one additional year—that is, for FY2013 and the 2013 crop year. Parts of the 2008 farm bill expired again in October 2013 and, technically, implementation of an outdated permanent law would have been imminent for dairy in January 2014, had it not been for the stated resolve to complete the conference negotiations. After the passage of the Agricultural Act of 2014 (2014 farm bill; P.L. 113-79 ) on February 7, 2014, expiration will not be an issue again until 2018. Expiration of the 2008 farm bill was an issue because the 112 th Congress made limited progress on a farm bill in 2012. The Senate passed S. 3240 , but the House committee-reported bill ( H.R. 6083 ) never reached the floor. Concern over budgetary reductions complicated the bills' progress. This impasse led to the one-year extension in P.L. 112-240 . Similar difficulties faced the farm bill in 2013. The Senate passed S. 954 on June 10, 2013. The House rejected a committee-reported bill ( H.R. 1947 ) on June 20, mostly over disagreements about the nutrition title. The House passed a "farm-only" bill ( H.R. 2642 ) on July 11 without the nutrition title, and on September 19 passed a stand-alone nutrition bill ( H.R. 3102 ). The House subsequently adopted a resolution ( H.Res. 361 ) that combined the texts of H.R. 2642 and H.R. 3102 into one bill ( H.R. 2642 ) for purposes of a conference committee with the Senate. The final 2014 farm bill was not conferenced and enacted until February 7, 2014. What happens if Congress does not enact a new farm bill? Does the fiscal year, calendar year, or crop year matter? Will some programs cease to operate? What is "permanent law" and what does it affect? Do the Supplemental Nutrition Assistance Program (SNAP) and crop insurance benefits end? This report answers these and other questions about the expiration of a farm bill. Funding Sources Affect Consequences of Expiration Farm bills include a wide range of authorities, some of which are authorized and funded in the farm bill (mandatory spending), while others are only authorized in the farm bill for their scope but wait for appropriations acts to determine their funding (discretionary spending). These differences affect how the farm bill is constructed and funded under normal circumstances. They also affect what happens when the farm bill expires or when annual appropriations are delayed. Discretionary Funding Without a new farm bill or extension, it may appear that many programs would not have statutory authority to receive appropriations (an "authorization of appropriations"), but appropriations law allows the continued operation of a program where only appropriations action has occurred. The Government Accountability Office (GAO) says there is no constitutional or statutory requirement for an appropriation to have a prior authorization. Congress distinguishes between authorizations and appropriations, but this is a congressional construct. GAO says that "the existence of a statute imposing substantive functions upon an agency that require funding for their performance is itself sufficient legal authorization for the necessary appropriations." For expired authorizations, GAO says that "appropriation of funds for a program whose funding authorization has expired ... provides sufficient legal basis to continue the program." Discretionary spending is authorized throughout the farm bill. Discretionary programs include most rural development, credit, research, and education programs, and some conservation and nutrition programs. The Supplemental Nutrition Assistance Program (SNAP)—a mandatory program—also requires an appropriation. Some smaller research, bioenergy, and rural development programs receive both mandatory and discretionary funding, but most is usually discretionary. Most agency operations are financed with discretionary funds. The Congressional Budget Office (CBO) compiles a list of programs with expired authorizations of appropriations. Eighteen agricultural programs received more than $37 million in FY2012 under expired authorizations of appropriations. More than 100 farm bill programs briefly lost their authorization for appropriations at the end of FY2012 and until the one-year extension was passed on January 1, 2013; they received $2.3 billion in FY2012. Farm bill discretionary programs generally were continued under the FY2013 appropriation ( P.L. 113-6 ), the continuing resolution for FY2014 ( P.L. 113-46 ), and the full-year FY2014 appropriation ( P.L. 113-76 ). Mandatory Funding Most farm bill programs with mandatory funding have an expiration date either on their program authority or their funding authority. These include SNAP, farm commodity programs, some conservation programs, agricultural trade programs, and foreign food aid programs. For the most part, without reauthorization or extension, these programs would cease to operate or undertake new activities. Some exceptions to that rule are: SNAP, which can be continued via appropriations action even if its authorization for appropriations is expired. Crop insurance, which is permanently authorized, and Some conservation programs, which were extended separately through FY2014. Mandatory spending is used primarily for the farm commodity programs, crop insurance, nutrition assistance programs, and some conservation and trade programs. Some smaller research, bioenergy, and rural development programs sometimes receive mandatory funding, but their combined share—however important to their own operations—is less than 1% of the total. Nutrition assistance was the largest category in 2013, with 79% of mandatory funding available to write the 2014 farm bill ($764 billion in the 10-year CBO May 2013 baseline for FY2014-FY2023). Other primary programs with mandatory funding were crop insurance (9%, or $84 billion), conservation (6%, or $62 billion), and farm commodity programs (6%, or $59 billion). Programs relying on mandatory funding—provided by the farm bill—are perhaps the most at risk for interruption, since their authorization and funding both require farm bill action. Yet, unlike discretionary programs, many farm bill programs with mandatory funding have their own source of funding via the CBO baseline. The enacted extension in January 2013 continued these programs for one additional year until September 30, 2013, or in the case of the farm commodity programs through crop year 2013. The baseline required no cost to extend the farm commodity, conservation, trade, and nutrition programs. However, another subset of mandatory programs did not have baseline beyond FY2012. Because these programs lacked built-in budgetary resources, offsets were needed to provide future funding. This group included certain agricultural disaster assistance programs, certain conservation programs, specialty crop research and grants, organic research and certification, beginning and socially disadvantaged farmer programs, rural development, bioenergy, and farmers market promotion programs. The extension did not provide these programs any mandatory funding, although many would have been funded in the new farm bill. The extension added an "authorization of appropriation" for discretionary funding in FY2013. But neither the full-year appropriation for FY2013 ( P.L. 113-6 ) nor the continuing resolution for FY2014 ( P.L. 113-46 ) provided any discretionary funding for these programs. Therefore, these programs remained in an expired state throughout 2013 due to a lack of funding. Brief History of Farm Bill Formulation, Enactment, and Extension Farm bills, like other legislation, have become more complicated and politically sensitive. They are taking longer to enact than in previous decades. For example, the 1973 farm bill was enacted less than two months after being introduced. In contrast, the 2008 farm bill took more than a year from when it was introduced. It was complicated by revenue provisions from other committees of jurisdiction, temporary extensions, and presidential vetoes. The 2014 farm bill took more than 18 months from its introduction. It spanned the 112 th and 113 th Congresses; the House rejected a bill, then passed two separate components before procedurally combining them for conference. Both the 2008 farm bill and the 2002 farm bill had expired for about three months (from October through December in 2012 and 2007, respectively) before extensions were enacted. In each case, the fiscal year began under a continuing resolution before the farm bill extended occurred. The extensions of the 2002 farm bill were for relatively short periods totaling about five months while final negotiations continued. However, the extension of the 2008 farm bill was for a full year since the 112 th Congress ended and the legislative process needed to restart in the 113 th Congress. Appendix A contains a history of major legislative action on farm bills since 1965. Timelines Enacting farm bills after the end of the fiscal year (in which a farm bill expired) is commonplace. In the past 48 years, only the 1973 and 1977 farm bills were enacted before September 30. Farm bills in 1965, 1970, 1981, 1985, and 1990 were enacted by December 31, a few months after the end of the fiscal year but still before spring-planted crops covered by the new law were planted. The most recent four farm bills have been enacted later, in April (1996), May (2002), June (2008), and February (2014), prior to the first crop harvested and covered by the farm bill. The House and Senate have taken turns as the first chamber to take action on a farm bill. Since 1965, the Senate was first to mark up a farm bill in 1973, 1977, 1981, 2012, and 2013. The House was first to mark up farm bills in 1965, 1970, 1985, 1990, 1995 (and 1996), 2001, and 2007. Since 1965, 8 out of 12 farm bills were introduced in the first session of a two-year Congress (the odd-numbered year); the exceptions are the 1970, 1990, and 2014 farm bills. The April and July introductions in 2012 for the 2014 farm bill were the latest such dates during a two-year Congress. Until the development of the 2014 farm bill that began in 2012, no farm bill has started in one Congress and needed to be reintroduced in a subsequent Congress. Enactment of the past five farm bills (1990-2014) have been in the second session (the even-numbered year), although except for the 1990 farm bill, some action had occurred in the prior year. Only the 1970 and 1990 farm bills were enacted after an election during a lame-duck Congress. A nutrition title has been part of each enacted farm bill since and including the 1973 farm bill. Since then, H.R. 2642 (as introduced and initially passed in 2013) has been the only chamber-passed proposal to exclude nutrition programs. Extensions Extensions of a prior farm bill are less common. Since 1970, only the two most recent farm bills—the 2002 farm bill and the 2008 farm bill—have required extensions as their successors were being written and enactment was delayed. The 1965 farm bill was extended for one year, but that extension occurred more than a year before expiration and the reauthorization process began. The 1996 and 2002 farm bills may appear to have been delayed, but their predecessors did not require extensions. The 1990 farm bill did not need to be extended because its original expiration dates had been extended by amendments in budget reconciliation. The 1996 farm bill did not need to be extended because the 2002 farm bill was enacted earlier than necessary. Extensions are rare in part because appropriations can continue discretionary programs and the SNAP program. The primary concern regarding extension becomes the expiration of mandatory programs whose funding is included in the farm bill. Most provisions can be continued by temporary extensions. However, those that expire before the end of the farm bill and those that do not have continuing funding in the baseline budget cannot be as easily extended unless offsets are included, which can complicate extension. When the 2002 farm bill expired, portions (but not all) of it were extended six times for less than a year, beginning in December 2007. The first of those extensions, in December 2007, continued authority for many expiring programs for about three months. Because final agreement was pending, five more month- or week-long extensions were needed. These extended all 2002 farm bill provisions that were in effect on September 30, 2007, with a few exceptions. Dairy and sugar programs were included, as were price support loan programs for wool and mohair. But the direct, counter-cyclical, and marketing loan programs for the 2008 crop year for all other supported commodities specifically were not extended (i.e., the primary supported commodities such as feed grains, oilseeds, wheat, rice, cotton, and peanuts). The first extension in December 2007 did not address permanent law, but the second and subsequent extensions in 2008 did extend the 2002 farm bill's suspension of permanent law. When the 2008 farm bill expired on September 30, 2012, the appropriations continuing resolution ( P.L. 112-175 , §§101, 111) continued the discretionary programs, SNAP, and certain related nutrition programs. Certain other mandatory programs such as the Market Assistance Program and the Conservation Reserve Program ceased to operate insofar as new activity. The farm commodity programs operated to finish the 2012 crop year, but could not continue if the 2013 crop year began without reauthorization or extension. On January 1, 2013, the entire 2008 farm bill, as it existed on September 30, 2012, was extended for the 2013 fiscal year and the 2013 crop year ( P.L. 112-240 ). This avoided reverting to permanent law for the farm commodity programs, which for the dairy programs was imminent. Provisions in the extension continued the dairy price support program until December 31, 2013. Programs that did not have budget authority in the baseline for FY2013 were not provided additional mandatory funding. The end of 2013 somewhat repeated the situation at the end of 2012. Most of the farm bill expired again on October 1, 2013. Some programs ceased new operations, while others were able to continue under appropriations. From January 1, 2014, until enactment on February 7, 2014, the dairy program technically had reverted to an outdated 1949-era permanent law, though USDA did not implement it since a conference agreement was imminent. For SNAP and the discretionary programs, farm bill expiration coupled with the two-week lapse in FY2014 appropriations (the "government shutdown") during October 2013 did cause challenges for some operations. Farm Commodity Support Programs The farm commodity price and income support programs raise farm income by making payments and reducing financial risks from uncertain weather and market conditions. Government-set target prices offer payments when market prices fall below support levels. Originally, the last year for the 2008 farm bill's commodity programs was the 2012 crop year—that is, crops harvested during 2012 and marketed during the following year. Dairy price supports and export incentives were to expire on December 31, 2012, and the milk income loss contract (MILC) on September 30, 2012. The one-year extension in the American Taxpayer Relief Act ( P.L. 112-240 ) covered the 2013 crop year for all covered commodities as they were available for the 2012 crop year. The extension continued the farm commodity programs that were in effect in 2012, including the $5 billion per year "direct payment" payment program, which paid farmers a fixed amount regardless of price or yield conditions. It also extended the dairy price support program until December 31, 2013, and the MILC program until September 30, 2013. The new effective deadlines for enacting the farm bill were January 1, 2014, for dairy, and when the first supported commodity would have been harvested in the 2014 crop year. In December 2013, the House passed a one-month extension of the farm bill that would have extended program authorities until January 31, 2014 ( H.R. 3695 ). The intent was to avoid the uncertainty of permanent law for dairy programs while conference negotiations were completed. The Senate did not act on the extension. From January 1, 2014, until enactment of the 2014 farm bill on February 7, 2014, the dairy program technically had reverted to the outdated 1949-era permanent law, though USDA did not implement it since conference negotiations were proceeding. USDA had indicated that a short-term extension was not be necessary if a new farm bill was completed in January, since the rollout of procedures to implement permanent law would take a month or more. Possible Reversion to Permanent Law Farm commodity support policy has evolved over time via successive farm bills that update and supersede prior policies. However, a set of non-expiring provisions remain in statute and are known as "permanent law." These provisions were enacted primarily in the Agriculture Adjustment Act of 1938 and the Agricultural Act of 1949, as amended by subsequent farm bills. As more modern farm bills evolved away from using the permanent law provisions, they have suspended permanent law, but only for the duration of each farm bill. If no action is taken before expiration, the suspension of permanent law expires, and the essentially mothballed permanent law policies would resume. The House farm bill ( H.R. 2642 ) that was part of the conference negotiations would have repealed the 1938 and 1949 permanent laws. In their place, the new farm commodity program would have become the permanent law since it would have applied to "the 2014 crop year and each succeeding crop year." The Senate bill ( S. 954 ) continued the long-standing suspension of permanent law, as did the initial House bill ( H.R. 1947 ). The enacted 2014 farm bill did not repeal permanent law but continued to suspend it. Proposals to repeal permanent law have been rare, though some have had support ( Appendix B ). Description of Permanent Law The commodity support provisions of the 1938 and 1949 permanent laws are commonly viewed as being so radically different from current policy—and inconsistent with today's farming practices, marketing system, and international trade agreements—as well as potentially costly to the federal government that Congress is unlikely to let permanent law take effect. Permanent law provides mandatory support for basic crops through nonrecourse loans. It does not authorize more modern support approaches such as loan deficiency payments, counter-cyclical payments, revenue-based payments, decoupled direct payments, or milk income loss contracts. Government Costs under Permanent Law A 1985 USDA report analyzed possible economic consequences of permanent law and found significant market intervention and increased government expenditures. Since then, no agency has released a comprehensive budget estimate of reverting to permanent law. Neither the Congressional Budget Office, the U.S. Department of Agriculture (USDA), nor the Food and Agriculture Policy Research Institute (FAPRI) have made official estimates. However, the White House issued an estimate for dairy in 2013. It suggested that permanent law could cost the government over $12 billion per year for dairy —compared with projected 2008 farm bill outlays of less than $100 million per year —and result in milk prices doubling. This is consistent with an extrapolation of the 1985 USDA report using modern prices and production levels that suggests outlays between $10 billion to $12.5 billion per year for dairy. Implementing Permanent Law Without statutory instructions to the contrary, USDA would be required to implement permanent law if the farm bill expires and its associated suspension of permanent law expires. USDA outlined in 2008 how it would implement permanent law in the absence of a new farm bill. However, given the nature of permanent law and the differences compared to current law, USDA may need time to develop the processes to implement permanent law and thus may not be ready to implement it immediately upon reversion. Therefore, although permanent law immediately may become the "law of the land" once a farm bill expires and new farm output is ready to be marketed, the practical effect of implementing permanent law may be more gradual. However, the duration of an implementation delay is unknown since it has not occurred, and depends on administrative actions. Counting on a delay of a definite time may have risks. Nonetheless, USDA Secretary Visack indicated in 2013 that it could take at least a month to implement permanent law. He said that a short-term farm bill extension may not be necessary if a new farm bill was enacted during January 2014: "What I have indicated to Senator Stabenow is that it is unlikely, given the complexity of what would be required to implement the [permanent] law, that we would have that in place through the month of January." Use of Parity Prices and Production Controls Support under permanent law uses the concept of "parity prices." Parity refers to the relationship between prices that farmers receive for their products and prices they pay for inputs. Support prices would be set to guarantee producers 50% to 90% of parity using the 1910-1914 ratio as a benchmark. However, productivity gains and technological advances over the past 100 years have made parity ratios out of touch with (and possibly irrelevant to) modern farming practices. Under permanent law, nonrecourse loan rates could be as high as 90% of parity, but not less than 50% of parity for corn, wheat, and rice, and 65% of parity for cotton. Milk support would be between 75% and 90% of parity. Even if support levels were set at the lower end of the range in permanent law (e.g., 50%-75% of parity prices), permanent law supports could have been above 2013 market prices for all supported commodities and resulted in federal greater outlays than under the 2008 farm bill ( Figure 1 and Table 1 ). For example, in November 2013, the "all milk" market price was $21.30 per hundredweight (cwt.). At this price, no support was needed under the 2008 farm bill effective support level of $9.90/cwt. But under permanent law, even this market price was well below the $37.20/cwt. calculated minimum support level (75% of parity; Figure 1 ). Under permanent law, nonrecourse loan rates for wheat, rice, cotton, corn, and other feed grains function as farm price supports. Unless commercial markets pay more than the nonrecourse loan prices, farmers could put their crops under loan and forfeit the commodities to USDA when the nine-month loans mature. However, to avoid forfeiture problems, USDA has permanent authority allowing farmers to repay nonrecourse loans for less than the principal (loan rate) plus interest, similar to marketing loans in the modern commodity program. Additional production controls exist for wheat and cotton. Permanent law requires USDA to announce acreage allotments and marketing quotas during the prior crop year, and to hold producer referenda on implementing marketing quotas. A two-thirds affirmative vote for marketing quotas results in the highest levels of support, with mandatory restrictions on acreage (and the quantity eligible for support). As implied by Table 1 , not all commodities in the 2008 (or 2014) farm bill that receive federal support are covered by permanent law. The commodities that would lose mandatory support include soybeans and other oilseeds, peanuts, wool, mohair, sugar beets and sugar cane, dry peas, lentils, and small and large chickpeas. Parity-based supports once existed for wool, mohair, and peanuts, but were repealed. Parity support is not allowed for oilseeds or sugar. A different set of commodities could receive support under discretionary authority given to the Secretary of Agriculture in the Agricultural Act of 1949 and the CCC Charter Act. But for budgetary and other reasons, such discretionary authority rarely has been used. Legislative Options Under Permanent Law Some see the existence of permanent law as an assurance for farm bill supporters that the farm commodity programs will be revisited every time a farm bill expires. Congress is not likely to let a farm bill expire without taking some action eventually, given the undesirable consequences of permanent law. Permanent law, however badly it may be perceived, has stayed on the books, and each new farm bill has suspended it for the duration of the farm bill. Several legislative options exist as a farm bill approaches expiration: 1. Pass a new farm bill (and reinstate the suspension of permanent law). 2. Pass an extension of the current farm bill (with its suspension of permanent law). 3. Do nothing (revert to permanent law). 4. Suspend permanent law (but no new farm bill or extension). 5. Repeal permanent law, and then do one of the following: a. pass a new farm bill (with or without a new permanent law provision); b. pass an extension of the current farm bill; c. do nothing (no new farm bill). The existence of an outdated permanent law likely forces Congress to take action, because inaction has unacceptable consequences—that is, reverting to a policy that almost everyone would regret. If Congress cannot reach agreement on a new farm bill, then the path of least resistance probably is extending the current farm bill rather than doing nothing and reverting to permanent law—but this, too, requires legislative action, which may pose other challenges. For those who oppose the farm commodity programs, repealing permanent law would allow Congress to debate farm supports without the permanent law consequence of inaction. But repealing permanent law requires legislative action. Some believe that it is easier to negotiate and pass a new farm bill than to deal with the question of repealing permanent law. Proposals to repeal permanent law are discussed in Appendix B . Crop Insurance The federal crop insurance program protects producers against losses in crop revenue or yield through federally subsidized policies purchased by producers. The program is permanently authorized by the Federal Crop Insurance Act, as amended (7 U.S.C. 1501 et seq.). A reauthorization of the program is not needed in the farm bill. Producers who grow a crop that is ineligible for crop insurance may be eligible for a direct payment under USDA's Noninsured Crop Disaster Assistance Program (NAP). Like crop insurance, NAP has permanent authority under Section 196 of the Federal Agriculture Improvement and Reform Act of 1996 (7 U.S.C. 7333). Conservation Programs In 2013, USDA administered more than 20 agricultural conservation programs. These programs addressed natural resource concerns on private agricultural and forested lands through technical and financial assistance. Many conservation programs had different expiration dates for program and funding authority ( Table 2 ). Because of this and appropriations peculiarities, they were affected differently by the 2008 farm bill expiration and extension. For many conservation programs, program authority is permanent under the Food Security Act of 1985, but the authority to receive mandatory funding expires. The one-year 2008 farm bill extension allowed programs with expired mandatory funding authority to continue until September 30, 2013, if the program had baseline beyond FY2012. The Conservation Reserve Program's (CRP's) funding and program authority expired at the end of FY2012 and was extended to the end of FY2013 in the one-year farm bill extension. Because CRP had baseline beyond FY2012, the program continued in FY2013 at the original authorized rate of enrollment—up to 32 million acres at any one time. Without reauthorization or a further extension of mandatory funding and program authority, expired conservation programs were unable to sign new contracts or enroll additional acres after September 30, 2013. All existing contracts and agreements stayed in force for the contract period, and payments continued to be made. Other expired mandatory conservation programs had limited baseline beyond FY2012 as a result of previous reductions in annual appropriations. For example, the Wetlands Reserve Program (WRP) had authority under the 2008 farm bill to enroll no more than 3.04 million acres before FY2012, and did not include budgetary baseline beyond FY2012. Temporary reductions in FY2011 and FY2012 annual appropriations acts limited USDA's ability to enroll the authorized level of acres. This resulted in limited baseline being carried forward into FY2013, whereas it would have otherwise been expended by the end of FY2012. With the one-year extension, WRP was able to use this additional baseline to enroll a limited number of acres within its original authorized acreage cap. A different set of mandatory conservation programs had no baseline beyond FY2012 and therefore required offset funding in order to be continued (e.g., Healthy Forest Reserve Program and Voluntary Public Access and Habitat Incentives Program, VPAHIP). Other budget enforcement rules and appropriations dynamics affected particular farm bill conservation programs. The Congressional Budget Office used the last year of authorization to determine the 10-year funding baseline for the farm bill reauthorization. Because the FY2012 Agriculture Appropriations Act ( P.L. 112-55 ) reduced spending for select mandatory conservation programs and could have reduced the multi-year budget baseline, it extended the funding authority expiration date for five of these programs, including Agricultural Management Assistance (AMA), the Conservation Stewardship Program (CSP), the Environmental Quality Incentives Program (EQIP), the Farmland Protection Program (FPP), and the Wildlife Habitat Incentives Program (WHIP). This allowed appropriators to score savings in FY2012, but not affect the overall farm bill baseline since program authority for many of the reduced programs was extended to 2014. Thus, even without a reauthorization of the 2008 farm bill, the five programs continued to operate. Several conservation programs also have permanent program authority, but are authorized to receive discretionary funds appropriated annually. Funding for these programs varies and is based on appropriated levels. Some discretionary programs with authorization to receive appropriations expired at the end of FY2013. Similar to other discretionary programs with expired authority, the program can continue as long as it receives appropriated funding. Table 2 separates the conservation programs by funding authority type—mandatory and discretionary. Other farm bill provisions affecting agricultural conservation also expired. The adjusted gross income requirement that limited eligibility for conservation programs, no longer applied to conservation programs during the expiration period. However, compliance activities and regional equity funding requirements continued for programs authorized beyond September 30, 2013. SNAP and the Other Nutrition Programs As discussed earlier, expiration and extension of SNAP (and the related nutrition programs in the 2008 farm bill) hinge on whether funding is available. The nutrition authorizations in the 2008 farm bill expired after September 30, 2012, and were extended another year by P.L. 112-240 . They expired again after September 30, 2013, yet operations for the most part were able to continue under the short-term appropriations continuing resolution ( P.L. 113-46 ) and the full-year FY2014 appropriation ( P.L. 113-76 ). The impact on operations is based on factors related to their authorizing statutes, appropriations actions, and the terms of a farm bill extension (if applicable). The 2008 farm bill reauthorized a number of domestic food assistance programs, including the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps), the Emergency Supplemental Food Assistance Program (TEFAP), the Commodity Supplemental Food Program (CSFP), the Food Distribution Program on Indian Reservations (FDPIR), the Senior Farmers' Market Nutrition Program, the Bill Emerson Hunger Fellowship Program, Community Food Projects, Nutrition Assistance block grants for American Samoa and Puerto Rico, and Hunger-Free Communities grants. With regard to expiration or extension, these programs fell into one of three categories: 1. Programs that were permanently authorized and funded, 2. Programs that can be continued solely by appropriations action, or 3. Programs or authorities which would have expired without extension or reauthorization. These categories are elaborated upon below. The majority of farm bill nutrition programs (and the majority of nutrition spending) falls in the second category Permanently Authorized and Funded Programs The 2008 farm bill included an expansion of the Fresh Fruit and Vegetable Program (FFVP, "snack" program), and permanently funded it through Section 32. As a result, the Fresh Fruit and Vegetable Program did not expire. Programs Continued via Appropriations Action56 Appropriations can allow a program to continue even if the underlying authorization has not been extended. Because many of the nutrition programs are funded by the SNAP account, appropriated funds for SNAP would be enough to extend operations for most of the programs in the Food and Nutrition Act of 2008. As such, the first weeks of FY2014—with an expired farm bill extension and lapsed appropriations—presented unique circumstances (see the text box below). The farm bill nutrition provisions listed below could have continued to operate if funds were appropriated to the SNAP account, but would have expired in the absence of a SNAP account appropriation. The CR ( P.L. 113-46 ) and the full-year appropriation ( P.L. 113-76 ) continued funding for the SNAP account, so these programs continued to operate: Most aspects of SNAP operations (except for the Healthy Incentives Pilot). Purchase and distribution of TEFAP commodities (administrative costs could continue with appropriations for the Commodity Assistance Program account). Most aspects of FDPIR (except as listed below). Nutrition assistance funding for Puerto Rico, American Samoa, and Commonwealth of Northern Mariana Islands. Community Food Projects (administered by the National Institute of Food and Agriculture). For CSFP, the authority to fund commodity purchases and administrative costs would have expired without an extension of the authority or without an appropriation. However, all program operations continued under CSFP appropriations. Programs That May Expire Without Reauthorization or Extension For the Senior Farmers' Market Nutrition Program (SFMNP), the 2008 farm bill contained both the authority and the funding (a transfer from the Commodity Credit Corporation). Therefore, authority and funding for this program expired after September 30, 2012. Once P.L. 112-240 was enacted, the funding and authority to operate the SFMNP was extended through September 30, 2013. However, it expired again when that extension expired. The following programs required either (a) an extension of the authority and specific appropriations language or (b) specific appropriations to operate. (No appropriations were made for these programs in FY2013 or FY2014; their authorities were extended by P.L. 112-240 but expired on September 30, 2013. Therefore, these authorities are not operational.) Hunger-Free Communities grants. SNAP pilot projects to evaluate health and nutrition promotion. This authority and funding was used to operate the Healthy Incentives Pilot program. The program could have continued to use existing funding beyond FY2013 but any additional funding would have needed specific authorization and appropriation. FDPIR's "Traditionally and Locally Grown Food Fund." Since it was not implemented, only an extension of the authorization with appropriations or a specific appropriation would extend it. Nutrition Information and Awareness Pilot Program. This authority was provided in the 2002 farm bill and reauthorized in the 2008 farm bill, but it was inactive. Several authorities relating to USDA's purchase and national processing of commodity foods. Trade and Foreign Food Aid Programs Several agricultural trade and international food aid programs would have expired without the new farm bill. The trade programs with mandatory funding that were affected were export credit guarantees (including those for emerging markets), facilities credit guarantees, export market promotion (the Market Access Program and the Foreign Market Development Program), dairy export subsidies, and technical assistance for specialty crops. Without new mandatory program authority, the Commodity Credit Corporation would not have been able to enter into agreements to guarantee U.S. commercial banks against defaults by foreign purchasers of U.S. agricultural commodities, fund grants to trade associations for the promotion of U.S. agricultural exports in foreign markets, or fund activities to address sanitary and phytosanitary (SPS) barriers to U.S. agricultural exports. The international emergency and non-emergency food aid programs that were affected were the Food for Peace Act, which is reauthorized in the farm bill, and the related agricultural technical assistance (the Farmer-to-Farmer program) in sub-Saharan African and Caribbean countries. Authority to provide commodities and pay transportation costs under the Food for Progress program was affected, as was authority to replenish stocks of the Bill Emerson Humanitarian Trust—a reserve of commodities and cash used to meet unanticipated food aid needs. The authorization of appropriations for the McGovern-Dole International Food for Education and Child Nutrition Program was affected, though the annual appropriation continued to fund this discretionary program. Appendix A. Farm Bill Legislative Action Since 1965 Presidential Vetoes Presidential vetoes of farm bills are not common. Two complete farm bills have been vetoed as stand-alone measures (1956 and 2008), the latter being vetoed twice. Another farm bill was vetoed as part of a larger budget reconciliation package (1995). The first veto of a farm bill was in 1956 when President Eisenhower vetoed H.R. 12, the first version of the Agricultural Act of 1956. The second and third vetoes were in 2008 by President George W. Bush. The 2008 farm bill was vetoed and overridden twice. After the initial veto of the bill ( H.R. 2419 ), Congress overrode the veto and enacted P.L. 110-234 , but accidentally enrolled the law without Title III (the trade title). Congress immediately reintroduced the same bill with the trade title as H.R. 6124 . President Bush vetoed this version as well, and Congress again overrode the veto to enact P.L. 110-246 , a complete 2008 farm bill that included the trade title. The overrides in 2008 were the only time that a farm bill was enacted by overriding a veto. A 1995 budget reconciliation package that included the first version of what became the 1996 farm bill was vetoed by President Clinton, but the veto was not necessarily due to the farm bill. Appendix B. Suspensions of "Permanent Law" and Proposals to Repeal It The "permanent law" provisions for the farm commodity programs were enacted primarily in the Agriculture Adjustment Act of 1938 and the Agricultural Act of 1949. Subsequent farm bills into the 1970s continued to use and amend the permanent law provisions. As more modern farm bills evolved away from using the permanent law provisions, those provisions have been suspended for the duration of each farm bill, rather than being repealed. If no action is taken when a farm bill expires, then the suspension of permanent law also expires. An "expiration of the suspension" would allow the essentially mothballed policies of permanent law to resume. Some see the existence of permanent law—and the undesirable policy and budget consequences that could result—as an assurance that the farm commodity programs will be revisited every time a farm bill expires. Suspension Throughout the 1950s and 1960s, farm bills generally used and amended the 1938 and/or 1949 acts. Amendments sometimes were made permanent and sometimes only applied to specific years. As farm commodity policy continued to evolve away from parity-based price supports and quotas, farm bills in the 1970s gradually began to move away from using the permanent law provisions. Yet, the 1970 and 1973 farm bills, for example, generally were written into the 1938 and/or 1949 farm bills, as amended, with provisions that were applicable only for the new period of the farm bill. Thus, while those farm bills might not have directly suspended permanent law in the same way that more modern farm bills have, they nonetheless supplanted some portion of the permanent law parity-based support system for the life of the farm bill, albeit from within the body of the permanent law itself. Beginning with the 1977 farm bill, direct suspension or nonapplicability language began to be used regarding the permanent laws. This approach has continued through the 2014 farm bill. Repeal Proposals to repeal permanent law have been relatively rare, though some have passed the floor in each chamber. For example, proposals to repeal permanent law advanced perhaps the farthest during the development of the 1996 farm bill. Repeal provisions may have had saliency then because of a perceived intent of the "Freedom to Farm" reform plans. If Agricultural Market Transition Act (AMTA) payments were to end in 2002 at the end of the farm bill, then the existence of permanent law could have been an obstacle. Whether or not repeal was a condition of the plan during its development, repeal was dropped in favor of continued suspension during conference negotiations in 1996. More specifically regarding the 1995-1996 developments, the initial bill considered by the House Agriculture Committee in 1995 would have continued to suspend permanent law ( H.R. 2195 , Title IV). After failing in committee, the text of that bill, including the suspension provision, was incorporated into a broader House-passed budget reconciliation package ( H.R. 2491 , §1105). However, the Senate-passed version of the 1995 reconciliation package included a provision to repeal permanent law ( S. 1357 , §1101). The conference agreement for the reconciliation package adopted the Senate approach for repeal ( H.R. 2491 , §1109). The conference agreement passed both the House and Senate, but was vetoed, albeit not because of the farm bill provisions. The next year, a stand-alone 1996 farm bill was introduced and passed in the House with the provision to repeal permanent law ( H.R. 2854 , §109). The repeal provision also was in the Senate-reported bill ( S. 1541 , §19). However, the Senate-passed version ( S. 1541 , §109) did not repeal permanent law but continued to suspend permanent law. The conference agreement for the 1996 farm bill ( H.R. 2854 , §171) followed the Senate-passed version and continued the suspension of permanent law. Other bills from 1995 to 2001 proposed repealing permanent law, but were not formally considered. In 1995, several bills were introduced to restructure government agencies. First, a bill was introduced to abolish USDA, eliminate all price support authorities including those of permanent law, and transfer certain powers to the Department of Commerce ( H.R. 1354 , S. 586 ). A broader government-wide restructuring bill also was introduced that would have repealed permanent law ( H.R. 1923 ). A separate agricultural reform bill was introduced that would have phased down agricultural supports and eventually repealed permanent law ( H.R. 2010 ). Two other bills to repeal permanent law were introduced in 1995 ( H.R. 2523 and H.R. 2787 ). In 1997-1998, H.R. 502 and S. 2573 would have repealed permanent law. Other bills to repeal permanent law were H.R. 328 in 1999 and S. 1571 in 2001. None of these bills advanced beyond being referred to committee. Other bills in various Congresses have been introduced with targeted repeal provisions for certain commodities, but not comprehensive repeal. These bills are not discussed here. In the 112 th Congress during consideration of the 2012 farm bill, an amendment was submitted, but not actually introduced on the floor, to replace the suspension of permanent law with the repeal of those provisions ( S.Amdt. 2379 to S. 3420 ). In 2013, the House-passed farm bill ( H.R. 2642 ) would have repealed the 1938 and 1949 permanent laws (§1602). In their place, the House-proposed farm commodity program would have become the permanent law since it would have applied to "the 2014 crop year and each succeeding crop year" (§§1107, 1202, 1204, 1205, 1206, 1301). The Senate bill ( S. 954 ) continued the long-standing suspension of permanent law, as did the initial House-rejected bill ( H.R. 1947 ). The enacted 2014 farm bill continues to suspend permanent law ( P.L. 113-79 , §1602).

Farm bills, like many other pieces of legislation, have become more complicated and politically sensitive. They are taking longer to enact than in previous decades. Legislative delays have caused the past two farm bills (the 2002 and 2008 farm bills) to expire for short periods, and to be extended for months or a year while a new farm bill was developed. The 2008 farm bill (the Food, Conservation, and Energy Act of 2008, P.L. 110-246) expired twice; the first time was from October 1, 2012 through January 1, 2013, and the second time was from October 1, 2013, through February 6, 2014. Some programs ceased new operations, while others were able to continue. However, neither expiration lasted long enough for the farm commodity programs to revert to an outdated "permanent law" that would have raised support prices and increased federal outlays. On January 2, 2013, the 2008 farm bill was extended for one year (P.L. 112-240). All provisions that were in effect on September 30, 2012, were extended through FY2013 or for the 2013 crop year. On February 7, 2014, the Agricultural Act of 2014 (2014 farm bill; P.L. 113-79) was enacted to cover the 2014-2018 crop years and other programs through September 30, 2018. Farm bill expiration does not affect all programs equally. For example: An appropriations act or a continuing resolution can continue some farm bill programs even though a program's authority has expired. Programs using discretionary funding—and programs using appropriated mandatory funding like the Supplemental Nutrition Assistance Program (SNAP) account—can be continued via appropriations action. Most farm bill programs with mandatory funding, with the exception of SNAP, generally cease new operations when they expire (e.g., the Conservation Reserve Program (CRP), Market Assistance Program, and Specialty Crop Block Grants). However, existing contracts under prior-year authority can continue to be paid. The mandatory farm commodity programs of the 2008 farm bill not only ended with the 2013 crop, but without congressional action an outdated and expensive "permanent law" from the 1938 and 1949 farm bills stood ready to be implemented to cover the 2014 crop, beginning with dairy, on January 1, 2014. Crop insurance is an example of a permanently authorized and funded mandatory program that does not expire. Lastly, a subset of mandatory conservation programs had been extended through FY2014 prior to expiration and did not expire like other programs (e.g., the Environmental Quality Incentives Program, EQIP). The one-year extension of the 2008 farm bill was budget-neutral. Congress extended those programs using an existing budget baseline. However, a subset of farm bill programs did not continue because they did not have a baseline. To be continued, those programs needed budgetary offsets. Likewise, budget reductions targeted in the 2014 farm bill were not achieved in the extension.

Background The Intelligence Identities Protection Act was enacted into law as an amendment to the National Security Act of 1947 in response to concerns of members of the House and Senate Intelligence Committees and others in Congress "about the systematic effort by a small group of Americans, including some former intelligence agency employees, to disclose the names of covert intelligence agents." The Senate Judiciary Committee's report also discussed the efforts of Philip Agee, Lewis Wolf, and others to identify and disclose U.S. intelligence officers as part of "a systematic effort to destroy the ability of [U.S.] intelligence agencies to operate clandestinely," and their apparent repercussions. Such disclosures preceded and may have contributed to circumstances resulting in the death or attempted assassination of some Central Intelligence Agency (CIA) officers, expulsion of others from a foreign country following charges of spying, and impairment of relations with foreign intelligence sources. Two of Agee's books revealed over 1,000 names of alleged CIA officers. Wolf was co-editor of the "Covert Action Information Bulletin," a publication which contained a section entitled "Naming Names." Wolf claimed to have revealed the names of over 2,000 CIA officers. He also provided addresses, phone numbers, license tag numbers, and colors of the automobiles of some alleged intelligence agents. These disclosures set the stage for the consideration and passage of the Intelligence Identities Protection Act. The Intelligence Identities Protection Act The Intelligence Identities Protection Act provides criminal penalties for the intentional, unauthorized disclosure of information identifying a covert agent with knowledge that the information identifies a covert agent as such and that the United States is taking affirmative measures to conceal the covert agent's foreign intelligence relationship to the United States. Covert agents include officers and employees of a U.S. intelligence agency (including military officers assigned to an intelligence agency) whose identities as such are classified and who are serving (or have served within the last five years) outside the United States; as well as a U.S. citizen residing abroad (or working for certain FBI components within the United States) or a foreign national anywhere, who acts as an informant, agent, or source to an intelligence agency, and whose relationship with the U.S. government is classified. The act prescribes punishments for disclosing the identities of covert agents with increasing severity according to the level of access to classified information the offender exploited. Offenders without authorized access to classified information are subject to punishment only if they participated in a pattern of activity designed to discover and reveal the identities of covert agents and have reason to believe that such disclosure will harm U.S. intelligence operations. Prohibitions The criminal provisions of the act are contained in 50 U.S.C. Section 421, which defines three offenses according to the offender's means of acquiring the information at issue: § 421. Protection of identities of certain United States undercover intelligence officers, agents, informants, and sources. (a) Disclosure of information by persons having or having had access to classified information that identifies covert agent Whoever, having or having had authorized access to classified information that identifies a covert agent, intentionally discloses any information identifying such covert agent to any individual not authorized to receive classified information, knowing that the information disclosed so identifies such covert agent and that the United States is taking affirmative measures to conceal such covert agent's intelligence relationship to the United States, shall be fined under Title 18 or imprisoned not more than 15 years, or both. (b) Disclosure of information by persons who learn identify of covert agents as result of having access to classified information Whoever, as a result of having authorized access to classified information, learns the identity of a covert agent and intentionally discloses any information identifying such covert agent to any individual not authorized to receive classified information, knowing that the information disclosed so identifies such covert agent and that the United States is taking affirmative measures to conceal such covert agent's intelligence relationship to the United States, shall be fined under Title 18 or imprisoned not more than ten years, or both. (c) Disclosure of information by persons in course of pattern of activities intended to identify and expose covert agents Whoever, in the course of a pattern of activities intended to identify and expose covert agents and with reason to believe that such activities would impair or impede the foreign intelligence activities of the United States, discloses any information that identifies an individual as a covert agent to any individual not authorized to receive classified information, knowing that the information disclosed so identifies such individual and that the United States is taking affirmative measures to conceal such individual's classified intelligence relationship to the United States, shall be fined under Title 18 or imprisoned not more than three years, or both. Each of these offenses is a felony. The applicable maximum fine is $250,000, unless any pecuniary gain or loss resulted from the offense, in which case the fine may be set at twice the amount of loss or gain. A sentence under Section 421 is to be served consecutively with respect to any other prison sentence. The offenses set forth in 50 U.S.C. Section 421 (a), (b), and (c) share some elements in common: (1) intentional disclosure of the identity of a covert agent (2) to someone not authorized to receive classified information, (3) knowing that the information disclosed identifies that agent, and (4) knowing further that the United States is taking affirmative measures to conceal the agent's intelligence relationship with the United States. Subsections 421(a) and (b) contemplate offenses where the perpetrator has or has had authorized access to classified information, while subsection 421(c) has no similar requirement. Subsection 421(a) applies to an offender who has or previously had access to classified information that identifies a covert agent. Subsection 421(b) applies to an offender who learns the identity of a covert agent as a result of having authorized access to classified information in general. In contrast to these provisions, subsection 421(c) does not require that the perpetrator ever had authorized access to classified information. Rather, it applies if the perpetrator discloses the identity of any covert agent (1) in the course of a pattern of activities intended to identify and expose covert agents, (2) with reason to believe that these activities would impair or impede U.S. foreign intelligence activities. Subsection 426(10) defines a "pattern of activities" as involving "a series of acts with a common purpose or objective." Section 424 establishes extraterritorial jurisdiction for offenses committed overseas only where the offender is a U.S. citizen or a permanent resident alien. Under 50 U.S.C. Section 422, it is a defense to a prosecution under 50 U.S.C. Section 421 that, prior to the commission of the offense, the United States publicly acknowledged or revealed the intelligence relationship to the United States of the covert agent involved. In addition, this provision precludes prosecution of anyone other than the person who made the disclosure of the identity of a covert agent for a Section 421 offense on the grounds of misprision of felony, aiding and abetting, or conspiracy, unless the elements of subsection 421(c) are satisfied. This would appear to preclude the prosecution of a recipient of covered information, whether solicited or not, who publishes the information but has not engaged in a prohibited "pattern of activities" intended to disclose the names of covert agents. It is not an offense for a person to transmit information directly to either the House or Senate intelligence committees, nor for a covert agent to disclose his or her own identity. Under Section 425, the act is not to be construed to permit the withholding of information from Congress or a committee of the House or Senate. First Amendment Implications During Congress's consideration of the measure, much attention was focused on subsection 421(c) and the First Amendment implications if it were employed to prosecute a journalist or anyone else who might publish the identities of covert agents learned from public sources or through other lawful activity. The Senate Judiciary and the Conference Committee addressed these concerns at length. Both concluded that the language of the measure would pass constitutional muster. The Conference Committee characterized the goal of the provision as follows: The record indicates that the harm this bill seeks to prevent is most likely to result from disclosure of covert agents' identities in such a course designed, first, to make an effort at identifying covert agents and, second, to expose such agents publicly. The gratuitous listing of agents' names in certain publications goes far beyond information that might contribute to informed public debate on foreign policy or foreign intelligence activities. That effort to identify U.S. intelligence officers and agents in countries throughout the world and to expose their identities repeatedly ... serves no legitimate purpose. It does not alert to abuses; it does not further civil liberties; it does not enlighten public debate; and it does not contribute one iota to the goal of an educated and informed electorate. Instead, it reflects a total disregard for the consequences that may jeopardize the lives and safety of individuals and damage the ability of the United States to safeguard the national defense and conduct an effective foreign policy.... The standard adopted in section [421(c)] applies criminal penalties only in very limited circumstances to deter those who make it their business to ferret out and publish the identities of agents. At the same time, it does not affect the First Amendment rights of those who disclose the identities of agents as an integral part of another enterprise such as news media reporting of intelligence failures or abuses, academic studies of U.S. government policies and programs, or a private organization's enforcement of its internal rules. The Conference Committee distinguished between the main purpose of a person engaged in "the business of 'naming names,'" whose intent is to identify and expose covert agents, and side effects of one's conduct that one "anticipates but allows to occur." "Those who republish previous disclosures and critics of U.S. intelligence would all stand beyond the reach of the law if they did not engage in a pattern of activities intended to identify and expose covert agents." Despite these assurances, some commentators have questioned the constitutional sufficiency of subsection 421(c) on First Amendment grounds, finding it overbroad, and questioning the absence of a specific intent requirement instead of the "reason to believe" standard. The courts have yet to consider the issue. Reporting Requirements Section 423 requires the President, after receiving information from the Director of Intelligence, to report to the House and Senate intelligence committees annually on measures to protect covert agents, and other relevant information. Such reports are exempt from any publication or disclosure requirement. Relevant Cases To date, there have been no reported cases interpreting the statute, but it did result in two convictions pursuant to guilty pleas. In 1985, Sharon Scranage, a former CIA clerk, pleaded guilty for providing classified information regarding U.S. intelligence operations in Ghana to a Ghanaian agent with whom she was romantically involved. She was initially sentenced to five years in prison, but a federal judge reduced her sentence to two years in light of the relatively lenient treatment received by the Ghanaian agent, who was sentenced to 20 years after pleading no contest to espionage but was soon thereafter returned to Ghana as part of a spy exchange. In 2012, a former CIA officer pleaded guilty to one count of violating the IIPA for having given the names of two covert agents to two journalists. The defendant, John Kiriakou, was initially charged under the Espionage Act, 18 U.S.C. Section 793, as well, but these charges were dropped as part of the plea agreement. He was sentenced to 30 months in prison. The disclosures came to light after defense counsel for certain high-value detainees at the U.S. Naval Station in Guantanamo Bay, Cuba, filed classified papers in connection with military commission trials that included photographs of the agents. Investigators concluded that the detainees' defense team had not violated any statute. Other spies whose crimes are known to have resulted in the deaths of covert agents were charged with more serious offenses under the Espionage Act, 18 U.S.C. Section 794, but not under the Intelligence Identities Protection Act. Aldrich Ames, whose activities resulted in the executions of 10 Soviet sources to the FBI and CIA, pleaded guilty to espionage and was sentenced to life imprisonment. Robert Hanssen, whose work as an FBI "mole" for the Soviet and later Russian security services resulted in the deaths of at least three covert agents, pleaded guilty in 2001 to multiple counts of espionage and likewise received a life sentence. In 2003, the Department of Justice opened an investigation to determine whether a violation of the Intelligence Identities Protection Act had occurred after syndicated columnist Robert Novak published the name of CIA officer Valerie Plame. No charges under Section 421 were pursued; however, the existence of the provision and its possible breach were held to overcome any privilege on the part of reporters to refuse to disclose their source to a grand jury. I. Lewis Libby, then Vice President Dick Cheney's chief of staff, was convicted of obstruction of justice, perjury, and making a false statement to federal investigators in connection with the incident, and was sentenced to 30 months' imprisonment, two years' probation, and a $250,000 fine. President George W. Bush commuted the prison portion of the sentence after Mr. Libby was denied release on bond pending his appeal. In a related case, the U.S. Court of Appeals for the D.C. Circuit interpreted the statute as neither providing for nor precluding a remedy for a covert agent whose identity is disclosed by a government employee, but as counseling against the creation of a Bivens remedy for such an agent because permitting a lawsuit "would inevitably require an inquiry into 'classified information that may undermine ongoing covert operations.'"

Concern that government documents obtained by WikiLeaks and disclosed to several newspapers could reveal the identities of United States intelligence agents or informants focused attention on whether the disclosure or publication of such information could give rise to criminal liability. This report summarizes the Intelligence Identities Protection Act (IIPA; P.L. 97-200), enacted by Congress in 1982 to address the unauthorized disclosure of information that exposes covert U.S. intelligence agents. The act, as amended, is codified at 50 U.S.C. Sections 421-426, and provides criminal penalties in certain circumstances for intentional, unauthorized disclosure of information identifying a covert agent, where those making such a disclosure know that the information disclosed identifies the covert agent as such and that the United States is taking affirmative measures to conceal the covert agent's foreign intelligence relationship to the United States. The act prescribes punishments for disclosing the identities of covert agents with increasing severity according to the level of access to classified information the offender exploited. Offenders without authorized access to classified information are subject to punishment only if they participated in a pattern of activity designed to discover and reveal the identities of covert agents and have reason to believe that such disclosure will harm U.S. intelligence operations. The act also provides exceptions and defenses to prosecution, makes provision for extraterritorial application for offenders who are U.S. citizens or permanent resident aliens, includes reporting requirements to Congress, and sets forth definitions of the terms used in the act. Prosecutions are rare, despite some high-profile incidents involving the exposure of U.S. intelligence agents. Although some officials have expressed concern that the WikiLeaks disclosures could endanger the lives of persons who provided information to assist U.S. forces in Iraq or Afghanistan or to embassy officials, no prosecutions appear to have occurred related to those disclosures. There was, however, one prosecution brought related to the revelation of the identities of CIA interrogators. The 111th Congress increased the penalties for violations by persons with access to classified information (P.L. 111-259).

Introduction Each Congress, hundreds of measures are introduced to recognize, support, honor, or acknowledge individuals, groups, and events with a national day, week, or month of recognition. As scholars Lawrence Dodd and Scot Schraufnagel observed, "this type of legislation generally has universal appeal with patriotism, altruism, and other worthy concerns ... [as] the motivation behind the legislation." These measures serve as one way that Members of Congress can fulfill their representational responsibilities and connect with their constituents. This type of legislation can be divided into three categories: federal holidays; patriotic and national observances; and recognition of a specific day, week, or month to commemorate a specific individual, group, or event. Federal holidays, which are often referred to as "national holidays," are created by law and are legally only applicable to the federal government and the District of Columbia. Most federal government offices are closed for the day—many states also acknowledge and participate in the celebration. Statutory observances, by contrast, which are often called patriotic or national observances, are found codified at 36 U.S.C. §§101-144, and do not provide specific time off for federal employees or the District of Columbia. Currently there are 44 patriotic or national observances. These include days for individuals (e.g., Wright Brothers, Leif Erikson, and Stephen Foster); groups (e.g., Mother's Day, and Peace Officers); events (e.g., Patriot Day [9/11], Korean War Veterans Armistice Day, and signing the Constitution); and other recognitions (e.g., Flag Day, Poison Prevention, and Heart Month). New statutory observances can only be created by enacting a law. The other type of commemorative period recognizes a special day, week, or month. Most often these are introduced as a simple resolution (H.Res. or S.Res.) or as a concurrent resolution (H.Con.Res. or S .Con.Res.). This report provides information on commemorative legislation that recognizes a specific time period, and then it discusses options for Congress. First, the report summarizes the different types of commemorative time periods—federal holidays; patriotic and national observances; and commemorative days, weeks, and months. Second, it discusses the current rules in the House and Senate that govern this type of legislation. Finally, the report discusses options for Congress, including introducing legislation in the House and Senate, and asking the President to issue a proclamation. Commemorative Time Periods Permanent commemorative time periods are authorized by law to commemorate groups, individuals, and events. Broadly, these permanent commemorations can be divided into two categories: Federal holidays and patriotic and national observances. Nonpermanent recognitions of commemorative days, weeks, and months can be authorized through the use of simple or concurrent resolutions. Federal Holidays The United States has established 11 permanent federal holidays. They are, in the order they appear in the calendar, New Year's Day, Martin Luther King Jr.'s Birthday, Inauguration Day (every four years, following a presidential election), George Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day. Although frequently called public or national days, these celebrations are only legally applicable to the federal government and the District of Columbia, as the states individually decide their own legal holidays. To create a new federal holiday, a law is required. In recent Congresses, legislation has been introduced that would have created holidays such as "Cesar E. Chavez Day," or to formally establish Election Day as a federal holiday. None of these recent proposals has been adopted. Patriotic and National Observances Since 1914, Congress has authorized 44 patriotic and national observances. Codified in Title 36, United States Code, these patriotic and national observances include days for individuals, groups, events, and other commemorations. New patriotic and national observances can only be created statutorily. In recent Congresses, for example, legislation has been introduced to designate March 29 as Vietnam Veterans Day to honor and recognize "the contributions of veterans who served in the United States Armed Forces in Vietnam during war and during peace." For a complete list of patriotic and national observances, see the Appendix . Recognition or Support of a Commemorative Day, Week, or Month In addition to statutory federal holidays and patriotic and national observances, Congress has historically considered legislation that recognizes, supports, honors, or acknowledges certain days, weeks, and months. For example, in the 114 th Congress, the Senate agreed to a resolution "designating the week of May 10 through May 16, 2015 as 'National Police Week.'" Usually introduced as a simple resolution (H.Res. or S.Res.), these commemorative measures provide recognition by one congressional chamber of individuals, groups, and events without creating a new federal holiday or permanent patriotic and national observance. Congressional Rules on Commemorative Legislation For the House, rules ban the introduction and consideration of date-specific commemorative legislation. In the Senate, no specific chamber rules exist on either the introduction or consideration of commemorative measures. House In the 104 th Congress (1995-1996), the House adopted a new standing rule to reduce the number of commemorative bills and resolutions introduced and considered by the chamber. House Rule XII, clause 5, prohibits the introduction and consideration of date-specific commemorative legislation. In addition, Republican Conference Rule 28 prohibits the Republican leader from scheduling commemorative legislation for floor consideration under suspension of the rules; a committee rule of the House Oversight and Government Reform Committee also addresses scheduling of such legislation under suspension of the rules. House Rule XII, Clause 5 As part of the rules adopted by the 104 th Congress, House Rule XII was amended to preclude the introduction or consideration of any bill, resolution, or amendment that "establishes or expresses any commemoration." The rule, which has been readopted each Congress since 1995, defines a commemoration as any "remembrance, celebration, or recognition for any purpose through the designation of a specified period of time." Further, in the House Rules Committee's section-by-section analysis of the House Rules resolution ( H.Res. 6 ) in the 104 th Congress, the following explanation was provided on the rule's intent: The new ban on date-specific commemorative measures or amendments applies to both the introduction and consideration of any measure containing such a commemorative. This is intended to include measures in which such a commemorative may only be incidental to the overall purpose of the measure. Such measures will be returned to the sponsor if they are dropped in the legislative hopper. The prohibition against consideration also extends to any measures received from the Senate which contain date-specific commemorative [sic]. While it does not block their receipt from the other body, it is intended that such measures would not be referred to the appropriate committee of the House or be considered by the House. Instead, they would simply be held at the desk without further action. Should such a commemorative be included in a conference report or Senate amendment to a House bill, the entire conference report or Senate amendment would be subject to a point of order. While the ban does not apply to commemorative [sic] which do not set aside a specified period of time, and instead simply call for some form of national recognition, it is not the intent of the rule that such alternative forms should become a new outlet for the consideration of such measures. Thus, while they could be referred to an appropriate committee, it is not expected that such committees should feel obligated or pressured to establish special rules for their release to the House floor. Nor should it be expected that the Rule [sic] Committee should become the new avenue for regular waivers of the rule against date specific commemorative [sic]. Such exceptions should be limited to those rare situations warranting special national recognition as determined by the Leadership. House Republican Conference Rule 28 The House Republican Conference rules (Rule 28 (6)) prohibit the Republican leader from scheduling "any bill or resolution for consideration under suspension of the Rules which ... expresses appreciation, commends, congratulates, celebrates, recognizes the accomplishments of, or celebrates the anniversary of, an entity, event, group, individual, institution, team or government program; or acknowledges or recognizes a period of time for such purposes." Additionally, the House majority party leadership has issued protocols "intended to guide the majority leadership in the scheduling and consideration of legislation on the House floor." Included in the protocols is guidance on possible exceptions to Conference Rule 28. A resolution of bereavement, or condemnation, or which calls on others (such as a foreign government) to take a particular action, but which does not otherwise violate the provisions of Rule 28 is eligible to be scheduled under suspension of the Rules. Party conference rules and protocols, however, are not enforceable by points of order on the House floor, though they may reflect a general reluctance on the part of the majority party to schedule any legislation with commemorative intent. In addition, in the 115 th Congress, the House Committee on Oversight and Government Reform (which has jurisdiction over holidays and celebrations) adopted a new committee rule. Its Rule 13(c) states, The Chairman shall not request to have scheduled any resolution for consideration under suspension of the Rules, which expresses appreciation, commends, congratulates, celebrates, recognizes the accomplishments of, or celebrates the anniversary of, an entity, event, group, individual, institution, team or government program; or acknowledges or recognizes a period of time for such purposes. In the past, the committee has issued additional guidance that "in accordance with the intent of this [House] rule, it will be the policy of the Committee that resolutions deemed to fit these criteria shall not be considered by the Committee." Past Waiver of House Rule XII Since House Rule XII, clause 5, was adopted in the 104 th Congress, it has been explicitly waived on at least one occasion. Specifically, the "House by unanimous consent waived the prohibition against introduction of a certain joint resolution specified by sponsor and title proposing a commemoration" to allow for the consideration of H.J.Res. 71 (107 th Congress), legislation establishing Patriot Day as a day of remembrance for September 11, 2001. Senate Unlike in the House, no Senate rules exist that would prohibit the introduction or consideration of commemorative measures. In the past, the Senate Judiciary Committee has had unpublished guidelines on the consideration of commemorative legislation. These guidelines were not officially part of the committee's rules. Past guidance restricted consideration of commemorative legislation without a minimum number of bipartisan cosponsors, and prohibited commemoration of specific categories. Data on Commemorative Legislation While the House prohibits the introduction and consideration of date-specific commemorative legislation, House resolutions to achieve a similar purpose continue to be introduced. These resolutions do not include a specific time period after the resolution's resolving clause. Consequently, the introduction of such a measure does not appear to violate House Rule XII, clause 5. Data on all measures used to propose recognition of a commemorative period were collected for the 113 th and the 114 th Congresses. A total of 915 commemorative measures were identified, 437 in the 113 th Congress and 478 in the 114 th Congress. Figure 1 shows the types of legislation used to introduce commemorative recognitions in the House, and also in the Senate (where no rules regarding the introduction of commemorative resolutions exist), during the 113 th and 114 th Congresses. As Figure 1 shows, the majority of commemorative measures were introduced as simple resolutions (95%) over the two congresses. A small number are measures that would need both House and Senate approval. These include concurrent resolutions (4%)—which do not require presidential action—or bills and joint resolutions (less than 1%). By using a simple resolution to designate a commemorative day, week, or month, only one chamber—either the House or Senate—can agree to the measure. A simple resolution, however, does not carry the force of law and can only be used by one chamber to recognize, support, honor, or acknowledge a specific day, week, or month. Of the commemorative legislation introduced in the 113 th and 114 th Congresses, approximately 40% of all measures would recognize a commemorative day. This compares with approximately 25% for a commemorative week, and approximately 30% for a commemorative month. Additionally, a small percentage of legislation (3%) would designate two time periods. For example, H.Res. 407 (113 th Congress) would "support the goals and ideals of National Adoption Day and National Adoption Month." A measure that would designate two time periods is counted twice in the data. Figure 2 shows the percentage of measures introduced that recognize a day, week, or month. In the 113 th and 114 th Congresses, a total of 915 commemorative measures were introduced, 433 in the House and 482 in the Senate. Of these measures, 401 of 474 (85%) Senate simple resolutions (S.Res.) were agreed to, with another two reported by Senate committees. Additionally, one Senate concurrent resolution (S.Con.Res.) and one bill (S.) were agreed to by the Senate. In the House, one measure ( H.Res. 842 [114 th Congress]) was agreed to. All other House measures (397 simple resolutions [H.Res.], 30 concurrent resolutions [H.Con.Res.], 3 joint resolution [H.J.Res.], and 2 bills [H.R.]) that were introduced were referred to committee, but none were agreed to. Table 1 shows the final disposition within the chamber of introduced commemorative measures in the 113 th and 114 th Congresses. Table 1 indicates that 83.6% of the Senate's measures and none of the House's measures were agreed to by the chamber of origin in the 113 th Congress, and 85% of the Senate's measures and one of the House's measures were agreed to in the 114 th Congress. As discussed above under " Congressional Rules on Commemorative Legislation ," House and Senate rules for the consideration of date-specific commemorative legislation differ considerably. While the Senate allows such measures to be introduced and considered, the House has a rule that prohibits both the introduction and consideration of date-specific commemorative measures. Consequently, while no prohibition exists in the Senate, measures with date-specific provisions cannot be introduced in the House, but measures without date-specific provisions apparently can. Whether or not non-date-specific measures are considered in the future will likely be determined by scheduling practices of the House majority leader, which are guided by party conference rules and legislative protocols, as discussed earlier. Options for Congress When Members of Congress engage in the legislative process, they do so for a variety of purposes. In some cases, just the introduction of legislation achieves the Member's purpose, while in other cases the Member's purpose can only be achieved by the approval of a measure they have introduced. For example, the introduction of legislation may indicate that a Member would like to be involved in future public policy discussions in a particular area, or that he or she is attempting to frame the debate on a particular policy issue. In general, there are three stages where a Member might achieve his or her goal: the introduction of legislation, the consideration of a measure in the House or Senate, or passage of a measure by the House, Senate, or both. Should Congress want to commemorate a day, week, or month, several options might be available that might allow a Member to meet his or her goal within the confines of House or Senate rules. These include the introduction of a House measure or the introduction (and possible consideration) of a Senate measure. Introduction of House Resolutions Though House Rule XII, clause 5, prohibits the introduction or consideration of date-specific commemorative legislation, hundreds of commemorative resolutions that would honor a day, week, or month are introduced each Congress. None of these resolutions, however, has been considered by either a House committee or on the House floor. Through an analysis of introduced resolutions, it appears they share a common trait: the lack of a specific date or time period after the resolving clause. Without a specific date or time period after the resolving clause, it appears that commemorative resolutions that support the recognition of a specific day, week, or month can be introduced. In these cases, the specific commemorative date is listed in the resolution's "whereas" clauses. For example, in the 113 th Congress, H.Res. 194 was introduced to express "support for designation of the month of May as Williams Syndrome Awareness Month." The text of the resolution reads: H.Res. 194 was introduced without language that would apparently be prohibited by House Rule XII, clause 5. While introduction was likely allowed because the resolution specified a date only in the "whereas clauses," scheduling the measure under suspension proceedings was still likely circumscribed by Republican Conference Rule 28, clause 6, which guides the majority leader on the scheduling of legislation for floor consideration. Senate Action Currently, the Senate does not have any chamber-wide restriction on the introduction or scheduling of date-specific commemorative legislation. Therefore, Senate resolutions can contain a specific date in the text following the resolving clause (although this is not a requirement). For example, S.Res. 131 (112 th Congress) designated April 2011, as "Tsunami Awareness Month." The text of the resolution read: Concluding Observations Legislation that recognizes, supports, honors, or acknowledges certain days, weeks, and months continues to be introduced each Congress. In the 113 th Congress (2013-2014), a total of 437 measures were introduced, 204 measures in the House and 233 in the Senate. The House did not consider any of these measures, while the Senate agreed to 193 of 233 (83%). In the 114 th Congress, a total of 478 measures were introduced, 229 measures in the House and 249 in the Senate. Based on the quantity of measures offered in both chambers, Members of Congress clearly see value in introducing commemorative legislation. While these measures generally may not be considered in the House, Members clearly desire ways to recognize commemorative days, weeks, and months to establish connections with their district and state. The desire to recognize commemoration days, weeks, and months may explain why House Members draft their resolutions to allow for introduction, even though it seems that the intent of the prohibition (reinforced by the Republican Conference Rules) will likely preclude any further action on such resolutions. Appendix. Patriotic and National Observances

Typically, each Congress, hundreds of legislative measures are introduced to recognize, support, honor, or acknowledge certain days, weeks, and months. Some scholars have observed that commemorative legislation has universal and patriotic appeal and also provides an opportunity to connect directly with constituents, which can help fulfill representational responsibilities to Members' districts or states. Often used to commemorate an individual, group, or event, these measures can be divided into three categories: (1) federal holidays; (2) patriotic and national observances; and (3) recognition of a specific day, week, or month that commemorates a specific individual, group, or event. To create either a federal holiday or a patriotic or national observance, a law is required. Action to recognize, support, honor, or acknowledge certain days, weeks, and months, however, requires only a simple resolution agreed to by the House or Senate, or a concurrent resolution agreed to by both chambers. While historically common for Congress to recognize a day, week, or month, this practice has become rarer since the adoption of House Rule XII, clause 5, in the 104th Congress (1995-1996). Since that time, the number of commemorative resolutions introduced and considered in the House has declined. This rule, however, does not apply to the Senate, where date-specific commemorative legislation is still introduced and considered.

The Federal Income Tax System The federal income tax system has several components. The largest component, in terms of revenue generated, is the individual income tax. For fiscal year (FY) 2018, an estimated $1.7 trillion, or 50% of the federal government's revenue, will come from the individual income tax. The corporate income tax is estimated to generate another $218 billion in revenue in FY2018, or just under 7% of total revenue. Social insurance or payroll taxes will generate an estimated $1.2 trillion, or 35% of revenue in FY2018. Estimates indicate that the remainder of federal revenue collected in FY2018 will come from excise taxes (3%) or other sources (6%). The Individual Income Tax4 The individual income tax is the largest source of revenue in the federal income tax system. Most of the income reported on individual income tax returns is wages and salaries. The Joint Committee on Taxation (JCT) estimates that in 2018, 68% of individuals' gross income will come from wages and salaries. However, a large portion of business income in the United States is also taxed in the individual income tax system. Pass-through businesses, including sole proprietorships, partnerships, S corporations, and limited liability companies, generally pass business income through to the business's owners, where that income is taxed at individual income tax rates. Projections indicate that in 2018, 10% of income reported by individual taxpayers will be business, farm, or Schedule E income. Gross Income and Adjustments To levy an income tax, income must first be defined. As a benchmark, economists often turn to the Haig-Simons comprehensive income definitions, which can differ from the measure of income used in computing a taxpayer's taxes. Under the Haig-Simons definition, taxable resources are defined as changes in a taxpayer's ability to consume during the tax year. Using this definition of income, an employer's contributions toward employee health insurance, for example, would be counted toward the employee's income. This income, however, is not included in the employee's taxable income under current tax law. In practice, the individual income tax is based on gross income individuals accrue from a variety of sources. Included in the individual income tax base are wages, salaries, tips, taxable interest and dividend income, business and farm income, realized net capital gains, income from rents, royalties, trusts, estates, partnerships, and taxable pension and annuity income. Gross income for tax purposes excludes certain items, which may deviate from the Haig-Simmons definition of income. For example, employer-provided health insurance, pension contributions, and certain other employee benefits are excluded from income subject to tax. Employer contributions to Social Security are also excluded from wages. Amounts received under life insurance contracts are excluded from income. Another exclusion from income is the interest received on certain state and local bonds. Some forgiven debts and various other items are also excluded from income for tax purposes. There are special rules for income earned as capital gains or dividends. Capital gains (or losses) are realized when assets are sold. The tax base excludes unrealized capital gains. There are reduced tax rates for certain capital gains and dividends (discussed below in the " Tax Rates " section). As with ordinary income, there may be exclusions. For example, certain capital gains on sales of primary residences are excluded from income. Income from operating a business through a proprietorship, partnership, or small business corporation that elects to be treated similarly to a partnership (Subchapter S corporation), or income from rental property, is also subject to the individual income tax. This income is the net of gross receipts reduced by such deductible costs as payments to labor, depreciation, costs of goods acquired for resale and other inputs, interest, and taxes. A taxpayer's adjusted gross income (AGI), the basic measure of income under the federal income tax, is determined by subtracting "above-the-line" deductions from gross income. Above-the-line deductions are available to taxpayers regardless of whether they itemize deductions or claim the standard deduction. Above-the-line deductions may be claimed for, among other items, contributions to qualified retirement plans by self-employed individuals, contributions to individual retirement accounts (IRAs), interest paid on student loans, higher education tuition expenses, and contributions to health savings accounts. Filing Status and Deductions Tax liability depends on the filing status of the taxpayer. There are four main filing categories: married filing jointly, married filing separately, head of household, and single individual. The computation of taxpayers' tax liability depends on their filing status, as discussed further below. The amount of the standard deduction also depends on filing status. Deductions are subtracted before determining taxable income. Taxpayers have a choice between claiming the standard deduction or claiming the sum of their itemized deductions. The standard deduction amount depends on filing status. The 2018 standard deduction for single filers is $12,000, while the standard deduction for married taxpayers filing jointly is twice that amount, or $24,000. The standard deduction for a head of household is $18,000. There is an additional standard deduction for the elderly (taxpayers age 65 and older) and the blind. The standard deduction amount is indexed for inflation. When the sum of taxpayers' itemized deductions exceeds the standard deduction, taxpayers may choose to itemize. Deductions may be allowed for mortgage interest and charitable contributions. Taxpayers may also claim up to $10,000 ($5,000 for married taxpayers filing separately) in total deductions for state and local taxes (income, sales, or property taxes). Some deductions can only be itemized and claimed in excess of a floor. For example, medical expenses can be deducted to the extent they exceed 7.5% of AGI. Casualty and theft losses attributable to federally declared disasters can also be deducted in excess of 10% of AGI. The JCT estimates that for 2018, 135.2 million tax returns filed will use the standard deduction, while 20.4 million returns will elect to itemize deductions (see Figure 1 ). Deduction for Qualified Business Income The deduction for qualified business income is also taken in determining taxable income. Individual taxpayers can deduct 20% of qualified business income from a partnership, S corporation, or sole proprietorship. Individual taxpayers can also deduct 20% of qualified Real Estate Investment Trust (REIT) dividends, publicly traded partnership income, and cooperative dividends. Above threshold amounts, the deduction begins to phase out for income from certain services, including health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, or investing and investments management services. These threshold amounts are $315,000 for married taxpayers filing joint returns, and $157,500 for all other taxpayers. The deduction is also subject to limitation based on the taxpayer's allocable share of W-2 wages paid and the taxpayer's allocable share of capital investment above these threshold amounts. Specifically, the dedu ction is limited to the greater of 50% of W-2 wages, or 25% of W-2 wages plus 2.5% multiplied by qualified property. Tax Rates The income tax system is designed to be progressive, with statutory marginal tax rates increasing as income increases. At a particular statutory marginal tax rate, all individuals subject to the regular income tax, regardless of their overall level of earnings, pay the same tax rate on taxable income within the bracket. Once taxpayers' incomes surpass a threshold level, placing them in a higher marginal tax bracket, the higher marginal tax rate is only applied on income that exceeds that threshold value. In 2018, the individual income tax system has seven marginal income tax rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. These marginal income tax rates are applied to taxable income to arrive at a taxpayer's gross income tax liability. Threshold levels associated with the rate brackets depend on filing status. Tax rates for 2018 are summarized in Table 1 . Certain higher-income individuals may be subject to the alternative minimum tax (AMT). There are two marginal tax rates under the AMT, 26% and 28%, that are applied to an expanded income base. The AMT is discussed in further detail below. Tax Rates on Capital Gains and Dividends As was noted above, income earned from long-term capital gains and qualified dividends may be taxed at lower rates. The rate on long-term capital gains and qualified dividends can be 0%, 15%, or 20%, depending on the taxpayer's taxable income and filing status. The rates are linked to the statutory rate brackets that were in effect before P.L. 115-97 was enacted, such that the 20% rate applies to taxpayers that would have been in the 39.6% bracket (under the pre- P.L. 115-97 rate structure). Taxpayers that would have been in the 25%, 28%, 33%, and 35% tax brackets under the former rate structure face a 15% tax rate on long-term capital gains and qualified dividends, whereas the rate is 0% for taxpayers that would have been in the 10% and 15% tax brackets under the former rate structure. The taxable income thresholds for long-term capital gains and qualified dividends in 2018 are summarized in Table 2 . Net Investment Income Certain higher-income individuals may be subject to an additional 3.8% tax on net investment income. Specifically, the tax applies to the lesser of (1) net investment income, or (2) the amount by which modified AGI exceeds fixed threshold amounts. The fixed threshold amounts are $250,000 for taxpayers filing jointly and $200,000 for other filers. The net-investment-income tax increases the maximum tax rate on capital gains and dividends to 23.8%. The maximum rate on other investment income, including interest, annuities, royalties, and rent, is 40.8%. Tax Credits After a taxpayer's tax liability has been calculated, tax credits are subtracted from gross tax liability to arrive at a final tax liability (see Figure 3 ). Tax credits offset tax liability on a dollar-for-dollar basis. There are two different types of tax credits: refundable and nonrefundable. If a tax credit is refundable, and the credit amount exceeds tax liability, a taxpayer receives the credit (or a portion of the credit) as a refund. If credits are not refundable, then the credit is limited to the amount of tax liability. In some cases, unused credits can be carried forward to offset tax liability in future tax years. Some credits are phased out as income rises to limit or eliminate benefits for higher-income taxpayers. Tax credits that are refundable or have a refundable portion include the earned income tax credit (EITC) and the child tax credit (CTC). The American Opportunity Tax Credit (AOTC), a tax credit for tuition expenses, also has a refundable portion. A nonrefundable tax credit can be claimed for child and dependent care expenses. There are also tax credits for other purposes, such as education and certain health insurance premiums. Tax credits add to the complexity of the tax system for various reasons. For one, tax credits can cause effective marginal tax rates to differ from statutory marginal tax rates for many taxpayers. For example, the earned income tax credit (EITC) phases in as income increases, reducing a taxpayer's marginal tax rate. At higher income levels, as the credit phases out, the taxpayer faces a higher marginal tax rate during that phaseout range. Thus, effective marginal tax rates can be less than or greater than statutory rates. Tax credits can also pose administrative challenges. Alternative Minimum Tax Individuals may also pay tax under the alternative minimum tax (AMT). The AMT applies lower tax rates to a broader income base. The policy goal of the AMT is to prevent certain higher-income taxpayers from using the graduated personal income tax rate structure and tax preferences to avoid paying sufficient amounts of taxes. To calculate the AMT, an individual first adds back various tax items, including certain itemized deductions and business tax preferences, to regular taxable income. This grossed-up amount becomes the income base for the AMT. The AMT exemption is subtracted from the AMT's income base. For 2018, the AMT exemption is $109,400 for married taxpayers filing a joint return, $54,700 for married taxpayers filing separate returns, and $70,300 for all other individual tax filers. These exemption amounts are indexed for inflation. The AMT exemption is reduced by 25% of the amount by which a taxpayer's AMT taxable income exceeds certain threshold amounts. In 2018, the AMT exemption amount begins to phase out at $1,000,000 for married taxpayers filing a joint return and $500,000 for all other individual tax filers. A two-tiered rate structure of 26% and 28% is assessed against AMT taxable income. The taxpayer compares his AMT tax liability to his regular tax liability and pays the greater of the two. Most nonrefundable personal tax credits are allowed against the AMT. The JCT estimates that roughly 600,000 tax filers will pay the AMT in 2018. The Corporate Income Tax47 The corporate income tax generally only applies to C corporations (also known as regular corporations). These corporations—named for Subchapter C of the Internal Revenue Code (IRC), which details their tax treatment—are generally treated as taxable entities separate from their shareholders. That is, corporate income is taxed once at the corporate level according to the corporate income tax system. When corporate dividend payments are made or capital gains are realized income is taxed again at the individual-shareholder level according to the individual tax system (discussed above). In contrast, noncorporate businesses, including S corporations and partnerships, pass their income through to owners who pay taxes. Collectively, these noncorporate business entities are referred to as pass-throughs. For these types of entities, business income is taxed only once, at individual income tax rates. As discussed above, taxpayers may be allowed to claim a 20% deduction from certain income earned by pass-through businesses. The corporate income tax is designed as a tax on corporate profits (also known as net income). Broadly defined, corporate profit is total income minus the cost associated with generating that income. Business expenses that may be deducted from income include employee compensation; the decline in value of machines, equipment, and structures (i.e., depreciation); general supplies and materials; advertising; and interest payments (subject to certain limitations). Businesses may also be allowed 100% first-year depreciation or to expense the costs of certain property. The corporate income tax also allows for a number of other special deductions, credits, and tax preferences that reduce taxes paid by corporations. Oftentimes, these provisions are intended to promote particular policy goals (promoting charitable giving or encouraging investment in renewable energy, for example). A corporation's tax liability can be calculated as follows: Taxes = [(Total Income – Deductible Expenses) × Tax Rate ] – Tax Credits. Some corporations experience net operating losses (NOLs), which occur when total income less expenses is negative. Losses arising after 2017 can generally be "carried forward" indefinitely, and used to offset future tax liability. The NOL deduction is generally limited to 80% of taxable income. The corporate income tax rate is a flat 21%. Thus, tax liability before applying tax credits is generally calculated as 21% of taxable income. Corporate tax liability can be reduced by claiming corporate tax credits. Credits claimed by corporations include the research credit, the low-income housing tax credit, certain energy credits, the new markets tax credit, the work opportunity tax credit, and an employer credit for paid family and medical leave (this provision expires in 2019). In broad economic terms, the base of the corporate income tax is the return to equity capital. Income produced by corporate capital investment includes that produced by corporate investment of borrowed funds (debt), and that produced by investment of equity, or funds provided by stockholders. The deductibility of certain items makes it such that the corporate income tax applies largely to equity capital. Specifically, wages are tax deductible, so labor's contribution to corporate revenue is excluded from the corporate tax base. Additionally, profits from debt-financed investment are paid out as interest, which is partially deductible. To the extent that interest is deductible, the return to debt capital is excluded from the corporate tax base. Equity investments are financed by retained earnings and the sale of stock. The income equity investment generates is paid out as dividends and the capital gains that accrue as stock increases in value. Neither form of equity income is generally deductible. Thus, the base of the corporate income tax is largely the return to equity capital. With the base of the corporate tax being largely equity income, the flow of capital out of the corporate sector and other economic adjustments probably cause the burden of the tax to spread to all owners of capital: owners of unincorporated business, bondholders, and homeowners. In analyzing the incidence of the corporate tax, the Congressional Budget Office (CBO) and JCT generally distribute most of the burden to owners of capital, with a smaller portion falling on labor income. Since owners of capital tend to be in higher income groups, and most of the corporate tax burden falls on capital, the corporate tax is widely viewed as being progressive. Corporate Income Earned Abroad The United States has a quasiterritorial tax system. In general, dividends received by U.S. corporate shareholders from their controlled foreign corporations (CFCs) are generally eligible for a 100% dividends-received deduction. However, certain forms of passive or easily shifted income are taxed in the year earned—under subpart F. In addition, global intangible low-taxed income (GILTI) is taxed at 10.5%. A deduction is allowed for the foreign derived intangible income (FDII)—roughly the share of intangible income that is attributed to foreign activity. Current law also contains a general antiabuse provision whose focus is primarily on U.S. subsidiaries of foreign parents, although it applies in general to all related parties. Unlike Subpart F or the new GILTI provision, the base erosion and antiavoidance tax (BEAT) is not aimed at including income but at disallowing deductions for certain "base erosion" payments made by U.S. parents to their foreign subsidiaries that historically have been used to shift profits out of the United States. BEAT imposes a minimum tax which is equal to 5%, in 2018, of the sum of taxable income and base erosion payments on corporations with average annual gross receipts of at least $500 million over the past three tax years and with deductions attributable to outbound payments exceeding 3% of overall deductions. Social Insurance and Retirement Payroll Taxes Payroll taxes are used to fund specific programs, largely Social Security and Medicare. Social Security and Medicare taxes are generally paid at a combined rate of 15.3% of wages, with 7.65% being paid by the employee and employer alike. The Social Security part of the tax, or the old age, survivors, and disability insurance (OASDI) tax, is 6.2% for both employees and employers (12.4% in total). In 2018, the tax applies to the first $128,400 in wages. This wage base is adjusted annually for inflation. The Medicare portion of the tax, or the Medicare hospital insurance (HI) tax, is 1.45% for both employees and employers (2.9% in total). There is no wage cap for the HI tax (the Medicare HI tax applies to all wage earnings). Certain higher-income taxpayers may be subject to an additional HI tax of 0.9%. For married taxpayers filing jointly, combined wages above $250,000 are subject to the additional 0.9% HI tax. The threshold for single and head of household filers is $200,000. These threshold amounts are not indexed for inflation. Employers may also be subject to a federal unemployment insurance payroll tax. This tax is 0.6% on the first $7,000 of wages. Federal unemployment insurance payroll taxes are used to pay for the administrative costs of the unemployment insurance (UI) program. State UI taxes generally pay for UI benefits. Most taxpayers pay more in payroll taxes than income taxes. The JCT projects that in 2018, 67% of tax units will pay more in payroll taxes than income taxes (see Figure 4 ). Most low- and middle-income taxpayers pay more in payroll taxes than in income taxes. Nearly all taxpayers with incomes of $30,000 or less pay more in payroll taxes than income taxes. Up through the $100,000 to $200,000 income category, the share of taxpayers paying more in payroll taxes than income taxes exceeds the share of taxpayers paying more in income taxes than payroll taxes. Estate and Gift Taxes Upon death, an individual's estate may be subject to tax. The base of the federal estate tax is generally property transferred at death, less allowable deductions and exemptions. An unlimited marital deduction is allowed for property transferred to a surviving spouse. Other allowable deductions include estate administration expenses and charitable bequests. The effective estate tax exemption is $11.2 million for 2018. The value of the estate over the exemption amount is generally taxed at a rate of 40%. The federal gift tax operates alongside the estate tax to prevent individuals from avoiding the estate tax by transferring property to heirs before dying. For 2018, the first $15,000 of gifts from one individual to another is excluded from taxation and does not apply to the lifetime exemption. Any amount over this annual exclusion lowers the effective lifetime estate tax exemption. The gift tax and estate tax are unified in that the same lifetime exemption amount applies to both taxes ($11.2 million in 2018). Being unified, taxable gifts reduce the exemption amount that is available for estate tax purposes. The gift tax rate is 40%, the same as the top rate for the estate tax, for gifts beyond the exemption amount. Few taxpayers pay the estate tax. Through 2025, an estimated 0.06% of decedents will pay the estate tax. The estate tax is also progressive, up to the very top of the income distribution. For taxpayers in the 95 th to 99 th percentile, the estate tax has been estimated to be 0.2% of cash income in 2016. For taxpayers in the top 1% and top 0.1% of the income distribution, the estate tax has been estimated to be 0.5% of cash income in 2016. The concentration in upper income categories will increase with the higher temporary exemption levels in effect in 2018. Excise Taxes Excise taxes are levied on the consumption of goods and services rather than income. Unlike sales taxes, they apply to particular commodities, rather than to broad categories. Historically, the federal government has levied excise taxes, but not a broad-based sales tax, instead leaving sales taxes to the states as a revenue source. Federal excise taxes are levied on a variety of products. The collection point of the tax varies across products. For some goods, taxes are collected at the production level. Other excise taxes are collected on retail sales. In terms of receipts, the single largest tax is the excise tax on gasoline. Other prominent excise taxes are those on diesel and other fuels; trucks, trailers, and tractors; aviation-related taxes and fees; excise taxes on beer, wine, and distilled spirits; taxes on tobacco products; Affordable Care Act (ACA) taxes and fees (e.g., insurance provider fee, branded pharmaceuticals fee); and taxes on firearms and ammunition. Most federal excise taxes are paid into federal trust funds devoted to specific federal activities, as opposed to remaining in the federal budget's general fund . Estimates for 2018 indicate that of the $108 billion in anticipated excise tax revenue, approximately 61% will support trust funds, with the remainder being general fund revenue. The largest trust fund is the Highway Trust Fund. Devoted revenue sources include excise taxes on fuels, trucks, and tires. Aviation-related excise taxes support the Airport and Airway Trust Fund, the second largest of the excise-tax-supported trust funds. General fund excise taxes include taxes on alcohol and tobacco and ACA-related excise taxes. Excise taxes can result in consumers paying higher prices for goods and services. Overall, households from the lower part of the income distribution tend to pay a larger share of their income in excise taxes than higher-income households. Thus, taken as a whole, federal excise taxes are generally believed to be regressive. The degree of regressivity can vary for different types of excise taxes. For example, tobacco excise taxes are estimated to be more regressive than aviation-related excise taxes. Tax Statistics Taxes as a Share of the Economy Federal revenues are derived from several sources and have collectively ranged from roughly one-fifth to one-seventh the size of the economy. Figure 5 displays total federal tax revenues and major sources of federal tax revenue as percentages of gross domestic product (GDP) since 1945. For 2018, it is estimated that revenues will be 16.7% of GDP, slightly below the post-World War II average of 17.2% of GDP. Since the mid-1940s, the individual income tax has been the most important single source of federal revenue (business income may also be taxed under the individual income tax system, as discussed above in " The Individual Income Tax "). Between 2000 and 2010, however, the individual income tax receipts decreased relative to the size of the economy, falling from nearly 10% of GDP in 2000 to just over 6% in 2010. Individual income tax receipts have subsequently increased, and are estimated to be 8.3% of GDP in 2018. Over time, the corporate income tax has fallen from the second- to the third-most important source of revenue. In the late 1960s, corporate taxes were replaced by social insurance and retirement taxes as the second-leading revenue source. Excise taxes and estate and gift taxes have also decreased as a share of GDP over time. Composition of Tax Revenue The changing shares of federal revenues over time are more clearly shown in Figure 6 . For example, the corporate income tax accounted for roughly 30% of federal revenue in 1946, but 9% in 2016. As a share of total revenues, the corporate income tax is projected to decline further, to roughly 7%, by 2021. Excise tax revenue is roughly 3% of federal receipts, down from nearly 18% in 1946. In contrast, receipts for social insurance and retirement taxes have risen post-World War II with the enactment of Social Security and Medicare and are now the second-largest source of federal receipts at approximately 35% of federal revenue. The Distribution of the Tax Burden The U.S. individual income tax system is generally progressive. As shown in Figure 7 , taxpayers with lower incomes tend to have a proportionally smaller share of the overall individual income tax burden. JCT projections indicate that in 2018, taxpayers in lower income categories will, on average, have a negative share of individual income taxes. Thus, on average, these groups receive more in refundable tax benefits than they pay in federal individual income taxes. For taxpayers in income groups above $200,000, projections for 2018 show that their share of taxes paid exceeds their share of income earned. About 50% of taxpayers fall into an income category below $50,000. In contrast, less than 7% of filers fall into an income category above $200,000. Since higher-income taxpayers pay a larger share of taxes than they earn in income, the system is generally progressive, and causes after-tax income to be more equally distributed than before-tax income. The tax system as a whole is progressive, but not as progressive as the individual income tax system. Payroll taxes and excise taxes tend to be regressive, with higher average tax rates paid by taxpayers in lower income groups. Thus, taken together in evaluating the federal tax system as a whole, payroll taxes and excise taxes offset some of the progressivity of the individual income tax. International Comparisons How the U.S. tax system compares to those in other countries is a perennial tax policy question. As shown in Figure 8 , total U.S. taxes as a percentage of GDP has historically been below the average for OECD countries. Four countries have tended to have lower taxes as a percentage of GDP than the United States, with most others tending to have higher taxes relative to the size of the economy. Note that such a direct comparison can be difficult to interpret, as it does not take into account government spending that reflects each country's policy preferences or deficit/surplus levels that provide more context. Table 3 provides this additional context for the United States and the other major democratic countries in the G-7. Among the G-7 countries, the United States has both the lowest revenue and spending as a percentage of GDP and the second-highest deficit level in 2017. Concluding Remarks The U.S. federal tax system in 2018 looks substantively different than it did in 2017. As taxpayers adjust to the federal tax system in place for 2018, Congress may consider further changes to the federal tax system. Given the scope and magnitude of the changes enacted in P.L. 115-97 , tax policy for the remainder of the 115 th Congress may build on or be related to this legislation. Over the longer term, as tax policies that were temporary in P.L. 115-97 expire, and delayed tax policies begin to phase in, Congress may choose to consider whether expirations, phase-ins, or other delayed policies in P.L. 115-97 should be modified. This report provides an overview of the federal tax system, as in effect in 2018. Information on taxes relative to the size of the economy, the distribution of the tax burden, and how the U.S. tax system compares to tax systems globally may provide context for consideration of future tax policy changes.

At the end of 2017, President Trump signed into law P.L. 115-97, which substantially changed the U.S. federal tax system. This report describes the federal tax structure and system in effect for 2018, incorporating these recent changes. The report also provides selected statistics on the tax system as a whole. Historically, the largest component of the federal tax system, in terms of revenue generated, has been the individual income tax. For fiscal year (FY) 2018, an estimated $1.7 trillion, or 50% of the federal government's revenue, will be collected from the individual income tax. The corporate income tax is estimated to generate another $218 billion in revenue in FY2018, or just under 7% of total revenue. Social insurance or payroll taxes will generate an estimated $1.2 trillion, or 35% of revenue in FY2018. For 2018, it is estimated that revenues will be 16.7% of GDP, slightly below the post-World War II average of 17.2% of GDP. The largest source of revenue for the federal government is the individual income tax. The federal individual income tax is levied on an individual's taxable income, which is adjusted gross income (AGI) less deductions. Tax rates based on filing status (e.g., married filing jointly, head of household, or single individual) determine the amount of tax liability. Income tax rates in the United States are generally progressive, such that higher levels of income are typically taxed at higher rates. Once tentative tax liability is calculated, tax credits can be used to reduce tax liability. Tax deductions and tax credits are tools available to policymakers to increase or decrease the after-tax price of undertaking specific activities. Individuals with high levels of deductions and credits relative to income may be required to pay the alternative minimum tax (AMT). The federal government also levies taxes on corporations, wage earnings, and certain other goods. Corporate taxable income is also subject to tax at a flat rate of 21%. Social Security and Medicare tax rates are, respectively, 12.4% and 2.9% of earnings. In 2018, Social Security taxes are levied on the first $128,400 of wages. Medicare taxes are assessed against all wage income. Federal excise taxes are levied on specific goods, such as transportation fuels, alcohol, and tobacco. Looking at the tax system as a whole, several observations can be made. Notably, the composition of revenues has changed over time. Corporate income tax revenues have become a smaller share of overall tax revenues over time, while social insurance revenues have trended upward as a share of total revenues. Social insurance revenues are a sizable component of the overall federal tax system. Most taxpayers pay more in payroll taxes than income taxes. Many taxpayers pay social insurance taxes but do not pay individual income taxes, having incomes below the amount that would generate a positive income tax liability. From an international perspective, the U.S. federal tax system tends to collect less in federal revenues as a percentage of GDP than other OECD countries.

Overview The United States is the largest foreign direct investor in the world and the largest recipient of such investment funds. This active role in foreign investment continues to drive a national debate over various aspects of foreign investment, including the impact on employment; the implications for national security of foreign direct investment in U.S. industrial firms; the effect on corporate research and development; and the implications for high-technology jobs, especially on science and engineering activities that are deemed to be important for continuing economic advancement. In 2004, Congress awarded a grant through P.L. 108-447 to the National Academy of Public Administration (NAPA) to conduct a comprehensive study on outsourcing, or off-shoring, and its major economic effects, particularly on any "associated shifts in employment." The NAPA study distinguished between outsourcing, or the contracting of services or activities to unaffiliated firms located either domestically or internationally, and off-shoring, or the shifting of services or activities abroad to unaffiliated firms or to affiliated firms. The data used in this report, however, do not distinguish between outsourcing and off-shoring or among a broad range of other activities that may be associated with foreign investment. In addition to foreign direct investment, the focus of this report, in which firms take a direct equity stake in an investment project, multinational corporations are engaging in an increasingly complex array of activities to build interdependent networks of operations in global value chains. The United Nations refers to these mechanisms, or alternative forms of governance of global value chains by multinational companies, as non-equity modes (NEM) of investment, that include partial ownership, joint ventures, contract manufacturing, services outsourcing, contract farming, franchising and licensing, and other forms of contractual relationships through which firms coordinate and control the activities of partner firms. As a result of these mechanisms, firms no longer must choose between full control of a foreign affiliate through direct investment or no control, but among a range of modes in which control is exercised in various configurations and to various degrees. Evidence to date suggests that such forms of control are not specific to any particular part of the value chain or type of activity, but are prevalent in shaping global trade patterns in such industries as automotive components, consumer electronics, garments, hotels, and information technology and business process services. The United Nations estimates that NEM investment generated $2 trillion in sales in 2010. While NEM investments can enhance the productive capacities of developing countries through integration into global value chains, employment in the affected industries can be highly cyclical and easily displaced. Currently, foreign investment spans all countries, industrial sectors, industries, and economic activities and has become a major conduit for goods, capital, and technology flows between the developed and the developing economies. Foreign direct investment often is a much-needed source of funds for capital formation in developing countries and foreign investment accounts for important shares of employment, sales, income, and R&D spending in developing countries. On a historical cost basis, or book value basis, the Department of Commerce estimates that by the end of 2011, U.S. firms had accumulated $4.1 trillion worth of direct investment abroad, compared with the $2.6 trillion foreign investors had spent to acquire or establish businesses in the United States, when direct investment is measured at historical cost. As Figure 1 shows, direct foreign investment flows generally have increased since 2003, while U.S. direct investment abroad dropped sharply in 2005 as a result of one-time tax provisions, but then rebounded sharply in 2006. New spending by U.S. firms on businesses and real estate abroad, or U.S. direct investment abroad, rose by 27% in nominal terms in 2011 over the amount invested in 2010, reflecting improvements in the rate of economic growth in Europe and elsewhere. Net investments rose from $328 billion in 2010 to $419 billion in 2011, including adjustments for changes in the value of some components, according to the Department of Commerce. According to preliminary data, U.S. direct investment abroad in 2012 was about $350 billion, a drop of 16% from the amount invested in 2011. Similarly, foreign direct investment in the United States in 2012 dropped by 25% from the amount invested in 2011. U.S. direct investment abroad slowed due to reductions in reinvested earnings, intercompany debt investment, and net equity investment. Despite increases in income and earnings in 2012 compared with 2011, foreign direct investment in the United States fell by $60 billion to $175 billion in 2012, a drop of 25% compared with the $234 billion invested in 2011, due to a sharp reduction in net equity investment and in intercompany debt. Globally, the total, or cumulative, amount of foreign direct investment exceeded $21 trillion in 2011 (the latest year for which detailed data are available), as indicated in Figure 2 . Nearly three-fourths of this amount is invested in the most economically advanced developed economies. The developed economies not only are the greatest recipient of investment funds, but they are also the greatest source of those funds. Similar to the United States, those countries that are the largest overseas investors also tend to be the most attractive destinations for foreign investments. The clear exception to this general observation is Japan, which had invested over $900 billion abroad through 2011, but had received over $225 billion in investment inflows. Among the developing economies, Asia, which includes China, has accumulated $4 trillion in direct investment, followed by Latin America ($2 trillion) and Africa ($600 billion). Global direct investment flows picked up sharply after 2004, following three years of reduced flows. According to the United Nations' World Investment Report , the largest 100 multinational corporations in the world experienced a stagnation of their sales, employment, and growth in assets from 2000 to 2003, but global foreign direct investment flows picked up in the 2006-2007 period before falling in 2008, as indicated in Table 1 . In 2006 and 2007 global direct investment flows grew by 38% and 18%, respectively, to reach nearly $2 trillion. The rise in global direct investment flows was driven by an increase in corporate profits worldwide and resulting higher stock prices that raised the value of cross-border mergers and acquisitions. In 2008, global direct investment flows fell by 14% to total $1.7 trillion, due in part to the tightening up of credit markets and slowing economic growth. Furthermore, the global financial crisis sharply reduced global investment flows in 2009 to $1.1 trillion as capital markets reduced funds available for mergers and acquisitions. The developed economies generally absorb about two-thirds of global direct investment flows, with the developing economies sharing the rest. Africa continues to receive the smallest share, generally less than 3%, with Latin America receiving about 8% and Asia getting between 18% and 22%. These shares changed abruptly in 2009 as the financial crisis tightened credit and reduced merger and acquisition activity, a major factor in direct investment in the developed economies. In 2011, however, global direct investment flows increased to all major geographic regions, but particularly to developed economies, which experienced a 21% increase in direct investment from the amount received in 2010. U.S. and Foreign Multinational Companies By the end of 2010, there were more than 2,300 U.S. parent companies with nearly 27,000 affiliates operating abroad, as Table 2 indicates. In comparison, foreign firms had over 6,000 affiliates operating in the United States. U.S. parent companies employed nearly 23 million workers in the United States, compared with the 13.3 million workers employed abroad by U.S. firms and slightly less than 6 million persons employed in the United States by foreign firms. Although the U.S.-based affiliates of foreign firms employ fewer workers than do the foreign affiliates of U.S. firms, they paid almost as much in aggregate employee compensation in the United States as did the U.S. affiliates operating abroad. The data also suggest that U.S. parent companies are more efficient than either the U.S. affiliates of U.S. firms or foreign firms operating in the United States with higher output per employee. Foreign firms operating in the United States are more capital intensive relative to employment than U.S. parent firms or U.S. affiliates, likely reflecting the newer age of the capital stock of the foreign firms. The U.S. affiliates of foreign companies, however, had one-quarter higher value of gross product than did the foreign affiliates of U.S. firms operating abroad. The foreign affiliates of U.S. firms, however, had total sales that were nearly twice as high as that of the U.S. affiliates of foreign firms, likely reflecting the slowdown in economic growth that had begun in the United States. The foreign affiliates of U.S. firms, however, paid considerably more in taxes to foreign governments than did the affiliates of foreign firms operating in the United States. The overseas affiliates of U.S. parent companies also paid nearly twice as much in taxes relative to their sales as did U.S. parent companies and as did foreign-owned affiliates operating in the United States. U.S. multinational companies also play an important role in the U.S. economy, as indicated in Table 3 . According to the total output of U.S. parent companies, or gross product, they produced $2.9 trillion in goods and services in 2010, up slightly from the $2.4 trillion dollars they produced in 2009. This amount represented about 23% of total U.S. private industry gross product, a share of total gross product of U.S. parent companies that was the highest since 2000. The data also demonstrate the impact the improvement in the U.S. economy in 2010 had on the operations of U.S. multinational companies, as those companies grew slightly faster than the economy as a whole and increased their share of private gross product. The manufacturing sector presents a similar picture. During the decades of the 1990s and the 2000s, manufacturing production experienced a slow decline as a share of U.S. parent company gross product, falling from 53% of total output in 1994, to 39.2% in 2010, reflecting the slowdown in the rate of growth in the U.S. economy and the decline overall in the share of the U.S. economy devoted to the manufacturing sector. After the turnaround in U.S. economic growth in 2003, the share of output arising from the manufacturing sector rose to 45.7% in 2005 among U.S. parent companies, although the manufacturing sector continued to slide as a share of overall U.S. gross product and as a share of gross product of multinational firms. Within the U.S. economy, U.S. multinational corporations (MNCs) rank among the largest U.S. firms. According to data collected by the Commerce Department's Bureau of Economic Analysis (BEA), when American parent companies and their foreign affiliates are compared by the size structure of employment classes, 40% of the more than 2,000 U.S. parent companies employ more than 2,499 persons each. These large parent firms account for 95% of the total number of people employed by U.S. MNCs. Employment abroad is even more concentrated among the largest foreign affiliates of U.S. parent firms: the largest 2% of the affiliates account for 90% of affiliate employment. Employment A major source of contention in the United States regarding foreign investment focuses on the impact such investment is having on U.S. employment. Some observers argue that actions by U.S. parent companies over the past two decades are different from previous experiences with foreign investment, because the parent companies are shifting jobs, capital, and technology offshore to their foreign affiliates in ways that are distinctly different from previous periods, and thereby are reducing employment in the United States. The Department of Commerce's Bureau of Economic Analysis provides the most comprehensive set of data on U.S. direct investment abroad and on foreign direct investment in the United States. These data, however, were not designed to link employment gains or losses in the United States, either for individual jobs, individual companies, or in the aggregate, with the gains and losses of jobs abroad. The data also do not capture the extent to which firms may outsource such services as legal, payroll, accounting, and advertising to other firms, both domestic and foreign. While estimates of this effect span a wide range, studies by the National Association of Public Administrators (NAPA) concluded that outsourcing services to domestic firms was substantially larger than other types of business restructuring. The data in Table 4 indicate that the employment trends of U.S. parent companies also are sensitive to economic conditions in the U.S. economy, particularly during periods in which economic growth slows down, as it did in the early 1980s, 1990s, in the early 2000s, and again in 2008. Foreign investment data seem to indicate that, despite, or perhaps because of, the growing international linkages between economies, an expansion or a contraction in the rate of growth in the U.S. economy affects employment among U.S. parent companies more than it affects employment among the overseas affiliates of these parent companies. Nevertheless, changes in jobs among U.S. parent companies that are related to the overall rate of growth of the economy also affect the rate of growth in other countries and, therefore, in employment among the foreign affiliates, though not necessarily by the same magnitude, as indicated in Figure 3 . Between 2002 and 2008, job gains were greater among the foreign affiliates of U.S. firms than among the parent companies, which is especially apparent when expressed in index number terms. Employment among the parent companies declined in 2008, but rebounded in 2009 and 2010, while employment among the foreign affiliates of those U.S. firms fell in 2009 and 2010, reflecting the impact of the economic recession and the sovereign debt crisis in Europe on the operations of the European affiliates of U.S. parent companies. The historical data generally indicate that the number of employees in the parent companies and in the affiliates tend to rise and fall in a broadly similar pattern. While international linkages between U.S. and foreign economies mean that economic conditions in the United States have an impact on economic conditions abroad, there appears to be no distinct pattern between the creation or loss of jobs within U.S. multinational companies and a commensurate loss or creation of jobs among the foreign affiliates of those companies. Indeed, within most of the major developed countries, those economic forces that spur direct investment inflows also boost direct investment outflows. As a result, foreign direct investment may create jobs in the foreign affiliate that substitute for jobs in the parent company, but foreign investment may also positively affect job creation in both the parent company and the foreign affiliates, which makes it difficult to identify any broad trend regarding the employment effects of direct investment. Source: Data developed by CRS from data published by the Department of Commerce and the Department of Labor. The apparent lack of a direct linkage between job gains and losses among parent companies and their foreign affiliates likely arises from the many factors that can affect job gains and losses both within individual companies and within the economy as a whole. Economists typically categorize unemployment as cyclical, structural, seasonal, and frictional. Only the first two types are relevant to the current discussion and are likely to account for the largest share of unwanted job changes during any given year. Cyclical changes in employment arise from changes in the economy associated with an economic expansion or contraction; structural changes in employment are associated with the long-term changes in the economy that arise from technological advances or other factors that alter the basic make-up of the economy. When cyclical and structural unemployment coincide it often is difficult to distinguish between them. Long-term changes in the basic structure of the economy, especially in such dynamic economies as the U.S. economy, alter the composition of jobs in the economy. Such changes occurred during the Industrial Revolution, when large numbers of workers migrated from farms to the rapidly developing manufacturing industries in northern cities. These structural changes represent the contraction and expansion of individual industries within the economy that arise from changes in technology and productivity that also direct changes in the composition of the nation's trade activities and foreign investment patterns. Other job changes are related to the impact of the business cycle on the economy. Such a cycle is characterized by a general slowdown or expansion in the rate of growth in the economy due to broad macroeconomic factors and generally affects large segments of the economy. Employment Trends Both U.S. parent companies and their foreign affiliates lost employment during the economic contraction of the early 2000s and again in the 2008-2009 period, although employment by the foreign affiliates increased sharply in 2010, as is indicated in Table 3 . These multinational companies apparently are affected at times more by the cyclical changes in the economy than are purely domestic firms. As a result, the parent companies' share of total U.S. civilian employment (the relative share of U.S. employment represented by the U.S. foreign affiliates is provided only for comparison purposes) declined from 2000 until 2008, when it began to increase, largely as a result of losses in U.S. civilian employment that were greater in relative terms than those among the parent companies. The affiliates of foreign firms operating in the United States followed a similar and experienced a declining share of total U.S. civilian employment between 2000 and 2005. The foreign affiliates' share of U.S. civilian employment rose between 2005 and 2008, before declining in 2009 and 2010. During the entire period most of the workers added by the affiliates were added through acquisitions of existing U.S. firms, rather than by establishing new enterprises. Merger and acquisition activity dropped sharply in 2008 as a result of the global financial crisis, which made it difficult for firms to access lines of credit for acquisitions. While acquisitions do not necessarily add to the total number of firms in the economy, they do support existing jobs and may even add to the overall demand for workers. Employment among U.S. parent companies dipped between 2001 and 2004 in response to an economic downturn that occurred during this period. Employment among U.S. parent companies and their foreign affiliates rose after 2004 as economic growth in the United States and abroad rebounded. During each U.S. economic downturn, the level of employment of U.S. parent companies declined more sharply than it did among their foreign affiliates and the decline in employment lasted longer than it did among the employment of the foreign affiliates. As a result, the share of employment represented by the foreign affiliates increased from 26% in the 1980s to 34% in 2005 as a share of total U.S. multinational company employment, as indicated in Figure 4 . Between 2005 and 2010, U.S. civilian employment declined from 136 million to 139 million as the financial crisis and the economic recession exacted steep cuts in jobs available in the economy. Parent company share of total U.S. civilian employment apparently increased in the 2009 to 2010 period as parent companies have lost employment at a slower rate than the economy as a whole. Employment by Sector and Area Despite various concerns about the nature of recent foreign investment, Department of Commerce data indicate that recent foreign investment activity offers no evidence of a major deviation from well-established long-term trends. These trends indicate that about half of the employment of the foreign affiliates in 2010 was in the manufacturing sector, as indicated in Table 5 . (Data in this table are for the non-bank U.S. affiliates rather than for the more inclusive category used elsewhere in order to provide detailed industry-level data.) Within the manufacturing sector, employment by the foreign affiliates of U.S. firms was concentrated most heavily in the transportation equipment sector, including automobile production, chemicals, and computers and equipment. Employment in the services sectors, finance and insurance, wholesale trade, and retail trade grew most rapidly from 2008 to 2010 among the U.S. foreign affiliates. Employment in most sectors increased or remained constant through the 2008-2010 period, but declines were experienced in the mining sector, computers and electronic products, broadcasting and communications, and a broad grouping of other industries. Source: Department of Commerce. By country, over two-thirds of the investments and the employees of U.S. overseas investors are in the most highly developed economies where labor compensation, standards of living, and consumer tastes are most closely comparable to those in the United States. These countries are also the largest foreign direct investors and the largest foreign employers in the United States, as indicated in Figure 5 and Figure 6 . U.S. direct investment abroad and employment have been heavily concentrated in Europe since the end of World War II. This investment coincided with the rapid expansion in economic activity that followed WWII and the formation of the European Economic Community (EEC), now the European Union. Initially, U.S. firms wanted to establish a foothold inside the tariff protection created by the formation of the EEC. Access to the European market continues to draw U.S. direct investment. Moreover, with the enlargement of the European Union, the largest share of U.S. direct investment abroad likely will remain focused on this region for some time to come. Nevertheless, from 2008 to 2010, employment by U.S. firms in Europe broadly fell, reflecting the economic recession and sovereign debt crisis. In Asia, particularly in China, Malaysia, and Singapore, affiliate employment grew especially rapidly. In China, for instance, employment over the 2008-2010 period grew by 61% to reach 1.5 million. As a whole, employment by U.S. firms in Asia accounts for one-third of the total employment by U.S. firms abroad. Some U.S. observers are concerned that the U.S. economy is losing jobs to developing countries, because U.S. firms are closing plants in the United States and opening plants in countries where wage rates and environmental standards are considerably below those in the United States. The data, however, show no appreciable change in the underlying trend that favors investment and jobs in developed economies. In addition, U.S. foreign affiliates as a whole lost employment in the early 2000s, similar to U.S. parent companies, counter to the concept of firms shifting jobs abroad. Employment losses were mostly concentrated among the highly developed economies of Europe, because their close ties with the U.S. economy made them highly susceptible to the financial crisis and the subsequent slowdown in the U.S. economy. Among the developing countries, U.S. investors have long been attracted to Latin America, likely because of its close proximity to the United States. In 2010 U.S. affiliates in Mexico had 1.3 million employees, third behind affiliates in the China with 1.5 million employees and the United Kingdom with nearly 1.4 million employees. At times, employment associated with U.S. direct investment in Latin America and Asia has increased, while employment in Africa and the Middle East has dropped, leading some observers to conclude that investment and employment among the developed and developing countries represent two relatively independent groups and that little employment is exchanged between them. This proposition would mean that employment shifts occur primarily between affiliated in such areas as Latin American and Asia, and among affiliates in developed countries, primarily within Europe and between Europe and Japan and Canada. On average, the U.S. economy created about 2 million civilian jobs per year from 1982 to 1992 and about 1.7 million jobs per year from 1992 to 2002. From 2003 to 2007, the economy created an average of more than 2 million jobs per year. In 2008, the economy lost more about 5 million jobs as a result of the economic recession. From 2009 to 2010, the economy lost about another 800,000 jobs. The foreign affiliates of U.S. parent companies created an average of about 24,000 jobs per year from 1982 to 1992 and about 300,000 jobs per year from 1992 to 2002. From 2005 to 2007, these affiliates created more than 300,000 jobs per year, reflecting the increase in economic activity abroad. This amount dropped to about 100 thousand jobs in 2008, again reflecting the economic recession and financial crisis. These affiliates lost about 100 thousand jobs in 2009, but gained about 2.5 million jobs in 2010. In part, this gain in jobs could be attributed to the stimulus efforts governments in Europe and elsewhere adopted in response to the economic recession that followed the financial crisis. There is no indication from the data, however, how many, if any at all, of the jobs created abroad by U.S. affiliates may have come at the expense of jobs created in the United States by U.S. parent companies. Over both periods, about two-thirds of the jobs that were added were in developed countries. As a result, U.S. foreign affiliates created on average about 100,000 jobs per year in low-cost developing countries during the 1992 to 2007 period, or about 6% of the average number of jobs created by the U.S. economy in a year. The 2008-2010 period, however, brakes from past trends. The financial crisis and the economic recession were centered in the most highly developed economies that had the most highly developed financial markets. As a result, employment among affiliates in Europe dropped, while employment increased among affiliates in Latin America, Africa, the Middle East, and Asia. Gross Product Another concern some observers have expressed about U.S. direct investment abroad is that as U.S. parent companies shift jobs abroad, they also transfer economic production abroad, thereby permanently replacing U.S. domestic production with foreign production. This effect would be partially muted by foreigners investing in the United States. A large share of foreign direct investment in the United States reflects foreign acquisitions of existing U.S. firms. In general, such acquisitions are not characterized as creating new jobs, but they may well sustain U.S. employment and production and potentially prevent job losses. Over time, there is bound to be some shifting of jobs and economic activities within the U.S. economy and between economies as part of the overall structural changes that occur within such dynamic economies as the U.S. economy. Such shifts in employment would continue to occur even in the absence of foreign investment. In addition, such shifting occurs as a result of greater economic specialization both within countries and between countries. As Table 6 indicates, U.S. parent companies had a gross product, or total U.S. output, of $2.9 trillion in 2010, representing 68% of the total output of U.S. multinational companies, compared with a gross product of their majority-owned foreign affiliates of $1.2 trillion. As the U.S. economy expanded rapidly in the last half of the 1990s through 2001, U.S. parent companies performed better than their overseas affiliates and increased their share of total multinational company gross product from 74.6% in 1995 to 76% in 2001. Since then, however, output among U.S. parent companies grew at a slower pace than did that of their majority-owned foreign affiliates, which had grown to account for nearly 30% of total output of the U.S. multinational companies in 2007. Since then, the foreign affiliates' share of total firm output has remained fairly stable at 33.6%. U.S. Multinational Companies While U.S. MNCs used their economic strengths to expand abroad during the 1980s and 1990s, the U.S.-based parent firms lost market shares at home, in large part due to corporate downsizing efforts to improve profits. U.S. MNC parent companies' share of all U.S. business gross domestic product (GDP)—the broadest measure of economic activity—declined from 32% to 25% from 1977 to 1989. This share stayed fairly constant at about 22% through much of the 1990s until 1998, when the parent companies experienced a short boost in their share of U.S. GDP as they benefitted from the rapidly growing U.S. economy. The economic slowdown in 2002 affected the parent companies disproportionately, as they lost shares of GDP. During the period from 1989 to 1998, these MNC parent companies increased their share of all U.S. business GDP in the services sector, which rose from 6% to 8% of U.S. GDP. The MNC share of all other industries rose from 16% to 18% during the 10-year period, but they lost shares in the manufacturing sector (from 62% to 58%) at a time when the U.S. manufacturing sector as a whole was shrinking as a share of national GDP (from 20% to 16%). U.S. parent companies continue to place the largest share of their annual investments in developed countries, primarily in Western Europe, as indicated in Table 7 . This tendency increased from 1999 to 2003 when U.S. direct investment shifted even more in favor of the richest developed economies: the share of U.S. direct investment going to developing countries fell from 28% in 1999 to 25% in 2003. In the 2005 through 2009 period, investment flows were somewhat erratic due to a one-time tax provisions in 2005 that sharply reduced U.S. direct investment abroad that year and the following year as flows returned to their historical trend, and the economic recession in 2008 and 2009. Investment outflows increased again in 2010 and in 2011, when U.S. direct investment abroad increased by 30% over the amount invested in 2010. In particular, U.S. direct investment abroad increased in Latin America, where economies were not directly affected by the financial crisis, and in Canada and Western Europe. During the five-year period from 2005 to 2010, flows to Asia increased as a share of total U.S. direct investment abroad, primarily due to a large increase in direct investment in China. Shifts in U.S. direct investment abroad over the last decade reflect fundamental changes that occurred in the U.S. economy during the period. As investment within the U.S. economy shifted from extractive, processing, and manufacturing industries toward high technology services and financial industries, U.S. investment abroad mirrored those changes. Consequently, U.S. direct investment abroad focused less on the extractive, processing, and basic manufacturing industries in developing countries and more on high technology, finance, and services industries located mostly in highly developed countries with advanced infrastructure and communications systems. Investments in the finance and services sectors grew twice as fast, on the whole, as direct investment abroad overall during the 1996-2000 period. Within the manufacturing sector, food processing, chemicals, and metals lagged in growth behind the industrial machinery, electronic, and transportation sectors. Foreign-Owned Firms The performance of foreign-owned establishments, on average, presents a mixed picture when compared with their U.S.-owned counterparts. Historically, foreign-owned firms operating in the United States have had lower rates of return, as measured by return on assets, than U.S.-owned firms, although the gap between the two groups appears to have narrowed over time. According to the Bureau of Economic Analysis, this narrowing of the gap in the rate of return appears to be related to age effects, or the costs associated with acquiring or establishing a new business that can entail startup costs that disappear over time and market share. By other measures, foreign-owned manufacturing firms appear to be outperforming their U.S. counterparts. Although foreign-owned firms account for less than 3% of all U.S. manufacturing establishments, they have had six times more value added on average and seven times higher value of shipments than other manufacturing establishments. The average plant size for foreign-owned firms is much larger—six times—than for other U.S. firms, on average, in similar industries. This difference in plant size apparently rises from an absence of small plants among those that are foreign-owned. As a result of the larger plant scale and newer plant age, foreign-owned firms paid wages on average that were 60% higher than other U.S. manufacturing firms, had 40% higher productivity per worker, and 58% greater output per worker than the average of comparable U.S.-owned manufacturing plants. Foreign-owned firms also display higher capital intensity in a larger number of industries than all U.S. establishments. Differences between foreign-owned firms and all U.S. firms should be viewed with some caution. First, the two groups of firms are not strictly comparable: the group of foreign-owned firms comprises a subset of all foreign firms, which includes primarily very large firms; the group of U.S. firms includes all firms, spanning a broader range of sizes. Secondly, the differences reflect a range of additional factors, including the prospect that foreign firms which invest in the United States likely are large firms with proven technologies or techniques they have successfully transferred to the United States. Small foreign ventures, experimenting with unproven technologies, are unlikely to want the added risk of investing overseas. Foreign investors also tend to opt for larger scale and higher capital-intensity plants than the average U.S. firm to offset the risks inherent in investing abroad and to generate higher profits to make it economical to manage an operation far removed from the parent firm. Cyclical vs. Structural Changes Some observers are concerned that U.S. direct investment abroad is an outlet for U.S. multinational companies that are outsourcing jobs overseas, or that they are shuttering plants in the United States and shifting plants and jobs to their affiliates abroad. Indeed, selected anecdotal evidence suggests that there are instances in which some firms may have shifted part of their operations abroad, but it is not clear if these incidences represent isolated activities or are part of a general pattern of behavior. It also is not clear if U.S. firms have invested abroad in order to shift their operations from the United States to a foreign location for export back to the United States, or if they have invested abroad primarily to serve the foreign market. The Bureau of Economic analysis (BEA) of the Department of Commerce collects and publishes an extensive amount of data on U.S. parent companies and their foreign affiliates. These data, however, are not collected in order to capture the outsourcing phenomenon. Indeed, no data are collected specifically to capture the closing of a production facility in the United States and the offsetting opening of a facility abroad. Given the lack of data that tie directly the closure of a plant in the United States with the opening of a plant abroad, one approach to capturing indirectly the outsourcing phenomenon is by examining other data, such as trade, output, and employment of U.S. multinational firms across various industries and different time periods for evidence of outsourcing. If U.S. multinational firms are shifting parts of their activities abroad to foreign affiliates, such outsourcing activities would be expected to appear as a direct substitute for U.S. domestic output and employment by the foreign affiliates, or there would be some direct relationship between a decrease in the domestic activities of the parent company and an increase in the activities of foreign affiliates. Such shifts in economic activity between parent firms and foreign affiliates would be expected to signal competitive weaknesses in the location of the parent firm and, therefore, favor a change in production location. In addition, such shifts in production between parent firms and foreign affiliates would be expected to occur during periods of economic downturn, when parent firms would be expected to reduce output and employment, and during periods of economic growth, when firms in growing industries would be expected to increase output and employment. During periods of economic recession, or a slowdown in the rate of economic growth, firms across a broad range of industrial sectors generally reduce output and employment. On the other hand, firms that reduce their operations and employment at home during periods of healthy economic growth may well do so as a result of competitive pressures that reflect long-term decline of the sector and structural changes in the underlying fundamentals of the economy. In particular, the U.S. economy has been shifting away from labor-intensive activities toward capital-intensive activities, including higher-wage knowledge-intensive activities. As a result of these structural changes, firms can respond to the economic pressures in a number of different ways in order to remain competitive; some firms may respond by shifting part or all of their operations abroad. To the extent that firms respond to competitive or structural changes in the economy by outsourcing abroad, it seems reasonable to expect that an expansion in the operations of a foreign affiliate would occur simultaneously with a contraction in the operations of the parent company, or that economic activity in the foreign affiliate would be a substitute for economic activity by the parent company. In an advanced economy such as the U.S. economy, there is always some amount of churning that occurs as some industries grow and others decline. Indeed, most economists agree that in order for some sectors of the economy to expand, other areas of the economy must shrink as capital and labor are shifted from declining to growing sectors of the economy. Such structural changes are different from cyclical changes in the economy that represent short-term expansions and contractions in the economy. Structural changes can occur in industries that are maturing and experiencing economies of scale and improvements due to technological improvements, or in declining industries that are shedding jobs and capital. It is not always possible to tell which stage of economic change specific sectors are experiencing, but such a distinction is important in order to understand how direct investment is affecting the economy, and for determining what, if any, legislative prescription would be appropriate. In general, industrial sectors in decline as a result of structural changes in the economy would be expected to experience a persistently lower annual rate of growth and overall decline in employment on average compared with the average of industries in the economy through periods of economic expansion and contraction, whereas industries not in structural decline would experience such losses only during periods of economic contraction. To assess this general proposition, detailed data published by the BEA on a broad range of industries represented by U.S. parent companies and their foreign affiliates are used to compare differences in performance between U.S. parent companies and their foreign affiliates during periods of economic expansion and contraction. The data in Table 8 represent average annual rates of change in gross production and employment across a range of industrial sectors during three time periods, representing one period of a relatively faster rate of growth and two periods of relatively slower rate of growth, including the economic recession that followed the 2008-2009 financial crisis. The data are compared to determine if there is a discernible pattern in the way U.S. parent companies have shifted production or jobs to their foreign affiliates in the 2000 to 2002 period and the 2006-2010 period, when economic growth slowed in the United States, that is different from what occurred during the 2002-2006 period when the rate of growth in the U.S. economy was relatively strong. The data are then reviewed to determine if there are perceived trends in the shifting of production and employment from parent companies to foreign affiliates that can be attributed to a broad outsourcing phenomenon that is arising from structural changes in the economy or to cyclical changes that are associated with the business cycle. During periods of cyclical change, such as an economic recession, a large number of firms in various industrial sectors can be expected to experience a slower rate of economic growth and a loss of employment. In contrast, firms experiencing structural changes would be expected to experience a mixed performance, with some firms gaining in output and employment while others lose output and employment. The data in Table 8 compare two periods of slow economic growth—2000-2002 and 2006-2010—with the economic expansion in the 2002-2006 period. In the first and third periods, the U.S. economy grew at an average annual rate of 1.4% per year and 0.2%, respectively and at an average annual rate of growth of 3.0% during the second period. Economic sectors that are experiencing long-term structural changes would be expected to perform at lower rates during all three periods, while sectors not subject to structural change would be expected to resume a relatively higher rate of growth during periods of economic expansion. During the period between 2000 and 2002, the U.S. economy grew at an average annual rate of 1.4% and employment grew at an average annual rate of 0.8%. At the same time, output by U.S. parent companies outpaced the performance of the U.S. economy as a whole and increased by an average annual rate of 9%; output among the foreign affiliates increased by an average annual rate of 16%. Despite this strong growth performance, employment among the parent companies grew by an average annual rate of only 1.0% and by an average annual rate of 0.2% among the affiliates, marking the jobless recovery of the early 2000s. Most of the sectors that experienced negative rates of growth were in the manufacturing, retail trade, and wholesale trade industries. In the next phase, the U.S. economy grew at an annual average rate of 3.0% in the 2002-2006 period and employment grew at an average annual rate of 1.5%. U.S. parent companies, however, increased their output by an average annual rate of 7.5%, more than double the rate for the economy as a whole, but lower than during the 2000-2002 period, and their foreign affiliates increased output by an average annual rate of 15.5% as indicated in Figure 7 and Figure 8 . During the same four-year period, parent companies expanded their employment by an average annual rate of 0.5%, while their foreign affiliates expanded employment by an average annual rate of 5.4%. Employment among the parent companies continued to fall in most manufacturing sectors, while the foreign affiliates fared somewhat better, but experienced similar declines in employment in the manufacturing sector. Above average increases in the average annual rate of growth in employment in oil and gas extraction and in wholesale trade were among the few bright spots for parent companies during this period. By contrast, the foreign affiliates experienced strong growth in employment in the real estate, retail trade, and services sectors. In the 2006-2010 period, when the U.S. economy barely managed a positive average annual rate of growth, parent companies and their foreign affiliates experienced positive average annual rates of growth of 3.4% and 6.0%, respectively. Moreover, both parent firms and their foreign affiliates posted positive rates of growth in employment over the period, in contrast to the drop in civilian employment in the United States. Even in the electronic equipment sector, where output among U.S. parents and their foreign affiliates increased by 26.0% and 24.2%, respectively, during the 2006-2010 period, employment among parent firms fell at an average annual rate of -1.8% and increased at an average annual rate of 5.4% among the foreign affiliates. These trends make it difficult to detect a general shift of jobs abroad by U.S. parent companies. U.S. parent firms, or the parent firms of multinational corporations, outperformed the U.S. economy as a whole, but also experienced the negative effects of the economic slowdown during the 2006-2010 period. During the three periods examined, multinational firms outperformed the U.S. economy as a whole in terms of average annual rates of growth. In contradiction to the expected behavior of firms engaging in outsourcing, both employment and output of the parent firms and the foreign affiliates generally seem to follow the same pattern. This partial synchronization may reflect the overwhelming impact the U.S. economy has on the global economy due to a growing network of economic and financial ties. It also makes it difficult to observe a general, or broad-based, outsourcing effect from parent firms to foreign affiliates. Parent firms that are active in industrial sectors that perform poorly during economic expansions or contractions also seem to have foreign affiliates that perform generally the same, indicating that structural changes in the U.S. economy may mirror similar changes that are taking place in other advanced economies where much of U.S. direct investment abroad is concentrated. The average annual rate of growth in output in the manufacturing sector was positive for both parent companies and their foreign affiliates over all three periods, although the foreign affiliates outperformed their parent companies with a faster average annual rate of growth in the second and third periods as indicated in Figure 9 and Figure 10 . Over the three periods, however, the U.S. parent companies experienced an overall decline in employment in manufacturing from 9.2 million in 2000 to 6.9 million in 2010. During the same 10-year period, employment in the manufacturing sector among the foreign affiliates increased from 4.4 million to 5.5 million. The financial crisis and economic recession not only reduced consumer spending, but caused a tightening in credit for consumers and firms and had a noticeable negative impact on the output of parent firms in the manufacturing sector. During the 2006-2010 period, output among the parent companies increased by an average annual rate of 1.8%, about half that of their foreign affiliates and more than half that experienced in the 2002-2006 period of relatively stronger growth in output. The decline in manufacturing employment among parent companies reflects the overall loss in employment in the U.S. manufacturing sector, which continued to experience structural changes and losses in employment, despite a robust increase in productivity. In contrast, employment among the foreign affiliates increased at an average annual rate of 1%, commensurate with their average annual rate of growth in output. During the 2000-2002 period, when the pace of U.S. economic growth quickened, gross product in the manufacturing sector among parent companies grew at an average annual rate of 6.8%, while employment fell at an average annual rate of 2.7%, likely reflecting the effects of the advanced stages of structural retrenchment that had already occurred. In comparison, U.S.-owned foreign manufacturing affiliates experienced a 2.7% increase in average annual gross product, but an average annual decrease in employment of 2.3%. During the recovery of 2002 to 2006, however, gross product among U.S. parent manufacturing companies increased at an average annual rate of 5.2%, while the foreign affiliates experienced an average annual increase of 11.6%. Despite this recovery in output, U.S. parent companies continued to experience a loss of manufacturing jobs, while the foreign affiliates expanded their employment rolls by an average annual rate of 2.5%. In other major industries, the results are mixed. The impact on wholesale trade shows the impact of the economic slowdown in the 2000 to 2002 period. In the 1995 to 1998 period, as the U.S. economy expanded, gross product in the wholesale trade sector among parent companies grew at an average annual rate of 26.6% and employment grew at an average annual rate of 16.6%. Among the foreign affiliates in the wholesale trade sector, gross product increased at an average annual rate of 1.2%, but employment increased at an average annual rate of 32.9%. In the 2000 to 2002 period, when the rate of economic growth had slowed, gross product among parent companies fell at an average annual rate of 6.9%, while employment also fell. Among the foreign affiliates, gross product increased at an average annual rate of 7.4. In the 2002 to 2006 period, however, both U.S. parent companies and their foreign affiliates experienced a resurgence in the average annual rate of growth in the wholesale trade sector (12.5% and 9.0%, respectively); employment grew at a much slower average annual rate among the parent companies (10.4%) than among the foreign affiliates (0.6%). In the 2006-2010 period, output increased at a far more robust pace for parent firms than foreign affiliates (7.1% to-3.8%, respectively), but employment fell among the parent firms and increased among the foreign affiliates (-1.3% and 0.9%, respectively). Finance, a sector where the United States is generally believed to have a competitive edge, shows the impact of the financial crisis on the industry. In the 1995-1998 period, gross product among U.S. parents in finance grew at an average annual rate of 16.7% and employment expanded by 3.9%. Affiliates in finance experienced similarly robust growth: gross product increased at an average annual rate of 20.4% and employment grew at an average annual rate of 9.58% as U.S. finance firms used their expertise to capture market shares abroad. The finance sector was affected by the slower growth in the economy in the 2000 to 2002 period, as average annual gross product among parent companies grew by 8.8%, compared with an increase of 19.2% for foreign affiliates. During the same period, employment among U.S. parent firms in the finance sector fell at an average annual rate of -0.4%, while employment among the affiliates fell at an average annual rate of -11.8%. The response during the recovery period, 2002 to 2006, by both the U.S. parents and the foreign affiliates is unique: gross product among U.S. parents rose at an average annual rate of 11.7% and employment fell at an average annual rate of -4.1%; gross product among the foreign affiliates grew at an average rate of 14.9% and employment grew by 3.1%, likely reflecting the differential effects of the financial crisis on American, European, and Asian finance firms. During the latest period, 2006-2010, the output in the finance sector by parent companies increased at an annual average rate of 1.6%, compared with the foreign affiliates, where output grew at an average annual rate of 6.4%. At the same time, employment among U.S. parent companies fell at an average annual rate of -2.8%, but increased among the foreign affiliates at a rate of 13.8%. This difference in the impact of the financial crisis reflects the impact of the crisis, which initially affected U.S.-based firms disproportionately. In 1999, the Bureau of Economic Analysis changed the composition of industries in its survey to include more high-tech and service sectors. Twenty of these sectors are listed in Table 9 , with data for the 2002 to 2006 period and for the 2006 to 2010 period. During the first period, average annual gross product by parent companies rose in 13 of the sectors, reflecting the higher overall rate of economic growth during the period. In comparison, the foreign affiliates experienced positive average annual rates of growth in 17 sectors. During the same period, the parent companies experienced a negative average annual rate of growth in employment in 12 sectors, while the foreign affiliates experienced negative average annual rates of growth in five sectors. In the 2006-2010 period, when the rate of economic growth slowed generally, U.S. parent companies and their foreign affiliates experienced a negative average annual rate of growth in only two sectors. In addition, both the parent companies and their foreign affiliates experienced negative rates of growth in employment in few of the high-tech and services sectors. These and the preceding data offer little support for the concept that there is a broad rush by U.S. multinational firms to close down plants in the United States and replace them with plants operated abroad by a foreign affiliate. In part this lack of a discernible pattern may reflect the growth in value chains where non-equity investments offer alternatives to traditional equity investments and, thereby, blunt the outsourcing phenomenon. The data also indicate that U.S. parent companies and their foreign affiliates often experience economic events in similar ways, rather than as substitutes so that outsourcing abroad by a parent firms is not always the first option. Trade Another aspect of foreign direct investment that causes concern is the impact foreign direct investment has on the amount of foreign trade associated with those investments. Some observers argue that U.S. direct investment abroad supplants U.S. exports, jobs, and research and development funds, thereby reducing employment and wages in the U.S. economy. Others are concerned that outward direct investment alters the industrial composition of domestic production and trade flows, which can affect the sectoral and regional distribution of employment and the relative demand for skilled and unskilled labor. According to this scenario, as firms invest abroad, they shift production abroad and replace U.S.-based production with exports back to the United States, thereby eliminating jobs in the United States. As production shifts abroad, jobs are lost in the United States and goods that once were produced in the United States are now imported from abroad. However, most studies indicate that, on balance, direct investment abroad does not substitute directly for investment or production at home and that it generally increases U.S. exports and helps sustain employment and wages at home. If a large number of firms engaged in outsourcing, or used foreign direct investment as a substitute for trade and replacement jobs in the parent company, it would be reasonable to expect the share of intra-firm trade to increase over time along with the flow of foreign investment. Such intra-firm trade represents trade between U.S. parent companies and their foreign affiliates and the U.S. affiliates of foreign firms and their foreign parent company. In particular, if firms used foreign investment to displace jobs and domestic production, or outsourcing jobs, it would be reasonable to expect that imports from U.S. foreign affiliates to the U.S. parent company would increase over time as a share of total trade among parent firms. There is little doubt that some firms do indeed replace domestic production with production from abroad, which would shift trade patterns, but the share of U.S. trade represented by U.S. parent companies and their affiliates since the 1990s has not increased as would be expected. Instead, as indicated in Figure 11 , intra-firm exports and imports fell as a share of total U.S. exports and imports during the 1990s. From 2000 to 2003, intra-firm trade, both exports and imports, increased as a share of total U.S. exports and imports respectively, but intrafirm trade in exports and imports since 2003 has trended lower as a share of total U.S. exports and imports. As Table 10 indicates, the share of U.S. exports shipped by U.S. parent companies peaked at 67% in 1994, but dropped to 47% in 2010, when U.S. parent companies exported $600 billion of total U.S. merchandise exports of $1,289 billion. Similarly, the share of U.S. exports shipped by the U.S. affiliates of foreign parent companies fell from 23% in 1992 to 18% of total U.S. merchandise exports in 2010. In addition to the decline in the overall share of U.S. exports, intra-firm trade, or exports from U.S. parent companies to their foreign affiliates, fell from 25% of U.S. exports in 1992 to 21% in 2008, as exports to firms not associated with the parent firm increased. The exports of U.S. affiliates of foreign firms to their foreign parent companies have remained steady at about 9% from 1992 to 2008. Similarly, total intra-firm exports fell from 35% of U.S. exports in 1992 to 30% in 2008. The intra-firm share of U.S. exports remained relatively stable during the economic downturn in the early 2000s, suggesting that such intra-firm trade is more stable than exports as a whole, so that its share rises or falls as U.S. exports fall or rise, respectively, with business cycle conditions. A different view of U.S. exports associated with U.S. multinational companies is offered by the data in Table 11 , which show the intended use of exports shipped to the foreign affiliates of U.S. parent companies by foreign country and industry. According to the data, which were collected as part of the 2009 benchmark survey on U.S. direct investment abroad, of the $227.5 billion in exports shipped by all U.S. persons to the foreign affiliates of U.S. parent companies, which represents about 21% of total U.S. exports, $187 billion was shipped by U.S. parent companies to their foreign affiliates, of which 59% was intended for further manufacture, or was not a final end-product. Similarly, exports shipped by U.S. persons that were not the U.S. parent company had 73% of their total products exported for further manufacturing. Well over 90% of the exports shipped to the foreign affiliates were manufactured goods, representing a broad range of manufacturing sectors. In terms of destination, exports shipped to Canada and Latin America had the highest share of goods that were exported for further manufacturing, while exports shipped to Africa and Asia had the lowest shares of goods that were shipped for further manufacturing. On the import side, intra-firm trade has also declined as a share of total U.S. imports, defying the notion that U.S. firms are supplanting U.S. production with imports by outsourcing production abroad. Until recently, intra-firm imports have remained fairly stable as a share of total U.S. imports as indicated in Table 12 . Imports shipped to U.S. parent companies fell from 41% of total U.S. imports in 1992 to 36% of U.S. imports in 2008, before rising to 42% of total U.S. imports in 2010. In addition, U.S. imports by the U.S. affiliates of foreign firms fell from 35% of U.S. imports in 1992 to 27% of U.S. imports in 2010. Intra-firm imports, or imports from the foreign affiliates of U.S. parent companies to those parent companies, fell from 18% of total U.S. imports to 13% of U.S. imports from 1992 to 2010, which raises questions about the concept of U.S. outsourcing of production abroad replacing U.S. domestic production. During the same 1992-2010 period, imports from foreign parent companies and their associated affiliates (collectively known as the foreign parent group) to their U.S. affiliates fell from 35% to 27% of U.S. imports, so that intra-firm imports as a whole fell from 43% of total U.S. imports in 1992 to 33% in 2010, due in part to imports shipped to importers outside the intra-firm trade relationship. These data do not seem to conform to the argument that U.S. firms have shifted some production facilities abroad and have supplanted domestic production with imports. At the same time, data are not conclusive and may also indicate that foreign investment can stimulate foreign sales, which boosts domestic production and mitigates the economic impact of foreign outsourcing. Sales Another way of viewing the impact foreign direct investment has on U.S. jobs is by examining the sales patterns of U.S. multinational companies. If U.S. parent companies are embarking on a more extensive effort to outsource jobs abroad, it is reasonable to expect that this pattern would affect the sales from these foreign affiliates to the U.S. parent company or that sales to other U.S. persons of foreign-sourced goods would increase over time. In addition, some observers are concerned that certain types of service jobs are being moved abroad with service activities being outsourced to foreign workers. The BEA data on sales of U.S. multinational companies, however, follow a pattern similar to that of the trade patterns of these companies and do not offer conclusive evidence in support of an increase in jobs or activities being outsourced abroad. As Table 13 indicates, the foreign affiliates of U.S. parent companies had $4.9 trillion in sales in 2010. The largest share of affiliate sales—about 61%—is in the local market where the affiliate is located. U.S. parent companies also use their foreign affiliates as a springboard to increase sales in neighboring areas or countries. Such sales to other foreign countries in 2010 accounted for about 30% of the affiliates' sales. European affiliates, which accounted for about half of all affiliate sales, also accounted for the lowest share of their sales back to the United States, where about 40% of their sales are to other foreign countries, mostly to other countries within the European Common Market. Of all U.S. affiliate sales, 7.7% of those sales was shipped back to parent firms in the United States, a share that has remained quite stable over the last decade, and another 1.9% of their sales were to other U.S. persons, or to importers that are not directly associated with the parent company. Affiliates located in the Middle East, which accounted for the lowest amount overall of affiliate sales, sent 13% of their goods back to the parent firm in the United States. A large part of these sales originated in Israel, which has had a free trade agreement (FTA) with the United States since 1985. Among all the regions, sales by affiliates in Europe and Africa are most evenly spread among sales to the United States, local sales, and sales to other foreign countries. Canada represents the most unequal distribution of sales, with 77% of affiliate sales taking place in Canada. Sales by European affiliates are heavily concentrated within Europe: sales either in the local area or to neighboring countries account for 93% of all sales by European affiliates. Sales by affiliates in Latin America are dominated by local sales, which accounted for about 66% of total sales, with about 11% of sales sent to the United States, and 21% is sent to other foreign countries, likely within the region. Sales by industry indicate that manufactured goods account for about half of all affiliate sales and that about 9% of these goods were shipped back to the United States in 2010. The largest share of sales by industry that are accounted for by sales to U.S. parent companies is in the semiconductor industry, as much of the physical making of computer chips has moved off-shore, while much of the high-tech engineering of the design of the chips has remained within the United States. All other industries show low levels of sales back to the U.S. parent, with a heavy concentration on sales within the local market and to other nearby foreign countries. Sales of Services For some observers, another concern is that U.S. parent firms have started moving service jobs offshore, or outsourcing, in sectors that once were thought to be immune to such activities. A report published by the National Academy of Public Administrators (NAPA) on the impact of foreign investment on the services sectors, especially on services involving advanced science and engineering education concluded that, "services off-shoring has had little economic impact on the S&E (science and engineering) labor market, education of S&E workers, or S&E career choices of American students." As Table 14 indicates, U.S. foreign affiliates had $841 billion in services sales in 2008. Of this amount, 4.9% consisted of service sales back to the U.S. parent company. The largest share—74%—of sales of services were made in the local market. This share is substantially higher than the comparable share for sales of goods and services combined and is consistent with the general view that the distinguishing feature of services is that they are consumed where they are produced. Latin America and the Middle East are the areas with the highest share of sales back to the U.S. parent companies, while Asia and Europe represent the areas with the lowest share of services sales back to the U.S. parent. The Commerce Department has suppressed a large amount of the data on sales of services by industry in order to protect the confidentiality of individual firms, but the highest share of service sales in the local market is in the areas of finance and insurance and information. The strong sale of financial services is not unusual, however, given the general conclusion that U.S. financial services companies are among the most competitive in the world. Although the dollar amount of sales of services back to the United States by U.S. foreign affiliates is low compared to the overall amount of sales of services, as Table 15 indicates, the rate of growth in the sale of services back to the U.S. parent has been among the highest of service sales to all areas. Between 2002 and 2006, when the U.S. economy was expanding at a relatively fast pace, the average annual rate of growth in the sales of services back to the U.S. parent company grew by 11%, based mostly on sales by affiliates in Europe. The average annual rate of growth in the sales of services from affiliates in Africa fell by 11%, while sales from other areas rose slowly. In the 2006 to 2010 period during which the pace of U.S. economic growth slowed relative to the previous period, the overall average annual rate of growth in the sales of services rose by nearly 75%. Similarly, sales of services to U.S. parent companies rose by 93%, or at nearly eight times the rate experienced in the previous period. The average annual rate in the sale of services back to the United States grew at especially rapid pace from affiliates in Canada and Africa. Overall, the average annual rate in the sales of services to the local markets grew by about 3.6% in the 2002-2006 period and by 63% in the 2006-2010 period. Sales of services to other foreign countries rose by 37% to in the 2006 period and by 114% in the 2006-2010 period, led by sales in Europe, where slow growth likely spurred firms to seek for sales outside their country of production. Research and Development National governments and many state and local governments spend considerable amounts of money attracting foreign direct investment under the belief that such investment has a positive impact on their respective economies. Although various academic studies have found that such "spillover" effects appear to be small, a 2003 study challenges these conclusions. The authors argue that technology spillovers from foreign direct investment to U.S.-owned manufacturing firms accounted for about 11% of the growth in productivity in the U.S. firms between 1987 and 1996. In addition, as Table 16 indicates, foreign firms generally spend more on high-technology research and development within the United States than U.S. firms spend abroad. All three types of R&D spending indicated in the table experienced a slowdown in R&D spending in 1991, 2002, and 2009 in response to the slowdown in economic growth in those periods. Other than those three years, however, R&D spending in nominal terms has increased every year by all three types of firms. In addition, affiliates of foreign firms operating in the United States outspent the foreign affiliates of U.S. multinational companies in every year, making the United States a net recipient of R&D expenditures. Global Value Chains Beyond the traditional equity-based direct investment, there is a growing prevalence of global value chains, within which production, trade, and investment all take place. These global value chains reflect a new phase in economic globalization in which multinational corporations are engaging in an increasingly complex array of non-equity activities to build interdependent networks of operations. Non-equity activities increase the costs and, therefore, reduce the profits of multinational firms, but reportedly they help firms avoid many of the costs associated with managing the cross-border activities of complex, multi-plant, multi-currency operations. Despite the many advantages of such multi-layer cross border trade and financial connections, the OECD warns that the small margin of error firms build into value chains in order to reduce costs "may well increase systemic risks, because the failure of a single entity or cluster of entities may result in cascading disruptions that can bring down the entire system or large parts of it." For instance, the 2008-2009 financial crisis quickly spread through cross-border linkages in financial markets to other developed economies and caused a serious contraction in the rate of economic growth among the developed economies. In addition, the contraction in economic growth combined with a collapse in trade financing and funding for mergers and acquisitions in 2009 caused a sharp drop in both foreign investment activity and in international trade flows. In turn, the drop in trade flows was transmitted quickly through the value chains to other geographical areas and may have intensified both the speed with which the rate of economic growth fell and the depth of the economic recession. According to the United Nations, the increased use of global value chains by multinational firms has been facilitated by four major developments: (1) the increasing fragmentation of production processes between locations; (2) the growing sophistication in codification of knowledge and the prevalence of industry standards; (3) the improving intellectual property protection regimes worldwide; and (4) the growing capabilities and increasing availability of credible and technologically sophisticated partner firms in new markets. Such activities have grown more rapidly than traditional equity investments over the past decade and are aiding firms in externalizing activities that had predominantly been accomplished within the firm. According to the OECD, the growth of global value chains "strengthens the case for advancing multilateral trade negotiations, as barriers between third countries upstream and downstream matter as much as barriers in direct trading partners and are best addressed together." These alternate forms of ownership mean that firms no longer need to choose between full control of a foreign affiliate through direct investment and no control, but they can choose between a range of modes in which control is exercised in various configurations and to various degrees. Evidence to date suggests that such forms of control are not specific to any particular part of the value chain or type of activity, but are prevalent in shaping global trade patterns in such industries as automotive components, consumer electronics, garments, hotels, and information technology and business process services. The United Nations refers to these mechanisms, or alternative forms of governing the disparate parts of global value chains by multinational companies, as non-equity modes (NEM) of investment, that include partial ownership, joint ventures, contract manufacturing, services outsourcing, contract farming, franchising and licensing, and other forms of contractual relationships through which firms coordinate and control the activities of partner firms. In order to protect their image and manage risks, multinational firms often attempt to control their foreign partners through codes of conduct developed individually by the firms, although these codes generally are founded on internationally agreed upon standards. The international operations of the overseas subsidiaries of U.S. multinational corporations combined with their non-equity investments provide such firms and national economies with opportunities to concentrate on that part of the production process they do best, while using intermediate goods and services imported from elsewhere to complement their own activities. This type of specialization is referred to as vertical specialization in which countries specialize in specific stages and tasks in the value chain. Traditional economic theory argues that firms and nations export goods and services that reflect their international comparative advantage. Global value chains, however, often are characterized by firms that have vertically integrated operations in which the disparate suppliers have a comparative advantage in some portion of the vertically integrated production process, rather than in the production of entire goods or services. Estimating the size of non-equity types of investments is complicated by the various forms such activities can take and the lack of any central entity that coordinates and collects data. Nevertheless, the United Nations estimates that the four main forms of non-equity investment—contract manufacturing, franchising, licensing, and management contracts—accounted for about $2 trillion in global sales in 2010. Contract manufacturing accounted for more than half this total amount, with franchising and licensing accounting for about $300 billion each and management contracts accounting for about $100 billion. Contract manufacturing and services outsourcing represent the largest modes of cross-border activities and comprise significant levels of intra-firm trade. By some estimates, contract manufacturing accounts for 90% of the cost of goods sold in the toys and sporting goods industries, 80% in the consumer electronics industry, and 60%-70% in the automotive industry. In addition, estimating the full economic impact of non-equity investments is challenging, because the impact of such investments varies depending on the type of investment activity, the industry of the investment, and the role the investment plays in the value chain of production. Worldwide, non-equity investments are estimated to employ directly 18 million-21 million workers, according to the United Nations. In addition, the non-equity investments are expected to have a significant impact on ancillary industries that are indirectly affected by non-equity investments. In some cases, however, non-equity investments have been characterized by substandard working conditions, a lack of employment stability, and prolonged reliance on low value-added activities. In addition, jobs in labor-intensive industries are highly sensitive to the business cycle and tend to be eliminated quickly during times of economic distress, magnifying the impact of the business cycle. In recognizing the importance of global supply chains, the Obama Administration issued a national strategy for securing the global supply chains, in which the Administration argued that, the global supply chain system provides the food, medicine, energy, and products that are essential to the economy and security of the United States and is a critical global asset. As a result, the Administration's strategy for strengthening and securing the global supply chains consists of two goals. The first goal of the strategy is to promote the "timely and efficient" flow of commerce while protecting and securing the supply chain from exploitation, and reducing its vulnerability to disruption. The second goal of the strategy is to foster a global supply chain system that is prepared for, and can withstand, evolving threats and hazards and can recover rapidly from disruptions. The growing role of global value chains in production and international trade has raised awareness that "conventional trade statistics may give a misleading perspective of the importance of trade to economic growth and income." In addition, global value chains may present a distorted view of bilateral trade relations and have important implications for trade negotiations between trading partners. Consequently, the World Trade Organization (WTO) and the Organization for Economic Cooperation and Development (OECD) are developing an international input-output model that identifies and creates links between exports in one country and the purchasing industries or final demand consumers in the importing country in order to estimate the real contribution that export-affiliated industries make to economic growth and employment. Table 17 presents data developed by the OECD and WTO on the domestic and foreign sources of value added in the exports of a broad range of countries. The data attempt to capture the extent to which intermediate imports are used in the production of final goods. The data indicate that the foreign and domestic sources of value added in a nation's exports can vary significantly between countries, reflecting a number of different factors. According to the OECD-WTO data set, U.S. exports contain 89% domestic value added and 11% foreign value added, which ranks it among the lowest of the advanced economies in terms of the share of foreign value added in the nation's exports. Countries in the European Union have higher shares of foreign value added, reflecting the special trading relationship among countries that exists within the European Community. Even within the EU, Luxembourg, with nearly a 50% share of foreign content in its exports, ranks as the country with the highest foreign value added content of its exports. Why Firms Invest Abroad Foreign direct investment challenges a number of concepts economists hold about international capital flows. Most explanations of such capital flows argue that direct investment is just another form of international capital flows and that capital flows to locations where the rate of return is the highest. While this may be true in a general sense, the bulk of foreign direct investment takes place between highly developed countries where rates of return are very similar. In addition, those countries that are large investors are also recipients of large amounts of direct investment and investment flows into and out of these countries seem to move together, so that those economic conditions that encourage inflows of direct investment also promote outflows of direct investment. Economists generally believe that firms invest abroad to increase their profits. They are less certain about which factors trigger the initial investment decision, about why firms choose to invest where they do, and about what distinguishes firms that invest abroad from those that remain purely domestic. In most cases, economists conclude that a broad range of factors influence a firm's decision to invest abroad that include far more than a simple search for low-cost labor. The United Nations characterizes the major determinants of foreign direct investment as the confluence of three sets of determining factors that exist simultaneously: (1) the presence of ownership-specific competitive advantages in a transnational corporation, (2) the presence of locational advantages in a host country, and (3) the presence of superior commercial benefits in an intra-firm as against arm's-length relationship between investor and recipient. For some observers, foreign direct investment seems to be characterized by a relatively simple process of firms seeking out low-cost production locations and low-cost resources, including low-cost labor. Multinational firms, however, are motivated by more than a single factor, and likely invest abroad not only to gain access to a low-cost resource, but to improve their efficiency, or to improve their market share. In all, direct investment is a complex activity that involves a long-term commitment to a business venture in a foreign country that requires the coordination and management of considerable resources and assets across countries. The relative importance of characteristics that determine where investments are located depend on a broad range of factors that can change over time and with economic conditions. Although low-cost abundant labor is a principal resource that some firms seek, academic studies of foreign direct investment indicate that it is always labor plus other advantages, particularly industrial infrastructure, that influence a firm's investment decision. Based on observations through 1998, the United Nations concluded that investments based solely on low-cost labor have been highly mobile and have increased dramatically the risk of losing any locational advantage based on just that factor alone. According to the United Nations, technological improvements in the area of telecommunications and computers have helped to make it possible for firms to extend their efficiency strategies across national borders. When firms undertake competitiveness-enhancing foreign direct investment, they seek not only cost-reductions and bigger market shares, but also access to technology and innovative capacity, which can be highly influenced by national policies. Nations that are successful in attracting direct investment generally possess such infrastructure facilities as high-quality telecommunications links, reliable transportation systems, and such skills as accountancy, legal services, purchasing and marketing, finance and R&D capabilities, and large markets. At times, economists have puzzled over the presence of foreign direct investment, because it seemed unthinkable to most of them that nations would simultaneously import and export the same good and that investments would occur within the same industry between two different trading countries and by the same company. For some economists, trade and investment were thought to be opposites; therefore, as long as international trade was free, there was no reason for international investment to occur. These economists based their conclusions on the argument that free trade caused commodity prices between countries to converge. Such a convergence was expected eventually to equalize wage rates and rates of return on investments and to make investing abroad of little economic value. These observations have not been borne out over time as foreign direct investment has become a prominent feature of the globalization process. This suggests that a complex set of factors account for the continued presence of foreign direct investment. Ownership-Specific Advantages Economists generally argue that foreign investment is a viable option for some firms due to economic advantages that arise from a unique set of characteristics that are related to specific types of firms. These characteristics include managerial ability, technical advantages, or market strength, which give firms an incentive to invest abroad and to provide the advantages necessary to be competitive in markets at home and abroad. These analysts conclude that market imperfections and firm-specific factors give some firms economic advantages over their competitors that allow them to attain an oligopolistic position in their home and in foreign markets and to increase their market shares. Such firms possess a competitive advantage over their foreign competitors or they would be incapable of overcoming the disadvantages of operating in a foreign market—additional costs associated with managing an enterprise at some distance, and added political and economic risks. Some of the potential advantages that firms might enjoy could arise from market imperfections and from firm specific advantages that arise from producing in large quantities (economies of scale), the market power of the firm, the absolute size of the firm, cost advantages that arise from patents or other special advantages, or from product-specific advantages (product differentiation). Location Advantages Foreign direct investment may also be one step in a series of actions multinational firms take to grow or to remain competitive by gaining access to new markets. Some of these actions may be related to gaining access to markets that are protected by high tariffs or by other economic barriers. In some cases, foreign investment is driven by a product cycle process that starts in the introduction of a new product and in the growth of market shares. At this early stage, product innovations serve as a basis for market advantages over competitors and production is centered in the home country, with foreign subsidiaries acting primarily as marketing agents. In later phases, competition increases as the innovation is acquired by other producers. In this stage, businesses invest abroad in order to maintain the market shares they gained through exporting. As a result, the transition from exporting, to assembling, to producing in the foreign market may be a natural process, with foreign investment being the facilitating link. While some of the motivation for shifting production abroad may be to avoid tariffs, or other export restraints, lower transportation costs and proximity to the foreign market are important considerations. This shift is apparent in U.S. direct investment abroad where large shares of foreign production are consumed in the local market or shipped to neighboring countries, rather than being exported back to the United States. Evidence indicates that there is little empirical basis for expecting a universal linkage between foreign investment and trade. If there is a tendency for overseas production to substitute for some exports from an area, it appears to be offset by influences that tend to increase exports of related products or services. Studies show that the higher the level of output by a U.S. firm in a foreign area, the higher are the firm's exports from the United States to that area and the smaller are the exports of other foreign firms. This pattern may be influenced by the host country's trade policy, which may discourage imports, thereby encouraging the affiliates of foreign companies to produce locally. Moreover, multinational companies may gain added economic flexibility as a result of their foreign subsidiaries, which allows the parent companies to alter their sources of inputs in response to cheaper imports: instead of altering prices of domestically produced goods to remain competitive. Multinational firms also tend to shift the source of their production to their offshore subsidiaries. Commercial Benefits The decision to invest abroad also represents a critical strategic move for a company operating in a global industry—a move that the company determines jointly with the use and development of its production and distribution facilities worldwide. In some cases, these investments can span a number of locations and production stages through a multi-layer supply chain. Such macroeconomic factors as monetary and fiscal policies have been found to be prime determinants not only of U.S. trade performance but also of a firm's investment behavior through their influence on exchange rates, prices, and wage and productivity behavior. These and such other external conditions as relative growth rates among national economies, exchange rate movements, productivity, trade restraints, and the desire to acquire technology are among the most important factors in determining foreign investments. As a result of these market conditions, multinational firms compensate for such market failures as poorly developed or non-functioning capital or labor markets, by investing abroad and by shifting resources among their foreign subsidiaries. The importance of these factors in motivating direct investment varies over time and among companies and foreign markets. For example, economists trace much of the surge of U.S. direct investment into Common Market countries in the late 1950s and the 1960s to attempts by U.S. companies to avoid trade barriers, to expectations of an increased rate of economic growth in these countries, and to efforts to overcome the perceived overvaluation of the dollar. Once these initial investments were established, a high level of earnings from them continued to be reinvested, probably to maintain market shares and profit margins. Additional analyses indicate that foreign investment and, therefore, foreign production, may allow corporations to reduce such risks as bad weather, national business cycles, strikes, and changes in government policies. Recent analysis suggests that the establishment of foreign subsidiaries can give multinational companies added flexibility in setting their prices in response to increased competition or to such other factors as changes in exchange rates. This may include the ability to switch among their various subsidiaries in supplying major markets to maintain their competitive position without altering the market price of their goods. As a result, local prices may grow less sensitive to changes in the costs of imports. Linkages between the foreign affiliates and the parent companies apparently allow the affiliates to curtail price changes, which might erode their price competitiveness, during periods of fluctuating exchange rates in order to maintain or even to enlarge their market shares in foreign countries. Conclusion This report utilizes a broad collection of data on direct investment published by the Bureau of Economic Analysis of the U.S. Department of Commerce to assess the impact of U.S. direct investment abroad and foreign direct investment in the United States on the U.S. economy. These data were analyzed to determine if U.S. parent companies are shifting jobs abroad in a way that is different or unique from previous experiences with such investment. Data published by the BEA are the most extensive set of published data on foreign investment activities, but they were not developed to address the issue of jobs outsourcing and it is not possible with the BEA data to track job losses or gains in specific industries, specific companies, or specific plants with changes in jobs abroad. Broad, comprehensive data on U.S. multinational companies published by the BEA lag behind current events by two years, which means that assessing these activities may seem to be out of sync with the more limited anecdotal examples that appear in the popular press and raises questions about the relevancy of the data to assessing short-term developments compared with long term trends. Despite these caveats, the data offer no conclusive evidence that current investment trends are substantially different from those of previous periods. A comparison of gross product and employment between U.S. parent companies and their foreign affiliates over three distinct time periods indicates that U.S. business cycles have a stronger impact on U.S. parent companies than on the foreign affiliates, but that even the affiliates are affected. Any long-term structural changes that are occurring in the economy apparently are reinforced by the business cycle in the economy, but these same business cycles affect the foreign affiliates. As a result of this partial synchronization effect, U.S. direct investment abroad and foreign direct investment in the United States generally move in the same direction. From the data examined, it is not apparent that U.S. parent companies are systematically outsourcing jobs at a faster pace or in a manner that is fundamentally different or distinct from previous periods. An increase in economic growth in the U.S. parent companies relative to the rate of growth in the foreign affiliates likely increases pressure within the economy to complete structural changes and to shift capital and labor from declining sectors to expanding sectors. Such changes may also lead to a greater number of jobs being outsourced, but this effect likely would be muted by the overall strong demand for jobs and by new foreign investments in the U.S. economy. On the other hand, an economic slowdown among U.S. parent companies relative to the rate of growth among foreign affiliates likely would lead to an overall decline in employment throughout the economy. This overall decline in employment would make it difficult to distinguish between those sectors that are undergoing long-term structural changes compared with those sectors that are experiencing short-term job losses due to the relatively slower rate of economic growth. U.S. parent companies may or may not respond to the economic slowdown by outsourcing jobs abroad because the dominating presence of the U.S. economy in the world economy means that an economic slowdown in the United States likely reduces economic growth abroad as well and that the foreign affiliates of those parent companies may not be a position to add more jobs. The uneven effect of an economic slowdown among U.S. parent companies on their investment behavior abroad likely means that jobs outsourcing may appear to be more acute during periods in which the long-term structural changes in the economy coincide with the short-term economic adjustments that arise from a slowdown in the rate of growth of the U.S. economy. A recent development in the area of foreign direct investment is the growing role of global value chains. Such chains include a broad range of activities, generally referred to as non-equity investments, that reflect a new phase in economic globalization in which multinational corporations are engaging in an increasingly complex array of non-equity activities to build interdependent networks of operations. Global value chains help firms avoid many of the costs associated with managing the cross-border activities of complex, multi-plant, multi-currency operations, but they can increase systemic risks, because the failure of a single entity or cluster of entities could result in a contagion of disruptions that could bring down an entire value chain and potentially large parts of the global trading system. Despite these advantages, global value chains, or non-equity investments, have been characterized by substandard working conditions, a lack of employment stability, and prolonged reliance on low value-added activities. In addition, jobs in labor-intensive industries are highly sensitive to the business cycle and tend to be eliminated quickly during times of economic distress, magnifying the impact of the business cycle. A lack of comprehensive data on the activities of global value chains severely constrains efforts to determine the full impact of the chains on international investment and trade and those factors that may limit their overall size and economic impact. Trade and sales data also indicate that there is no perceptible change in previous patterns that would signal a shift toward a greater emphasis on foreign production and imports. In fact, BEA data indicate that intra-firm trade has declined over the last decade. Although not conclusive, this result is contrary to what would be expected if U.S. parent companies were outsourcing a greater share of their production abroad and importing more goods from their foreign affiliates. These results also seem to challenge estimates that predict a large shift of jobs abroad over the next half decade. Concerns about the currency of BEA do not seem to be warranted. One characteristic of U.S. direct investment abroad and foreign direct investment in the United States is the relative stability in the patterns of that investment over time. This pattern is unlikely to change over a short period of time, so that the lag in publication of BEA data is unlikely to alter appreciably any general conclusions about the role of direct investment in the economy. A large share of U.S. direct investment abroad remains concentrated in the most highly developed economies and the share of jobs supported by the foreign affiliates comprises a small share relative to the U.S. economy. Employment and jobs in the U.S. economy continue to arise from economic factors that are unique to the U.S. economy and to U.S. economic policies. On average, U.S. foreign affiliates are expected to continue to produce about 300,000 jobs a year, a small share of the average number of jobs produced by the U.S. economy during any given year. For Congress, the data on direct investment seem to indicate that the number of jobs created by U.S. parent companies and by the foreign affiliates of those parent companies is tied closely to the overall performance of the U.S. economy. Such economic measures as employment, trade, and investment will rise and fall among U.S. parent companies and their foreign affiliates generally in tandem. Swings in the rate of growth in the economy that are associated with the business cycle tend to affect U.S. parent companies more than they affect their foreign affiliates and more than those U.S. firms that are purely domestic firms. Policies that ameliorate the business cycle, especially the downside of the cycle when the economy is experiencing a slow rate of economic growth, likely would do the most to help U.S. parent companies. Furthermore, Congress may choose to address the economic plight of those workers and communities that experience a disproportionate share of the adjustment costs that are associated with the business cycle by providing specialized assistance or other types of short-term support. Workers and communities that are involved with economic activities that are facing long-term structural decline may require support to assist displaced workers regain employment or to find new business partners to sustain economic development in those communities. Workers in industries that are undergoing long-term structural decline may well see production and jobs move abroad. Addressing such long-term structural decline, however, is especially challenging, because the economic forces that are working against such industries can be immense.

The impact of foreign direct investment on U.S. employment continues to attract national attention. While local communities compete with one another for investment projects, many of the residents of those communities fear losing their jobs as U.S. companies seek out foreign locations and foreign workers to perform work that traditionally has been done in the United States, generally referred to as outsourcing. Some observers suggest that current U.S. experiences with outsourcing are different from those that have preceded them and that this merits legislative actions by Congress to blunt the economic impact of these activities. Other observers argue that investing abroad by U.S. multinational companies impedes the growth of new jobs in the economy and thwarts the nation's investments in high technology sectors. Some opponents also argue that mid-career workers who lose good-paying manufacturing and service-sector jobs likely will never recover their standard of living. Economists and others generally argue that free and unimpeded international flows of capital ultimately have a positive impact on both domestic and foreign economies. Direct investment is unique among international capital flows because it adds permanently to the capital stock and skill set of a nation, but it also challenges the general theory of capital flows because of the presence of strong cross-border and intra-industry investment. Supporters contend that to the extent that foreign investment shifts jobs abroad, it is a minor component of the overall economic picture and that it is offset somewhat by the investment of foreign firms in the U.S. economy (referred to as insourcing), which supports existing jobs and creates new jobs in the economy. Broad, comprehensive data on U.S. multinational companies generally lag behind current events by two years and were not developed to address the issue of jobs outsourcing. Many economists argue, however, that there is little evidence to date to support the notion that the overseas investment activities of U.S. multinational companies play a significant role in the rate at which jobs are created in the U.S. economy. Instead, they argue that the source of job creation in the economy is rooted in the combination of macroeconomic policies the nation has chosen, the rate of productivity growth, and the availability of resources. This report addresses these issues by analyzing the extent of direct investment into and out of the economy, the role such investment plays in U.S. trade, jobs, and production, and the relationship between direct investment and the broader economic changes that are occurring in the U.S. economy.

Background Historically, proceeds from the sale of lands managed by the Bureau of Land Management (BLM) under various laws were deposited in the general fund of the Treasury. However, certain laws have provided for the proceeds of land sales to be deposited in separate Treasury accounts, with funds available to agencies for subsequent land acquisition and other purposes. The Federal Land Transaction Facilitation Act (FLTFA, 43 U.S.C. §2301), which expired on July 25, 2011, was one such law. The law's purposes included allowing for the reconfiguration of land ownership patterns to better facilitate resource management, improving administrative efficiency, and increasing the effectiveness of the allocation of fiscal and human resources. FLTFA provided for the sale or exchange of land identified for disposal under BLM's land use plans "as in effect on July 25, 2000"—the date of enactment. Most BLM lands (except some lands in Alaska) are covered by a land use plan. Most of the proceeds were to be used for land acquisition, as described below. Proceeds from the sale or exchange of BLM lands under FLTFA were split between the state in which the lands were disposed of (4%) and a separate Treasury account (96%), called the Federal Land Disposal Account. Funds in this account, often called the FLTFA account, were available without further appropriation. The authority to sell or exchange BLM lands under FLTFA briefly expired on July 25, 2010—10 years after enactment. On July 29, 2010, it was subsequently extended for one year. An issue for Congress is whether to reauthorize this authority and, if so, in what form. The 112 th Congress has considered related legislation. (See " Administrative and Legislative Action "below.) The funds in the Treasury account when FLTFA initially expired, an estimated $52 million, ceased to be available under the law. An estimated $2 million in the account at the end of the one-year extension (July 25, 2011) also has ceased to be available. The funds in the FLTFA account were available to both the Secretary of the Interior and the Secretary of Agriculture to acquire inholdings and other non-federal lands (or interests therein) that are adjacent to federal lands and contain exceptional resources, with no more than 20% for BLM's administrative expenses to carry out the land disposal program. Of the funds for acquisitions, at least 80% were to be used in the state in which the funds were generated, and the remaining funds could be used in any state. Further, not less than 80% of the funds for land purchases within a state were to be used to acquire inholdings. Figure 1 illustrates how $1.0 million in receipts from the sale or exchange of land under FLTFA was to be disposed of, in accordance with the percentage categories in the law. From the enactment of FLTFA through FY2010, a total of $115.7 million was raised through the sale or exchange of BLM lands, and 25,967 acres were sold. Over the same period, about $63.7 million in funding was disbursed, with $49.2 million spent on the purchase of 18,135 acres. The balance of this report is organized into four sections. First, " Overview of FLTFA Authority " describes FLTFA's provisions on selling and acquiring land, and provides a summary of the program's termination. Second, " Implementation of FLTFA " presents an overview of how the land sale and acquisition authorities were used over the past decade, including the acreage of land sold and acquired and the amount of money collected and spent, both nationally and in particular states. Third, " Administrative and Legislative Action " outlines President Obama's proposal to amend FLTFA and make it permanent, and 112 th and 111 th Congress measures to extend and amend FLTFA. Fourth, the " Issues " section discusses several issues related to whether to extend or make FLTFA permanent that have been of focus, including the need for FLTFA, length of any extension, currency of land use plans, and retention and use of proceeds. Overview of FLTFA Authority Land Sales BLM is authorized to sell tracts of land that meet specific criteria under the Federal Land Policy and Management Act of 1976 (FLPMA). These criteria include that the land is difficult and uneconomic to manage, is no longer required for a federal purpose, and will serve important public objectives if disposed of. These tracts are identified through BLM's land use planning process, and then reflected in the land use plans that govern management of BLM lands. FLTFA required the Secretary of the Interior to establish a program for the sale or exchange of land identified for disposal under BLM's approved land use plans. Eligible lands were those identified for potential disposal in the land management plans that were in effect at the time FLTFA was enacted—July 25, 2000. Public lands identified for disposal after July 25, 2000, in a land management plan, could still be considered for sale or exchange. However, the proceeds of any such disposal would not be deposited into the account established under FLTFA. There was no regular schedule for sale of lands under FLTFA. In deciding which lands to offer for sale, BLM might have been responding to expressions of interest from individuals or local governments or activities in the local real estate market. The size and configuration of parcels offered for sale were determined by various factors, including the land ownership in the area, marketability of the land, and cost of processing the sale. Lands selected for sale were subject to laws, regulations, and processes governing BLM land sales generally, such as those requiring an appraisal of the value of the land. BLM lands cannot be sold for less than fair market value, determined by an appraisal approved by the Department of the Interior's Appraisal Services Directorate. In most cases, lands will be sold through competitive bidding. Other provisions of law require environmental studies of lands proposed for sale. These studies could cover a variety of issues, such as air quality, cultural resources, hazardous materials, minerals, recreation, wildlife, vegetation, and wetlands/riparian areas. Still other provisions of law provide that the public must be made aware of the proposed land sale, and be given an opportunity to comment on that proposal. The time to complete a land sale varies depending on the complexity of the issues that must be addressed, but can be a year or longer. Land Acquisitions The law provided for the revenue in the FLTFA account in the Treasury to be used for certain administrative expenses and land acquisitions. No more than 20% of the amount in the FLTFA account could be used to reimburse administrative and other expenses incurred by the BLM in carrying out the land disposal program under FLTFA. Not less than 80% of the money in the FLTFA account was to be used to acquire lands or interests therein that were otherwise authorized by law to be acquired. While BLM alone disposed of land under FLTFA, the four major federal land management agencies could acquire lands with the proceeds. In addition to the BLM, these agencies were the Fish and Wildlife Service (FWS) and the National Park Service (NPS), within the Department of the Interior, and the Forest Service (FS), within the Department of Agriculture. Under FLTFA, the Secretary of the Interior and the Secretary of Agriculture were authorized to acquire inholdings within the boundaries of certain federally designated areas, or lands adjacent to such federally designated areas that contain exceptional resources. As defined in the law, federally designated areas included units of the National Park System, managed by the National Park Service; units of the National Wildlife Refuge System, managed by the Fish and Wildlife Service; and areas within wilderness, wilderness study areas, the Wild and Scenic Rivers System, and the National Trails System. The term included areas within the National Forest System, managed by the Forest Service, that have been designated by Congress for special management, as well as certain areas managed by BLM, including national monuments, national conservation areas, and areas of critical environmental concern. The law defined exceptional resource as "a resource of scientific, natural, historic, cultural, or recreational value that has been documented by a Federal, State, or local governmental authority, and for which there is a compelling need for conservation and protection under the jurisdiction of a Federal agency in order to maintain the resource for the benefit of the public." Of the funding allocated for acquisitions, FLTFA provided that not less than 80% must be spent in the state where the funds were generated. Thus, up to 20% could be used for acquisitions in any state. Of the funding for acquisitions within a state, not less than 80% was to be used to acquire inholdings. Thus, up to 20% could be used to acquire adjacent lands (known as edgeholdings) that contain exceptional resources. In focusing on acquisition of inholdings, FLTFA noted that the existence of inholdings often caused problems for the land management agencies, that many private landowners within the boundaries of federal land units desired to sell their land to the federal government, and that acquisition of inholdings would be mutually beneficial to both the federal government and private landowners in many cases. The acquisition of land under FLTFA was governed by authorities pertaining to acquisitions generally, as well as by FLTFA itself, a memorandum of understanding (MOU) among the four agencies, and related state-specific guidance. FLTFA required the Secretary of the Interior and the Secretary of Agriculture to establish a program to identify and prioritize the acquisition of inholdings and lands with exceptional resources. The Secretaries were to consider the extent to which the acquisition of land would facilitate management efficiency, among other criteria. Any land acquired had to be from a willing seller, acquired at a price that was not more than fair market value, and contingent on the conveyance of title acceptable to the Secretary of the Interior or the Secretary of Agriculture. The Secretaries could not acquire land that contained a hazardous substance or other contaminant, or that was difficult or uneconomic to manage based on the land's location or other characteristics. The MOU among the four land management agencies for the implementation of FLTFA became effective on May 5, 2003. It provided a targeted allocation of the acquisition funds among the four land management agencies as follows: 60% to BLM, 20% to FS, 10% to FWS, and 10% to NPS. Notwithstanding that allocation, the Secretary of the Interior and the Secretary of Agriculture could mutually agree to allocate funds for a specific acquisition. The MOU also directed the preparation of state-level implementation plans, and each state developed such a plan, according to BLM. Any of the four participating land management agencies could make recommendations as to lands that should be acquired with the FLTFA funds. However, all four agencies ultimately had to agree on all the expenditures of funds from the account. Program Termination Under FLTFA as originally enacted, the authority in the law to sell or exchange BLM lands was to terminate 10 years after the date of enactment, on July 25, 2010. Any money remaining in the account on that date was to become available for appropriation under the Land and Water Conservation Fund Act (LWCF; 16 U.S.C. §§460 l -4 et seq.). FLTFA expired on July 25, 2010. On that date, the monies in the account ceased to be available for FLTFA purposes—acquisition of lands and the administrative costs of BLM land sales. BLM has estimated that nearly $52 million was in the account on that date. On July 29, 2010, FLTFA was subsequently extended for one year. During that year, land sales under the law were relatively modest. This was due primarily to a lack of funds for the up-front costs of conducting land sales, according to BLM. Of the $52 million in the account when it expired, an estimated $13 million had been anticipated to be used to cover the administrative costs of land sales. From July 25, 2010, through July 25, 2011, BLM collected $3.8 million from land sales under FLTFA. These funds were derived primarily from land sales that were nearing completion prior to the initial expiration of FLTFA on July 25, 2010. Approximately $0.2 million (4%) was to be paid to the states in which the lands were sold, leaving $3.6 million in the FLTFA fund to administer land sales and acquire additional lands during the year. BLM estimated that approximately $2 million was in the FLTFA account at the end of the one-year extension, and thus ceased to be available for FLTFA purposes. Implementation of FLTFA From the enactment of FLTFA through FY2010, a total of $115.7 million was raised through the sale or exchange of BLM lands under the authority. Of this total, BLM collected $103.2 million from the sale of 25,967 acres, and another $12.5 million from equalization payments for exchanged lands. Of the total receipts, $4.6 million (4%) was provided to the states in which the lands were conveyed, and $111.0 million (96%) was deposited into the FLTFA fund. Of the money in the fund, approximately $59 million was spent, with $49.2 million used for acquiring land and an estimated $10 million for the costs of administering the land sale program, according to BLM. Acquisitions were smaller than sales in terms of acreage and value. Specifically, the agencies acquired a total of 18,135 acres, using $49.2 million in FLTFA funds and $9.7 million in other funds, for a total cost of $58.9 million. The approximately $59 million in spending from the FLTFA account represented about half (53%) of the $111.0 million that was available before the program's initial termination, when the revenues ceased to be available. Several factors accounted for this relatively low level of spending relative to available funding. In a 2008 report, the Government Accountability Office (GAO) identified challenges to completing land acquisitions, including the time, cost, and complexity of acquisitions; difficulty in identifying a willing seller; insufficient realty staff to conduct acquisitions; lack of funding for some states; and public opposition to land acquisitions. Initial expenditures for acquisitions were not made until FY2007, pending the development of interagency agreements and the availability of funding. Specifically, the acquisition of lands under FLTFA was delayed while implementing agreements were being developed among the four participating agencies. In 2003, the agencies issued the national MOU on implementation, which included provisions on how the receipts were to be distributed among the agencies, and by March 2007 all BLM state offices had developed and published state-specific interagency implementation agreements, according to BLM. Also, little funding for land acquisition was available in the earlier part of the decade, because the land sales needed to raise funds for acquisitions began slowly following the enactment of FLTFA. For instance, only $5.0 million in receipts from sales was generated from FY2000 to FY2003. Receipts from land sales increased dramatically over the next three years, with an additional $87.4 million in receipts from FY2004 to FY2006. The $49.2 million in total expenditures occurred between FY2007 and FY2010. Acreage Sold and Revenues from Land Sales Of the $115.7 million in receipts under FLTFA, 89% was from the sale of land and 11% was from cash equalization payments for exchanged lands. Equalization payments are generally required under law if the values of the BLM and nonfederal lands exchanged are not equal. In this case, the values are to be equalized by the payment of money up to 25% of the value of the federal lands conveyed in the exchange. The parties in the exchange may agree to waive this payment, within limitations, including if it involves not more than 3% of the value of the federal lands or $15,000. Another way of equalizing value is for either party to add or remove lands. Sale of land under FLTFA was concentrated in two states. While land was sold in 12 states, sales in Nevada and Oregon accounted for more than three-quarters of the 25,967 total acres sold. Specifically, they accounted for 78% of acres sold (45% and 33%, respectively). Another 7% of the acreage sold was in Idaho, while 4% was in Wyoming and 3% was in New Mexico. The other seven states in which land was sold collectively accounted for 8% of the acreage. (See Table 1 .) The average price per acre sold varied considerably among the states, from a low of $198 per acre in Montana to a high of $24,850 per acre in Arizona. The average price of all 25,967 acres sold was $3,973. It would likely be problematic to make more general comparisons about the value of lands among the states, or to generalize about the value of all BLM landholdings based on this data. This is because the total acreage sold under FLTFA is likely to be too small to be representative of lands within a state or of all BLM lands. In fact, the total acreage sold under FLTFA was 0.01% of the 247.5 million acres managed by BLM. The parcels sold are unlikely to be representative of the variety of lands in each state and throughout the West, in terms of natural resources, development potential, location, and other variables. Most of the revenues from both land sales and exchanges came from Nevada—$88.1 million (76%). Nevada has generated the most revenue due to the large BLM holdings in areas of population growth, the high demand for such land to develop, and the experience of BLM with selling land in Nevada under another land sale program. Another 6% of the revenues from land sales and exchanges were generated in each of Arizona and New Mexico, while 3% of the revenues were derived from sales and exchanges in each of California and Colorado. Nine other states collectively accounted for 6% of the total receipts. Acreage Acquired and Expenditures on Acquisitions The acquisition of lands and expenditures on acquisitions were less concentrated among states than land sales and receipts. Lands were acquired in 10 states, with about a quarter of the acreage acquired in each of two states—California (28%) and Colorado (26%). Acquisitions in Idaho accounted for another 18% of the total acreage, while acquisitions in New Mexico and Montana accounted for 14% and 7%, respectively. The other five states collectively accounted for 8% of the acreage acquired. (See Table 2 .) The $49.2 million in expenditure of FLTFA funds was dispersed among the 10 states. While expenditures ranged from a high of 38% in Nevada to a low of 1% in Utah, six states each had between 11% and 7% of total expenditures. These states were Idaho (11%), Arizona (10%), California (9%), New Mexico (8%), Wyoming (8%), and Colorado (7%). An additional $9.7 million of non-FLTFA funds was used to help pay for parcels acquired with FLTFA funding, which comprised 17% of the total funding for these parcels ($58.9 million). The average price per acre acquired by BLM varied more widely among the states than the average price per acre sold. The price per acre acquired (including non-FLTFA funds) ranged from a low of $763 per acre in Colorado to a high of $88,878 in Nevada. The average price of all 18,135 acres acquired was $3,250. As in the case of sale data, the acquisition data are too limited a sample to allow for generalizations about the value of all nonfederal lands within a state or throughout the West. Like federal lands, nonfederal lands exhibit great variety in resources and attributes, commercial use potential, and location, among other factors. Acreage Sold and Acquired, and Receipts and Expenditures, by State The data on activity under FLTFA is depicted by state in the bar graphs below. Figure 2 depicts the acreage sold and acquired within each state from the enactment of FLTFA through FY2010. In the two states with the preponderance of the land sales, Nevada and Oregon, the acreage sold vastly exceeded the acreage acquired. Two other states sold more land than they acquired—Utah and Wyoming. In Utah, both sales and acquisitions were small (76 acres and 10 acres, respectively), while in Wyoming the acreage sold (1,095) was more than three times the acreage acquired (317 acres). By contrast, several states acquired more land than they sold, namely, Arizona, California, Colorado, Idaho, Montana, and New Mexico. The largest differences occurred in California and Colorado; California acquired 12 times the amount of land sold, while Colorado acquired 9 times the amount sold. Many factors might have influenced the extent to which land was acquired within each state, including whether the land was an inholding or an edgeholding, whether there was a willing seller, the cost of the land, and the land's natural resources and other attributes. Figure 3 depicts the receipts and expenditures within each state from enactment of FLTFA through FY2010. It shows that Nevada had by far the highest amount of both receipts and expenditures, although the receipts from land sales vastly exceeded expenditures on acquisitions. This is likely due to the large BLM land holdings in Nevada and the relative ease in selling these lands for community growth and development and other purposes. Three other states had higher receipts than expenditures, namely, Arizona, New Mexico, and Oregon. Six states had higher expenditures than receipts. In some cases the difference was small, as in California, which had $3.1 million in receipts and $3.5 million in expenditures. In other cases the difference was greater. In Montana and Wyoming, for instance, expenditures were more than triple receipts. States can have higher expenditures than receipts because up to 20% of the funds for acquisition can be used in any state. In this way, a portion of the large collections in Nevada, for instance, could be used to purchase land in other states. Administrative and Legislative Action The Obama Administration's FY2013 budget proposed making FLTFA permanent and using current land management plans for determining which lands to sell or exchange. The Administration also testified in the 112 th Congress in support of reauthorizing FLTFA. In one such testimony, the Administration asserted that FLTFA has been a "critical tool for enhancing our Nation's treasured landscapes," and further stated that there are difficulties with relying on land exchanges under other BLM authorities, that using current land use plans as the basis for sales would foster land disposals, and that important acquisitions have been made under FLTFA. The George W. Bush Administration also supported using updated land management plans for determining which lands to sell or exchange, and proposed extending FLTFA for about 10 years. In the 112 th Congress, legislation to amend FLTFA has been introduced in both chambers. S. 3525 , S. 714 , and H.R. 3365 contain provisions to extend the authority to sell or exchange BLM lands under FLTFA, although the length of the extension varies among the measures. S. 3525 would extend the authority for 11 years (from July 25, 2011, until July 25, 2022), S. 714 would extend it for 10 years (until July 25, 2021), and H.R. 3365 would extend it for 7 years (until July 25, 2018). In other respects the bills are identical. They would remove the provision that terminates the FLTFA account should the authority to sell and exchange lands expire. This would allow funds in the account to continue to be used for acquisitions. They also would allow for updated land management plans to be used as the basis for identifying lands for sale and exchange. Specifically, they call for use of plans in effect as of the date of enactment of the measures. Further, the bills would allow for acquisition of lands within or adjacent to federally designated areas regardless of when they were established. On November 26, 2012, S. 3525 was considered on the Senate floor. However, it was returned to the Senate calendar after a point of order against an amendment in the nature of a substitute was sustained and the amendment was ruled out of order. The Senate majority leader sought and received unanimous consent to resume consideration of S. 3525 at a future time. S. 714 was placed on the Senate calendar on September 6, 2011, and a House subcommittee held a hearing on H.R. 3365 on May 17, 2012. Legislation pertaining to FLTFA also was introduced in the 111 th Congress, but was not enacted. Among the measures, H.R. 6206 and S. 3762 had proposed to reinstate the monies that were in the FLTFA account when the law expired on July 25, 2010. Both measures specified that the balance in the FLTFA account as of July 24, 2010, was to be reinstated, and available until expended, for the purposes covered by the FLTFA law. Issues Several issues concerning whether to extend or make FLTFA permanent have been under debate. One issue is the extent to which there is a need for this authority in the context of other laws authorizing the sale and acquisition of federal land and other sources of funding for these purposes. A second issue is whether any extension of FLTFA should be relatively short (e.g., one year) or relatively long (e.g., 10 years or more). A third issue is whether to require land use plans as of July 25, 2000, to continue to be used as the basis of land sales. A fourth set of issues relates to the retention and use of proceeds, including the extent to which any future proceeds should be retained by the agencies, used exclusively for land sales and acquisitions, and used primarily in the state in which they were generated, and whether previously generated proceeds should be returned to the FLTFA fund. Need for FLTFA The expiration of FLTFA does not bar BLM from selling or exchanging land identified for disposal, because BLM has authority to dispose of lands under FLPMA and other laws. Further, the expiration of FLTFA does not preclude BLM, FWS, NPS, and FS from acquiring land, because the agencies have authorities (of varying breadth) to acquire nonfederal lands. Thus, an issue for Congress is the extent to which FLTFA provides a more efficient mechanism for the government to sell and purchase lands. In enacting FLTFA, Congress asserted that "a more expeditious process for disposal and acquisition of land, established to facilitate a more effective configuration of land ownership patterns, would benefit the public interest." To establish a "more expeditious process" for disposing and acquiring land, FLTFA provided that the proceeds of BLM land sales would be retained by the agencies for subsequent land acquisitions. The expiration of FLTFA prevents the proceeds of sales from being retained. Allowing the agencies to keep the proceeds was intended to provide incentive to BLM to sell land that had been identified for disposal. It was also intended to provide a permanent, reliable source of funding for important acquisitions, rather than have such acquisitions depend primarily on the variability of the annual appropriations process. For these reasons, Congress may reinstate this permanent source of funding for land acquisitions. Alternatively, Congress may continue to centralize decision-making on acquisition funding in the annual appropriations process. Annual appropriations for programs are often regarded as opportunities to target funding levels to changing needs and circumstances, and to conduct program oversight and evaluation. The extent to which FLTFA has fostered land sales and acquisitions is not clear from publicly available data. Consistent data on the number, acreage, and value of agency sales and acquisitions in the decade before and after the enactment of FLTFA are not readily available. Further, it is unclear to what extent sales and acquisitions under other standing authorities, or individually enacted laws of Congress, would have occurred since 2000 if FLTFA had not been enacted. Challenges to selling and acquiring land could arise independent of FLTFA, since FLTFA did not change the general land sale and acquisition processes. For instance, land sales and acquisitions are typically voluntary, unless specifically directed by Congress. Some of the BLM land for sale is in relatively low-value markets where the sales would not be expected to raise significant funding, or in some cases even to cover the administrative costs of the sales. This could create a disincentive to selling these lands. Further, there may not be much demand for some of the BLM lands available for sale, and BLM does not typically market land for sale in the absence of expressed interest. Also, BLM is required by law to sell land for at least fair market value, and may have difficulty finding buyers willing to pay market value. In 2008, GAO determined that BLM had not made sale of land under FLTFA a priority, and that few parcels had been purchased with FLTFA funds. The agency cited several challenges to the sale and acquisition of land under FLTFA. GAO noted a limited availability of knowledgeable realty staff, given the focus of realty staff on other agency priorities (e.g., processing rights-of-way for energy purposes). Other obstacles included the lack of sales goals or a sales implementation strategy, and weaknesses in developing a strategy for identifying and acquiring inholdings. Other factors, mentioned above, included the cost and complexity of acquisitions, difficulty in finding willing sellers, insufficient funding for some states, and public opposition. BLM has taken steps to address GAO recommendations on setting goals for land sales, developing a strategy for implementing sales goals, and identifying and setting priorities for acquiring inholdings. Another issue is whether sufficient funding for land sales and acquisitions exists without the revenues derived from FLTFA. The amount of funding for BLM land sales is not readily available, because appropriations for this particular purpose are not typically specified in appropriations laws or agency budget justification materials. By contrast, each year, each of the four federal land management agencies receives a specified appropriation for land acquisition, primarily derived from the LWCF and provided through annual laws appropriating funds for Interior, Environment, and Related Agencies. Over the past decade (FY2003-FY2012), appropriations from LWCF for the four agencies have ranged from a low of $119.2 million for FY2006 to a high of $316.0 million for FY2003. Appropriations for land acquisition for the most recent fiscal year, FY2012, were $199.2 million. The portion for each of the four agencies has varied considerably. It is not clear whether different levels of appropriations from LWCF might have been provided if FLTFA funding were not available for acquisitions. Length of Extension Another short-term extension of FLTFA could provide additional time to assess whether there is a long-term need for FLTFA relative to other sale and acquisition authorities. A short-term extension also could be used if Congress had specific sale and acquisition goals to be achieved under FLTFA, such as the sale of a particular amount of land. If this were the intent, Congress could allow the authority to expire or could repeal it when the acreage goals were reached. In general, shorter and more frequent program extensions could be viewed as fostering oversight and evaluation of the effectiveness of FLTFA, and opportunities to amend the law to address changing circumstances and problems that might arise. A longer-term extension might facilitate the establishment of a more vigorous and stable sale and acquisition program. Land sales might occur slowly during the early years of any extension, due to a lack of sufficient funds for the up-front costs of administering sales. A longer-term extension might allow for the hiring of additional realty staff with some of the proceeds of sales. Further, the length and complexity of many sales and acquisitions could require a longer-term extension. GAO determined that the anticipated sunset of the original 10-year program and the uncertainty of renewal might have weakened the incentive to sell land. Further, GAO reported that the acquisition process can take 2½ to 3 years, given the need for the four agencies to coordinate on and approve of proposed acquisitions. Land Use Plans The changing nature of land use plans has prompted interest in amending FLTFA to allow the most current land use plans to be used as the basis of land disposals. In 2001, BLM began a multiyear effort to develop new land use plans and to update existing ones to address changing circumstances, such as increased demand for energy resources. BLM estimates that, from the start of that effort, it has completed over 75 plan revisions and major plan amendments. Further, as of May 2012, the agency was working on an additional 48 management plans, which were expected to be completed by 2016. The use of plans in effect as of enactment of FLTFA does not keep BLM from selling land identified for disposal in plans after that date, but prevents BLM from keeping the proceeds of such sales. The FLTFA sales authority was not tied to future land use plans due to concerns that BLM might revise plans to pursue a broad land disposal program as a way to generate funds. BLM asserts that its authorities to dispose of public lands would preclude this. Under FLPMA, for example, BLM is authorized to sell certain tracts of land only if they meet specified criteria. The agency also has asserted that land use plan revisions since 2000 have not changed significantly the acreage identified for disposal. Further, GAO concluded in its 2008 report that, while BLM land use plans identified areas for disposal, BLM had not made sale of lands under FLTFA a priority. Retention and Allocation of Proceeds Several issues arise regarding the allocation of proceeds of land sales. One question has been whether to continue to allow 96% of the proceeds to be retained by the agencies, or whether to direct some portion of these receipts to the general fund of the Treasury. Under a proposal in the FY2009 George W. Bush Administration budget, for instance, 70% of the net proceeds would have been deposited in the general fund of the Treasury. The proposal was promoted to reduce the federal deficit, to ensure that the public would benefit from land sales, and to reduce the amount of money not subject to oversight during the appropriations process. However, such a change would reduce funds for acquisition of priority areas. Funding from the primary acquisition source—the Land and Water Conservation Fund—has varied widely over the past decade and remains uncertain. A related question is whether some of the proceeds from land sales should be used for other federal lands purposes. This idea was proposed by the George W. Bush Administration in several years. For instance, in 2004 the Bush Administration had sought to dedicate 20% of the funds in the FLTFA fund to conservation projects on federal lands, to include habitat restoration, rehabilitation, and improvement. Another issue regarding the allocation of proceeds is whether to retain the requirement that most of the funds for land acquisition be used in the state where the funds were generated. GAO concluded in 2008 that this requirement has made it difficult to acquire priority lands in states that sell relatively little land. As mentioned above, 76% of the revenues raised through FY2010—$88.1 million—came from land sales in Nevada. However, retention of funds within a state could foster stability of landownership in those states. Still another focus is on whether to reinstate the estimated $52 million in proceeds that were in the FLTFA fund when the law initially expired and the $2 million in proceeds that were in the fund at the end of the one-year extension. BLM had intended to use a sizeable portion of the monies to sell lands under the law, and the agencies would resume the acquisition of priority inholdings and edgeholdings with these funds. The $54 million in total funds was to become available for appropriation under the LWCF when FLTFA expired. It is uncertain whether these funds will be appropriated, whether in addition to or in lieu of traditional LWCF appropriations. Under current law, the LWCF accumulates $900.0 million in revenues, primarily from offshore oil and gas development. Historically, Congress has appropriated this level of funding only twice, and on average typically appropriates less than half of the annual revenues. Another option could be to redirect these revenues to another specific government program or activity or to the general fund of the Treasury.

The Federal Land Transaction Facilitation Act (FLTFA), which expired on July 25, 2011, provided for the sale or exchange of lands owned by the Bureau of Land Management (BLM) that have been identified for disposal under BLM's land use plans. Most of the proceeds were to be used for land acquisition. The law's goals included allowing for reconfiguration of land ownership patterns to better facilitate resource management, improving administrative efficiency, and increasing the effectiveness of the allocation of fiscal and human resources. The authority to sell or exchange BLM lands under FLTFA was initially authorized for 10 years, expiring on July 25, 2010. When it expired, an estimated $52 million in the account ceased to be available for purposes of the law. These funds have not been reinstated in the FLTFA account. On July 29, 2010, the authority was subsequently extended for one year, expiring on July 25, 2011. Upon expiration, there was $2 million in the FLTFA account, which also ceased to be available. An issue for Congress is whether to reauthorize the FLTFA authority and, if so, in what form. One question is the extent to which there is a need for this authority, given other laws authorizing the sale and acquisition of federal land and other sources of funding for these purposes. A second question is whether any extension of FLTFA should be relatively short (e.g., one year) or relatively long (e.g., 10 years or more). A third question is whether to continue to require land use plans as of July 25, 2000, to be used as the basis of land sales, or to allow updated plans to be used. A fourth set of questions relates to the retention and use of proceeds, including the extent to which any future proceeds should be retained by the agencies, used exclusively for land sales and acquisitions, and used primarily in the state in which they were generated, and whether the previously generated funds should be returned to the FLTFA fund. The Obama Administration has proposed making FLTFA permanent, and using current land management plans for determining which lands to sell or exchange. S. 3525, S. 714, and H.R. 3365 would extend the law for varying numbers of years. In other respects they are similar, for instance, in allowing BLM to use updated land management plans to sell and exchange land. Proceeds from the sale or exchange of BLM lands under FLTFA were split between the state in which the lands were disposed of (4%) and a separate Treasury account (96%). No more than 20% of the funds in the account could be used for administrative expenses. While BLM alone disposed of land, not less than 80% of the funds in the account were used by the four major federal land management agencies to acquire lands. In addition to BLM, these agencies were the Fish and Wildlife Service, National Park Service, and Forest Service. The agencies could acquire inholdings and other non-federal lands (or interests therein) that are adjacent to federal lands and contain exceptional resources. Of the funds for acquisition, at least 80% were to be used in the state in which the funds were generated; remaining funds could be used in any state. Further, not less than 80% of the funds for land purchases within a state were for acquisition of inholdings. From the enactment of FLTFA through FY2010, a total of $115.7 million was raised through the sale or exchange of BLM lands, and 25,967 acres were sold. Disposal of land under FLTFA was concentrated in Nevada and Oregon, with most of the revenues (76%) being generated in Nevada. Over the same period, about $63.7 million in funding was disbursed, of which $49.2 million was spent on the purchase of 18,135 acres (together with $9.7 million in other funds). The acquisition of lands and expenditures on acquisitions were less concentrated in particular states than land sales and receipts.

Introduction The Constitution grants Congress the power of the purse and provides that "No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law." It does not, however, establish any specific procedures by which Congress must consider spending legislation. Instead, Congress has developed rules and practices that govern consideration of spending and other budgetary legislation under each chamber's constitutional authority to " ... determine the Rules of its Proceedings." It is under this authority that the procedures in the Congressional Budget Act of 1974 were created. The Congressional Budget Act established the basic framework that is used today for congressional consideration of budget and fiscal policy. It provides for the annual adoption of a concurrent resolution on the budget as a mechanism for coordinating congressional budgetary decision making. The budget resolution creates enforceable parameters with which spending, revenue, and debt legislation must be consistent. It is not a law. It is not signed by the President nor can it be vetoed. Instead, its purpose is to establish a framework within which Congress considers legislation dealing with spending and revenue. The budget resolution is not intended to establish details of spending or revenue policy. Instead, details of such policy are to be included in legislation reported from the committees with legislative jurisdiction subsequent to the adoption of the budget resolution. All spending or revenue legislation reported from legislative committees, however, is expected to be consistent with the levels and priorities agreed to in the budget resolution. The spending policies in the budget resolution encompass two types of spending legislation: discretionary spending and direct (or mandatory) spending. Discretionary spending is controlled through the appropriations process. Appropriations legislation is considered annually for the fiscal year beginning October 1. Appropriations legislation provides funding for numerous activities such as national defense, education, and homeland security, as well as general government operations. Direct spending, alternately, is provided for in legislation outside of appropriations acts. Direct spending programs are typically established in permanent law that continue in effect until such time as they are revised or terminated by another law. The actual annual cost of direct spending is not determined by Congress. It is instead dictated by formulas within the legislation providing for the program. The overall cost of a program depends on the eligibility requirements and benefits set forth in the legislation. These criteria determine who will be eligible to receive benefits and how much benefit they will receive. Only by altering these formulas can Congress adjust how much money will be spent. The Budget Resolution Content The budget resolution sets forth levels for new budget authority, outlays, revenue, and public debt for the budget year and four outyears. The levels in the budget resolution deal with aggregates, not programmatic spending details. Assumptions concerning some major programs may be discussed in the reports accompanying the budget resolution, but these assumptions are not in the form of legislative language and are not binding on the committee of jurisdiction. Rather than including levels of spending for specific agencies or programs, the budget resolution establishes congressional priorities by dividing spending among the 20 major functional categories of the federal budget. These 20 functional categories do not correspond to the committee system by which Congress operates. As a result, the spending levels in the 20 functional categories are allocated, or "crosswalked," to the House and Senate committees having jurisdiction over discretionary spending (appropriations committees) and direct spending (legislative committees). These "crosswalked" totals appear in the joint explanatory statement of the conference report on the budget resolution and are referred to as 302(a) allocations. These 302(a) amounts hold committees accountable for staying within the spending limits established by the budget resolution. Programmatic Assumptions It is inevitable that Members will consider the impact on particular programs or agencies when they consider a budget resolution. Each committee is required to submit its "views and estimates" with information on the preferences and legislative plans of that committee regarding budget matters to help the Budget Committee determine spending levels for each of the functional categories. While the budget resolution does not allocate funds among specific agencies or programs, assumptions underlying the amounts set forth in the functional categories are frequently discussed in the reports accompanying the budget resolution. For example, the committee print accompanying the budget resolution for FY2009 included the following language: The Committee-reported resolution assumes approximately $2 billion for the Department of Energy's Energy Efficiency and Renewable Energy program. The funding level is $738 million above the President's request and would accommodate significant increases for programs such as wind, solar, geothermal, biomass and biorefinery R&D, hydrogen, and vehicle/building technologies. This funding level would also provide $450 million for the Weatherization Assistance Program, a program which was zeroed out in the President's budget. Report language, however, is not binding on the committees with jurisdiction over spending and revenue. In addition to report language, certain provisions often included in the budget resolution may indicate programmatic assumptions or desires. Budget resolutions frequently include "Sense of the Congress" language expressing the assumptions or desires of one or both chambers for certain programs to receive priority in funding. For example, the budget resolution for FY2010 included language concerning the sense of the Congress on Great Lakes restoration: It is the sense of the Congress that this resolution recognizes the need to address significant and long-standing problems affecting the major large scale aquatic, estuarine, and coastal ecosystems nationwide. This resolution includes funding for a new interagency initiative to address such regional ecosystems. It also includes funding to work with Great Lakes States, tribes, local communities, and organizations to more effectively address issues prioritized in the Great Lakes Regional Collaborative. This initiative could address issues such as invasive species, habitat restoration and conservation, non-point source pollution, and contaminated sediment. The resolution also supports the President's proposal to use outcome-oriented performance goals and measures to target the most significant problems and track progress in addressing these ecosystems. Budget resolutions may also include "Policy" statements. These statements sometimes include language indicating that spending levels in the budget resolution assume certain policies will be carried out. For example, It is the policy of this resolution that ... (5) TRICARE fees for military retirees under the age of 65 should not be increased as the President's budget proposes; Neither "Sense of the Congress" provisions nor "Policy" statements are binding on the committees with jurisdiction over spending and revenue. Budget resolutions often include procedural provisions, such as reserve funds or reconciliation instructions. These provisions often indicate underlying program assumptions or desires of Congress. (Further information on reserve funds and reconciliation instructions is provided below.) Formulation of the Budget and the Budget Cycle Federal budgeting is a cyclical activity. The President submits a budget request to Congress early in the calendar year. Congressional committees then hold hearings where they hear testimony from OMB officials, presidential advisors, and agencies who defend the President's budget recommendations. Committees then submit their "views and estimates" to the Budget Committee of their respective chamber. A committee's "views and estimates" provide the Budget Committees with information on the preferences and legislative plans of that committee regarding budget matters within its jurisdiction. House and Senate Budget Committees then consider and report a budget resolution. The Congressional Budget Act establishes a timetable for the consideration of budgetary legislation. This timetable provides various target dates that reflect when certain actions typically occur. Once the budget resolution is adopted, chambers may consider appropriations bills and any other spending and revenue legislation consistent with the budget resolution. Discretionary Spending The 302(a) allocations made to the House and Senate Appropriations Committees reflect their jurisdiction over all discretionary spending. These allocations hold the appropriations committees accountable for staying within the spending limits established by the budget resolution. In recent years, budget resolutions have also sometimes included explicit spending limits on discretionary spending. Both the House and Senate Appropriations Committees have 12 subcommittees. Each of these subcommittees is responsible for reporting one regular appropriations bill. Sometimes these bills are packaged together in what is referred to as an omnibus appropriations act. Once an Appropriations Committee has received its 302(a) allocation, it then subdivides the committee allocation among its subcommittees as soon as practicable after the budget resolution has been adopted. These suballocations are known as 302(b) subdivisions. The appropriations committees may make allocations among subcommittees, even if they do not correspond with the levels set forth in the functional categories of the budget resolution. Section 302(c) of the Budget Act provides a point of order against the consideration of any appropriations measures before the Appropriations Committee reports its subdivisions. The appropriations committees are then required to report these subdivisions to their respective chambers. The appropriations committees may revise the 302(b) subdivisions anytime during the appropriations process to reflect actions taken on spending legislation. If an appropriations committee does adjust the subdivisions among subcommittees, it must inform its respective chamber of the new levels by issuing a new 302(b) subdivision report. After extensive hearings, each of the subcommittees reports one of the regular appropriations bills to its respective full appropriations committee. Then, the full Appropriations Committee reports the bill to its respective chamber. Section 302(f) of the Budget Act prohibits consideration of any measure or amendment that would cause the 302(a) or 302(b) allocations to be exceeded. Since appropriations subcommittees usually report their bills at the maximum level of spending, amendments offered to the appropriations bill on the floor are often vulnerable to being ruled out of order since they would cause the spending to exceed the 302(b). This rule, combined with other rules and practices, makes it difficult to rearrange spending priorities within an appropriations bill through amendments on the floor. A separate amendment (or amendments) to reduce spending would need to be agreed upon prior to, or in conjunction with, one that would increase spending for an agency or program in order to offset that increase. Direct Spending House and Senate legislative committees also receive 302(a) allocations that reflect their jurisdiction over direct spending programs. Any legislation reported by these committees must be consistent with these allocations. As with discretionary spending, Section 302(f) prohibits the consideration of any measure or amendment that would cause the 302(a) allocation to be exceeded. Reconciliation Points of order can effectively limit spending that results from appropriations acts or new entitlement legislation to levels consistent with the budget resolution, but are not an effective control on spending that results from existing laws providing direct spending. As a result, Congress has established the reconciliation process as a way to instruct committees to develop legislation to change current revenue or direct spending laws so that these programs conform with policies established in the budget resolution. The reconciliation process is an optional two-stage process in which instructions are included in the budget resolution. Reconciliation instructions are in the form of a directive to a specific committee to recommend legislative changes. These instructions are specific and include (1) the committee responsible for making the change, (2) the dollar amount of the change, and (3) the period over which this change should be measured. Reconciliation instructions also include a deadline for the committee to submit such recommendations. For example, the budget resolution for FY2006 included the following reconciliation instruction: (a) SUBMISSIONS TO SLOW THE GROWTH IN MANDATORY SPENDING- (1) Not later than September 16, 2005, the House committees named in paragraph (2) shall submit their recommendations to the House Committee on the Budget. After receiving those recommendations, the House Committee on the Budget shall report to the House a reconciliation bill carrying out all such recommendations without any substantive revision. (2) INSTRUCTIONS- (A) COMMITTEE ON AGRICULTURE- The House Committee on Agriculture shall report changes in laws within its jurisdiction sufficient to reduce the level of direct spending for that committee by $173,000,000 in outlays for fiscal year 2006 and $3,000,000,000 in outlays for the period of fiscal years 2006 through 2010. Many changes in direct spending programs have been a result of reconciliation legislation. For example, the instructions in the above example resulted in Title I of the Deficit Reduction Act of 2005 ( P.L. 109-171 ), a reconciliation act. Other titles of that measure included language to make changes in Medicare (Title V), Medicaid and SCHIP (Title VI), and LIHEAP (Title IX). Similarly, reconciliation acts in other years have included titles making changes in diverse direct spending programs as well. The reconciliation process begins when Congress includes reconciliation instructions in a budget resolution directing one or more committees to recommend changes in current law to achieve the levels of direct spending, revenues, or the debt limit agreed to in the budget resolution. Committees respond to these instructions by drafting legislative language to meet their specified targets. The legislative language recommended by committees is packaged "without any substantive revision" into one or more reconciliation bills by the House and Senate Budget Committees. If only a single committee is instructed to recommend reconciliation changes then those changes are reported directly to its respective chamber. Once reported, reconciliation legislation is considered under special procedures on the House and Senate floor. Reserve Funds Spending allocations may be revised subsequent to the adoption of the budget resolution if provided for in the budget resolution. Congress frequently includes provisions referred to as "reserve funds" in the annual budget resolution, which provide the chairs of the House and Senate Budget Committees the authority to adjust the committee spending allocations if certain conditions are met. Typically these conditions consist of legislation dealing with a particular policy being reported by the appropriate committee or an amendment dealing with that policy being offered on the floor. Once this action has taken place, the Budget Committee chairman submits the adjustment to his respective chamber. Reserve funds frequently require that the net budgetary impact of the specified legislation be deficit neutral. Deficit-neutral reserve funds provide that a committee may report legislation with spending in excess of its allocations, but require the excess amounts be "offset" by equivalent amounts. The Budget Committee chairman may then increase the committee spending allocations by the appropriate amounts to prevent a point of order under Section 302 of the Budget Act. For example, the budget resolution for FY2009 included the following language providing for a deficit-neutral reserve fund concerning San Joaquin River restoration and Navajo nation water rights settlements: In the House, the Chairman of the Committee on the Budget may revise the allocations, aggregates, and other appropriate levels in this resolution for any bill, joint resolution, amendment, or conference report that would fulfill the purposes of the San Joaquin River Restoration Settlement Act or implement a Navajo Nation water rights settlement and other provisions authorized by the Northwestern New Mexico Rural Water Projects Act by the amounts provided in such measure if such measure would not increase the deficit or decrease the surplus for the period of fiscal years 2008 through 2013 or for the period of fiscal years 2008 through 2018. Reserve funds are not always required to be deficit-neutral. They may, instead, allow the levels of spending set forth in the budget resolution to be exceeded, as long as the policy legislation meets the conditions of the reserve fund. In some instances, the increases authorized by a reserve fund are limited to specified amounts.

The budget resolution sets forth aggregate levels of spending, revenue, and public debt. It is not intended to establish details of spending or revenue policy and does not provide levels of spending for specific agencies or programs. Instead, its purpose is to create enforceable parameters within which Congress can consider legislation dealing with spending and revenue. The spending policies in the budget resolution encompass two types of spending legislation: discretionary spending and direct (mandatory) spending. Discretionary spending is controlled through the appropriations process. Appropriations legislation is considered each fiscal year and provides funding for numerous programs such as national defense, education, and homeland security. Direct spending, alternately, is provided for in legislation outside of appropriations acts. Direct spending programs are typically established in permanent law and continue in effect until such time as revised or terminated by another law. The budget resolution establishes congressional priorities by dividing spending among the 20 major functional categories of the federal budget. These 20 categories do not correspond to the committee system by which Congress operates, and as a result these spending levels must be "crosswalked" to the House and Senate committees having jurisdiction over both discretionary and direct spending. These amounts are known as 302(a) allocations and hold committees accountable for staying within the spending limits established by the budget resolution. Each Appropriations Committee is responsible for subdividing its 302(a) allocation among its 12 subcommittees. These allocations, referred to as 302(b) subdivisions, establish the maximum amount that each of the 12 appropriations bills can spend. It is inevitable that Members will consider the impact on particular programs or agencies when they consider a budget resolution. While the budget resolution does not allocate funds among specific agencies or programs, congressional assumptions or desires underlying the amounts set forth in the functional categories are frequently communicated through the budget resolution. Report language accompanying the budget resolution, as well as certain provisions in the budget resolution, can sometimes express non-binding programmatic assumptions and desires. Budget resolutions also often include procedural provisions such as reserve funds or reconciliation instructions. These provisions may also reflect underlying program assumptions or desires of Congress.

Introduction The Federal Food, Drug, and Cosmetic Act (FFDCA) authorizes the Food and Drug Administration (FDA) to regulate the safety and effectiveness of drug products sold in the United States. Prior to marketing a drug, a manufacturer must submit to FDA a new drug application (NDA) demonstrating that the drug is safe and effective for its intended use. FDA reviews each NDA with three major concerns: (1) safety and effectiveness in the drug's proposed use; (2) appropriateness of the proposed labeling; and (3) adequacy of manufacturing methods to ensure the drug's identity, strength, quality, and purity. FDA's determination that a drug is safe does not signify an absence of risk but rather that the drug has an appropriate benefit-risk balance for its intended use and population. For most drugs, FDA has generally considered routine risk minimization measures to be sufficient; for example, FDA-approved labeling and postmarket studies. In certain cases, however, FDA has recommended or required additional measures to minimize risk. This report provides a brief history of FDA drug regulation, describes FDA's early risk management programs, and focuses on the agency's current risk management authorities, specifically risk evaluation and mitigation strategies (REMS). The report also discusses issues that have arisen as a result of REMS, particularly the impact on generic drug competition. While this report generally focuses on REMS in the context of generic drug development, the issues discussed are also relevant to biological and biosimilar product development. This report does not address antitrust issues raised by restricted distribution systems. History of FDA Drug Regulation The regulation of drugs by the federal government began with the Pure Food and Drug Act of 1906, which prohibited the interstate commerce of adulterated and misbranded drugs. The law did not require drug manufacturers to demonstrate safety or effectiveness prior to marketing. In 1937, a safety incident surrounding the drug Elixir Sulfanilamide generated public support for increased government regulation over drug safety. The following year, the FFDCA was signed into law, requiring a manufacturer to demonstrate, prior to marketing, that a drug was safe. In 1951, the FFDCA was amended to include a prescription-only category of drugs; drugs in this category require health practitioner supervision (due to drug toxicity, potential harmful effects, and/or method of use), compared with over-the-counter drugs, which may be used without a prescriber's authorization, provided that they have an acceptable safety margin, among meeting other conditions. In 1962, the FFDCA was amended again to require a manufacturer to demonstrate that a drug is effective, in addition to safe, for its intended use. This standard became the basis for the current NDA process. The Drug Price Competition and Patent Term Restoration Act of 1984 ("Hatch-Waxman Act," P.L. 98-417 ) amended the FFDCA to establish an expedited pathway for generic drugs, allowing a generic drug manufacturer to submit an abbreviated new drug application (ANDA) to FDA for premarket review. Rather than replicate and submit data from animal, clinical, and bioavailability studies, the generic sponsor must show that the generic product is the same as the brand drug (i.e., the reference listed drug [RLD]). Specifically, the generic product must have the same active ingredient(s), strength, dosage form, and route of administration and must be bioequivalent to the RLD, along with meeting other requirements (e.g., reviews of chemistry, manufacturing, controls, labeling, and testing). In 2007, the Food and Drug Administration Amendments Act (FDAAA; P.L. 110-85 ) gave FDA the authority to require for certain drugs, under specified conditions, risk evaluation and mitigation strategies (REMS). REMS is defined as a required risk management plan that uses risk mitigation strategies beyond FDA-approved professional labeling. While REMS has allowed FDA to approve certain drugs that otherwise may have been kept off the market due to safety risks, the implementation of REMS, particularly REMS with restricted distribution, has raised some concerns. One such concern is that certain brand pharmaceutical companies have used REMS to delay competition by refusing generic product developers access to samples needed to conduct the necessary bioequivalence testing to support an ANDA. In 2012, in response to concerns surrounding misuse of REMS, legislation was introduced that would have generally prohibited the use of REMS to restrict availability of a drug for purposes of bioequivalence testing by a generic product developer; it was not enacted. With growing concern over high drug prices, REMS reform came to the forefront again during the 2017 user fee reauthorization, proposed as a way to increase generic product competition and reduce drug prices. In a March 2017 hearing on generic drug user fees, the Director of the Center for Drug Evaluation and Research (CDER) at FDA identified inappropriate use of REMS as one factor that can delay consumer access to less expensive generic drugs. The director had previously raised this same issue in a January 2016 hearing on generic drugs. The Federal Trade Commission (FTC), the generic drug industry, and some Members of Congress have expressed similar concerns regarding the misuse of REMS, and in the 114 th and 115 th Congresses, legislation addressing REMS in the context of generic drug development was introduced. During the House Energy and Commerce full committee markup of H.R. 2430 , which was later enacted as the FDA Reauthorization Act of 2017 (FDARA, P.L. 115-52 ), language targeting misuse of REMS was offered as an amendment to the bill. However, it was withdrawn and ultimately not included in the bill reported out of committee. Early FDA Risk Management Programs As aforementioned, prior to marketing a drug in the United States, a manufacturer is required to obtain approval from FDA. The statutory standard for FDA approval is that the drug is safe and effective for its intended use. FDA's determination that a drug is safe does not signify an absence of risk but rather that the product has an appropriate benefit-risk balance for its intended use and population. Beginning in the 1980s, the first risk management programs for drugs were developed at FDA. These programs included elements such as education for patients and providers and restrictions on distribution. One example of an early formalized risk management program was the Accutane (isotretinoin) Pregnancy Prevention Program (PPP). In 1982, FDA approved Accutane for the treatment of severe acne. Due to the potential for teratogenicity, warnings against use of the product during pregnancy were included in three sections of the package insert—"warnings," "precautions," and "contraindications—as well as in the patient information brochure. Accutane materials provided to physicians contained warnings about the potential teratogenicity of the drug, and education programs about adverse events related to Accutane. In the summer of 1983, reports emerged of human malformation associated with Accutane exposure. In response to these reports, the Accutane package insert was revised to highlight warnings, and health communication letters (Dear Doctor and Dear Pharmacist letters) were sent to 500,000 prescribers and 60,000 pharmacists to reiterate the information from the "contraindications" section on the package insert. The Accutane PPP was implemented following a May 1988 Dermatologic Advisory Committee Meeting, and it was the first risk management program introduced by a pharmaceutical company. Elements of the program included a boxed warning; informed consent for female patients; a PPP kit for physicians containing patient information brochures and pregnancy counseling materials for the prescriber; a prescriber tracking survey; and annual and quarterly meetings with FDA. Prior to FDAAA (i.e., 2007), 16 drugs were approved with restrictive risk management programs, including Clozapine (the "No Blood, No Drug" program) and Thalidomide (the "System for Thalidomide Education and Prescribing Safety" program, or S.T.E.P.S.). In 2002, the Public Health Security and Bioterrorism Preparedness and Response Act ( P.L. 107-188 ) was signed into law. Title V of the law (PDUFA III) reauthorized prescription drug user fees through FY2007, and in exchange for industry user fees, FDA committed to several performance goals, including those related to the agency's risk management activities such as review pre-NDA/Biologics License Application (BLA) meeting packages that include summaries of relevant safety information and industry questions/discussion points regarding proposed risk management plan activities and discuss the need for any post-approval risk management studies; review proposed risk management plan activities included in an NDA/BLA; and develop and issue guidance for industry addressing risk assessment, risk management, and pharmacovigilance practices. Pursuant to the PDUFA III agreement, FDA issued three risk management guidance documents, including guidance on the development, implementation, and evaluation of risk minimization action plans (RiskMAPs) for prescription drugs products (and biologics). A RiskMAP is defined as a safety program designed to meet specific goal s (i.e., a desired end result such as a health outcome) and objective s (i.e., an intermediate step to achieving goal) in minimizing the known risks of a drug while preserving its benefits). A RiskMAP targets one or more safety goals and uses certain tools (e.g., targeted education and outreach) to achieve those goals. RiskMAPs contained elements similar to REMS (described in the next section), and while FDA could recommend that a sponsor implement such a safety program, FDAAA gave FDA the explicit authority to require REMS if necessary to ensure the benefits of a drug outweigh the risks. Some drug applications approved prior to the effective date of FDAAA contained elements to assure safe use, which typically appeared in approved RiskMAPs. In March 2008, FDA identified and published in the Federal Register a list of drug and biological products that were deemed to have an approved REMS and directed application holders to submit a proposed REMS, as specified. Risk Evaluation and Mitigation Strategies (REMS) In 2007, FDAAA expanded the risk management authority of FDA, authorizing the agency to require REMS for certain drugs, under specified conditions. Although FDA practice had long included most of the elements that a REMS may contain, FDAAA gave FDA, through the REMS process, the authority for structured follow-through, dispute resolution, and enforcement. REMS is a required risk management plan that uses risk mitigation strategies beyond FDA-approved professional labeling. FDA may determine that a REMS is required upon the manufacturer's submission of an NDA or BLA, as part of the initial approval or licensing, when a manufacturer presents a new indication or other change, or when the agency becomes aware of certain new information. As part of a REMS, a drug manufacturer may be required to provide certain information to patients (e.g., a medication guide) and health care providers (e.g., a communication plan) or to impose restrictions on distribution or use of the drug via one or more "Elements to Assure Safe Use" (ETASU). In determining whether REMS is necessary, the law requires the consideration of the following factors: the estimated size of the population likely to use the drug involved, the seriousness of the disease or condition that is to be treated with the drug, the expected benefit of the drug with respect to such disease or condition, the expected or actual duration of treatment with the drug, the seriousness of any known or potential adverse events that may be related to the drug and the background incidence of such events in the population likely to use the drug, and whether the drug is a new molecular entity. Elements of REMS An approved REMS must include a timetable of when the manufacturer will provide reports to FDA to assess the effectiveness of the REMS components; this includes an assessment, at minimum, by 18 months, three years, and in the seventh year after the REMS is approved, or as otherwise specified. The assessment requirement may be removed after three years if FDA determines that the risks of the drug have been adequately identified, assessed, and managed. In addition to the required timetable of assessments, a REMS may include the following elements: Patient Information: The REMS may require the manufacturer to develop materials for distribution to each patient when the drug is dispensed. This could be a Medication Guide, as provided for under FDA regulations, or a patient package insert. In 2011 guidance, FDA determined that it was no longer necessary to consider every Medication Guide to be an element of a REMS. The updated FDA policy allowed manufacturers with REMS that included only a Medication Guide and a timetable for assessment (and no ETASU) to request a modification to eliminate the REMS; however, a Medication Guide could still be required under FDA regulations. Communication Plan : The REMS may require the manufacturer to create a communication plan, which could include sending letters to health care providers; disseminating information to providers about REMS elements to encourage implementation or explaining safety protocols; or disseminating information through professional societies about any serious risks of the drug and any protocol to assure safe use. ETASU: An ETASU is a restriction on distribution or use that is intended to (1) allow access to those who could benefit from a drug while minimizing the risk of adverse events, and (2) block access to those for whom the risks would outweigh the potential benefits. For example, an ETASU could require that pharmacies, practitioners, or health care settings that dispense the drug be specially certified, or that the patient using the drug be subject to monitoring (e.g., regular pregnancy testing for a drug associated with birth defects). By including such restrictions, FDA is able to approve a drug that it otherwise would have to keep off the market due to safety issues. Implementation System: The REMS may include an implementation system related to ETASU through which the manufacturer may be required to take reasonable steps to monitor and evaluate those in the health care system (e.g., doctors, pharmacists) responsible for implementing the ETASU. According to FDA's website, as of January 2018, there are 72 active, approved REMS, of which 45 include ETASU, 10 include only a communication plan, and 17 include only the medication guide. The number of REMS has changed over time, and FDA's website provides information on both the number of active and released REMS (i.e., products whose REMS are no longer in effect). As aforementioned, in 2011, FDA determined that it was no longer necessary to consider every Medication Guide to be part of a REMS and subsequently released from REMS, under certain circumstances, drugs that had a only Medication Guide and timetable for submission of assessments. Examples of Approved REMS REMS can be required for an individual drug or a class of drugs. One example of a REMS for an individual drug is the REMS for Mifeprex (mifepristone), used together in a regimen with the drug misoprostol, to terminate a pregnancy through 70 days gestation. The REMS was initially approved in June 2011 and has been updated on subsequent occasions. It includes an ETASU requiring health care providers who prescribe Mifeprex to be specially certified, as specified; an implementation system requiring distributors of Mifeprex to follow specified processes and procedures; and a timetable for submission of assessments. The REMS specifies that Mifeprex must be dispensed to patients only in certain health care settings—specifically clinics, medical offices, and hospitals—by or under the supervision of a certified prescriber. Mifeprex may not be distributed to or dispensed through retail pharmacies or other settings not described above. An example of REMS that affects an entire class of drugs is the REMS for Opioid Analgesics, which covers brand-name and generic pain-reducing medications that bind to opioid receptors in the body. While opioid drugs are a necessary component of pain management for certain patients and have therapeutic benefits when used properly, they also present serious risks. Past efforts to prevent the misuse, abuse, and overdose of these drugs, such as additional warnings on the label, risk management plans, and inter-agency collaborations, were found to be insufficient. Thus, in February 2009, FDA sent letters to manufacturers of extended-release, long-acting (ER/LA) opioids indicating that REMS would be required to ensure that the benefits of these drugs continue to outweigh the risks. The REMS for ER/LA opioids was initially approved on July 9, 2012, and has been updated on subsequent occasions. In 2017, for example, FDA announced that immediate-release (IR) opioids would be subject to the same REMS requirements as ER/LA opioids. The REMS includes a medication guide, an ETASU that requires covered manufacturers to provide training to health care providers, and a timetable for submission of assessments. Impact of REMS on Generic Drug Development The Hatch-Waxman Act created an abbreviated pathway for generic drugs, allowing a generic drug manufacturer to submit to FDA an ANDA, rather than a full NDA, demonstrating that the generic product is the same as the brand drug (i.e., the reference listed drug [RLD]). To prove sameness, the generic product must have the same active ingredient(s), strength, dosage form, and route of administration as the RLD; be bioequivalent to the RLD; and meet other requirements (e.g., reviews of chemistry, manufacturing, controls, labeling, and testing). Unlike drugs, biologics and biosimilars are generally regulated under the Public Health Service Act (PHSA) and are licensed by FDA rather than approved. A biological product, or biologic, is a preparation, such as a drug or a vaccine, that is made from living organisms. The Hatch-Waxman Act did not provide an expedited mechanism for follow-on biologics, with the exception of follow-on applications submitted for the few so-called "natural source" biologics approved under the FFDCA (e.g., insulin). Because biologics are made from living organisms and feature a more complex structure than chemical drugs, it would be challenging for manufacturers of follow-on products to demonstrate sameness as required under Hatch-Waxman. In 2010, the Biologics Price Competition and Innovation Act (BPCIA) created an abbreviated licensure pathway for biological products that are demonstrated to be "highly similar" (biosimilar) to or "interchangeable" with an FDA-licensed biological product. A company interested in marketing a biosimilar product in the United States must submit to FDA an application that provides information demonstrating biosimilarity based on data from analytical studies (structural and functional tests), animal studies (toxicity tests), and a clinical study or studies (tests in human patients). Bioequivalence testing is not required of biosimilar product applicants, but other required testing may necessitate access to samples of the biologic to demonstrate "biosimilarity." While this report focuses on REMS in the context of generic drug development and approval, stakeholders have raised similar REMS-related concerns for biologics and biosimilars. A REMS-restricted distribution program controls the chain of supply so that the drugs are provided only to patients with prescriptions from authorized physicians or pharmacies under specified conditions. The law prohibits the holder of an approved application (i.e., the brand company, which is the RLD holder) from using ETASU "to block or delay approval of an application under [FFDCA] section 505(b)(2) or (j)." However, FDA, FTC, the Association for Accessible Medicines (AAM), and others have alleged that some brand companies may be using REMS to delay competition by refusing to sell samples of the brand drug to generic product developers and delaying negotiation of a single, shared system REMS (see the section " Developing a Single, Shared System REMS "). By withholding samples, the RLD holder is generally able to prevent or delay the generic product developer from conducting the required testing and submitting an application for review; by delaying negotiation of a single shared system REMS, the RLD holder is effectively able to stay FDA approval of the ANDA. Brand companies have typically justified their refusal to sell samples by citing safety concerns, particularly that product developers may not ensure the safe use of these drugs, and that the brand company could be held liable. Bioequivalence Testing To obtain approval of the generic version of an RLD, the generic product developer must demonstrate to FDA that, among other things, the generic drug is the same as the RLD. To conduct the required bioequivalence testing, the generic drug developer must obtain a sufficient quantity of samples of the RLD. Although the generic product developer generally needs samples to conduct bioequivalence testing, the law does not require the RLD holder to provide samples to generic product developers. Typically, generic drug companies have obtained necessary samples from wholesale distribution channels. However, when a drug is subject to REMS with ETASU and distribution restrictions are in place, the generic product developer is not an authorized entity and, thus, the wholesale distributor of the RLD may be in violation of the terms of the REMS if it were to sell the samples to an unauthorized party. Generic companies have looked to FDA to intervene when the RLD holder has refused to sell a drug to an eligible product developer for testing purposes, citing the REMS with ETASU as justification. In December 2014, FDA issued draft guidance outlining the steps that an ANDA sponsor should take to obtain a letter from FDA to the RLD holder, indicating the ANDA sponsor's proposed bioequivalence testing protocol is comparably as safe as the applicable ETASU, and that it would not be a violation of the REMS to provide the product samples for such testing. The FDA letter cannot compel the RLD holder to sell the samples to the generic product developer, but rather states that the agency finds the safety protections proposed in the bioequivalence protocol to be comparable to the brand company's REMS program. Per the guidance, when requesting FDA to send such a letter to the RLD holder, the generic drug developer should complete a disclosure authorization form, which authorizes the agency to disclose to the RLD holder the name of the generic drug developer and the active ingredient of the proposed generic drug product, in addition to other potentially confidential commercial or financial information or trade secrets. By signing this letter, the generic drug developer is agreeing to hold FDA harmless for any injury caused by sharing such information with the RLD holder. In electing to involve FDA, the generic product developer authorizes FDA to disclose potentially confidential information to the RLD holder in hopes of acquiring samples for testing, but the RLD holder may still choose to withhold the samples. The guidance is specific to ANDA sponsors (i.e., generic drug applicants) and does not address obtaining samples for purposes of biosimilar product testing. In a June 2016 testimony before the Senate Judiciary Subcommittee on Antitrust, Competition, Policy, and Consumer Rights, a representative from the generic pharmaceutical manufacturer Amneal testified that in December 2013, the company requested samples of a brand product subject to REMS for purposes of bioequivalence testing. The testimony reports that it took nearly three years to sign a supply agreement, yet four months later, at the time of the hearing, the company had still not received the samples. Brand companies have cited safety and liability concerns as justification for refusing to sell samples. During that same June 2016 hearing, a representative of brand drug companies testified that various safety concerns could arise as a result of certain legislative attempts to make it easier for generic companies to obtain samples. The representative added in his testimony that Congress and FDA have long recognized the risks associated with drugs requiring REMS—and particularly the products whose REMS must also include ETASU in order to receive or maintain FDA approval. Examples of such serious safety issues associated with currently approved drugs with ETASU include risks of shortened overall survival, increased risk of tumor progression or recurrence, increased risks of first trimester pregnancy loss and congenital malformations, and central nervous system depression. Developing a Single, Shared System REMS Current law requires that if the RLD is subject to REMS, the generic drug referencing that product is subject to two of the REMS components: (1) the medication guide or package insert and (2) the ETASU, specifically that the generic and RLD must enter into a single, shared system of ETASU. The Secretary may waive this requirement for the generic drug if (1) the burden of creating a single, shared system outweighs the benefit, taking into consideration the impact on health care providers, patients, the generic applicant, and the RLD holder, or (2) an aspect of the ETASU for the RLD is claimed by an unexpired patent or is a method entitled to protection, and the generic applicant "certifies that it has sought a license for use of an aspect of the [ETASU] for the applicable listed drug and that it was unable to obtain a license." As described in FDA presentations, the process of developing a single, shared system REMS begins with the Office of Generic Drugs (OGD), which first notifies the ANDA sponsor of the requirement via a REMS notification letter. This letter directs the ANDA sponsor to contact the RLD holder. The ANDA sponsor initiates discussions with the RLD holder, and FDA then hosts a kick-off meeting to convey expectations and facilitate development of the single, shared system. The generic developer and RLD holder may form an industry working group (IWG) to develop a proposal for the single, shared system REMS, providing biweekly updates to the agency. FDA forms a REMS review team comprising members from various offices within CDER; this review team is responsible for tasks such as communicating to the IWG expected timeframes for milestones and for scheduling periodic teleconferences with the IWG. Once the REMS proposal is developed, the RLD holder and ANDA sponsor submit it to FDA for review. If either the brand or generic company indicates to FDA that the other company in the IWG is not receptive or responsive to developing a shared REMS, the agency may serve as facilitator to aid in reaching a resolution. The purpose of a single, shared system is to reduce burden for stakeholders by providing a single portal to access REMS materials and other documentation. Doing so would enable prescribers, pharmacies, and health care settings to complete certification and other administrative requirements once rather than separately for the brand and generic drug. However, negotiations surrounding shared REMS often include issues such as cost-sharing, confidentiality, product liability concerns, antitrust concerns, and access to a license for elements protected by a patent, and generic drug companies have reported difficulty in trying to develop a single, shared system with brand companies. While the law does provide for a waiver if a single, shared system REMS is not feasible, the agency considers the waiver an "option of last resort." To date, the agency has issued three such waivers. During the course of negotiations, if FDA or the sponsors believe that a waiver may be necessary, the agency would determine whether the statutory criteria for a waiver have been met; if so, the agency may permit the ANDA sponsor to use a "different, comparable aspect" of the ETASU (e.g., contains the same elements, must achieve the same level of safety). In November 2017, as part of FDA's Drug Competition Action Plan, the agency issued draft guidance to facilitate the submission and review process for shared system REMS. The guidance addresses how companies with products in shared system REMS programs can use a single Drug Master File to submit one collective set of files to the agency. According to FDA, the process "eliminates duplicative paperwork for sponsors, and will decrease the volume of forms the FDA's reviewers must assess." CDER plans to publish two guidance documents, Development of a Shared System REMS and Waivers of the Single, Shared System REMS Requirement , during calendar year 2018. In a June 2016 testimony before the Senate Judiciary Subcommittee on Antitrust, Competition, Policy, and Consumer Rights, a representative of brand drug companies testified that "negotiations over a single, shared REMS are complicated—in large part because they deal with important safety issues and a complex healthcare system," and that it takes time for parties to reach agreement on "the range of concerns that must be addressed (e.g., REMS design, adverse event reporting protocols, collective standard operating procedures, cost sharing, decision-making authority about REMS administration, assessments, and modification, and associated legal issues such as intellectual property and product liability)." Non-REMS Restricted Distribution Programs While FDA may require a REMS with ETASU for certain drugs or biologics with known or potential serious safety risks, some brand companies have implemented restricted distribution programs not mandated by FDA. For example, Turing Pharmaceuticals employed a non-REMS restricted distribution system whereby prescriptions could be obtained only from a single source—a specialty pharmacy—and the company could refuse sale to competitors (e.g., generic product developers). Such restricted distribution programs are self-imposed by the company rather than mandated by FDA and have raised antitrust concerns that go beyond the scope of this report. Issues for Congress Stakeholders generally agree that ensuring access to safe and effective drugs is important. While REMS has allowed FDA to approve certain drugs that otherwise may have been kept off the market due to safety risks, the implementation of REMS, particularly REMS with restricted distribution, has raised some issues. The first issue concerns access to samples and whether brand companies are withholding samples for bioequivalence testing due to safety reasons or to delay competition. Generic drug companies have reported that brand companies are inappropriately using REMS-restricted distribution systems to prevent product developers from obtaining samples for testing and thus delaying market entry of lower cost drugs. In a March 2017 hearing on restricted distribution systems, CDER Director Dr. Janet Woodcock stated that FDA has received about 150 "inquiries" from generic product developers regarding difficulty accessing samples for bioequivalence testing. Brand companies have justified their refusal to sell samples by citing safety concerns (e.g., that the generic company may not ensure safe use of the drug), particularly for REMS-restricted distribution drugs that could have serious side effects or are prone to abuse. Brand companies have also expressed that they could be held liable for any injuries caused by the generic product, which could result in FDA requiring additional REMS elements or taking further regulatory action against the RLD. In addition, adverse events associated with the generic could impact the RLD holder's reputation. As aforementioned, FDA can review the generic product developer's bioequivalence protocol and send a letter to the RLD holder stating that providing samples for such testing would not be a violation of the REMS; however, FDA does not have the authority to compel the RLD holder to provide the samples. The Pharmaceutical Research and Manufacturers of America (PhRMA) trade group has provided feedback to FDA on the guidance, writing that "final guidance should provide meaningful detail on how FDA plans to ensure that a [bioequivalence] study contains adequate safety measures to protect research participants." The FTC has also weighed in on the issue, stating that although the law allows brand-name drug manufacturers to use restricted drug distribution programs in ways that impede generic competition, the Hatch-Waxman Act cannot function as intended if generic drug companies are unable to access samples of the RLD for the necessary testing. The second issue concerns entry into a single, shared system REMS, and whether delays are a result of complex and time-consuming negotiations or attempts to delay competition. Current law requires that unless waived by the Secretary, the RLD and generic must enter into a single, shared system REMS. The purpose of this requirement is to reduce the burden for stakeholders (e.g., health care providers and patients) by providing a single portal to access REMS materials and other documentation. The FDA and generic drug industry have expressed concern that brand companies may be using this requirement to prevent or delay generic drugs from entering the market by impeding development of a single, shared system. Brand companies, however, have said that "negotiations over a single, shared REMS are complicated—in large part because they deal with important safety issues and a complex healthcare system" and that it takes time for both parties to reach agreement on issues such as REMS design, adverse event reporting protocols, collective standard operating procedures, cost sharing, decision-making authority about REMS administration, assessments, and modification, and associated legal issues such as intellectual property and product liability. This is consistent with an FDA presentation stating that negotiations surrounding shared REMS often include issues such as cost-sharing, confidentiality, product liability concerns, antitrust concerns, and access to a license for elements protected by a patent. Legislative Proposals Some Members of Congress have expressed concern regarding "tactics that appeared to frustrate the intent of the Hatch-Waxman Act—a law enacted to streamline and expedite the approval process for generic drugs." In the 112 th Congress, in response to concerns surrounding misuse of REMS, an early version of the Food and Drug Administration Safety and Innovation Act (FDASIA; P.L. 112-144 ) legislation ( S. 2516 ) contained a provision—Section 1131 "Drug Development and Bioequivalence Testing"—that would have generally prohibited the use of ETASU to restrict availability of a covered drug for BE testing by an eligible product developer, among other things. Section 1131 was ultimately not included in the final version of the bill signed into law as FDASIA. In the 115 th Congress, two bills to keep brand companies from using REMS to prevent or delay generic drugs from entering the market were introduced: the Fair Access for Safe and Timely Generics Act of 2017, or the FAST Generics Act of 2017 ( H.R. 2051 ) and the Creating and Restoring Equal Access to Equivalent Samples Act of 2017, or the CREATES Act of 2017 ( S. 974 , H.R. 2212 ). The FAST Generics Act and CREATES Act use the term c overed product to refer to any drug approved under FFDCA Section 505(b) or 505(j), a biologic licensed under PHSA Section 351, or a combination thereof "when reasonably necessary to demonstrate sameness, biosimilarity, or interchangeability," excluding drugs and biologics that appear on the drug shortage list under FFDCA Section 506E, as specified; e ligible product developer to refer to a person that seeks to develop a product for approval pursuant to an application for approval under FFDCA Section 505(b)(2) or 505(j), or for licensing under PHSA Section 351(k); and l icense holder to refer to the sponsor of an approved NDA, ANDA, or BLA for a covered product. The FAST Generics Act of 2017 (H.R. 2051) The FAST Generics Act seeks to generally limit a license holder of a covered product from restricting its availability for testing purposes by an eligible product developer. Among other things, it would allow the developer to seek authorization from the Secretary to obtain a covered product subject to a REMS with ETASU; would specify the procedure for obtaining authorization from the Secretary and access to the product; and would require the license holder to publicly designate at least one wholesaler or specialty distributor to fulfill product requests, with specified disclosure restrictions. It would allow the Secretary to prohibit or limit the transfer of a product if it would present an "imminent hazard" to public health. It would also exempt the license holder from liability for any claim arising out of an eligible product developer's "failure to follow adequate safeguards during development or testing activities." In addition, the bill would generally prohibit a license holder from taking any steps to impede the development of a single, shared system of ETASU or the entry of a product developer into a previously approved system of ETASU. It would require license holders to negotiate in good faith toward a single, shared system, but would allow the Secretary to waive the requirement for a single, shared system if the product developer is unable to finalize terms with the license holder. Further, the legislation would also allow an eligible product developer that is injured based on certain violations of the legislation to sue the license holder for injunctive relief and damages. The CREATES Act of 2017 (S. 974, H.R. 2212) The CREATES Act would likewise establish a mechanism for an eligible product developer to obtain the covered product for testing. The legislation would allow the product developer to bring a civil action against the license holder for failure to provide the eligible product developer sufficient quantities of the drug on "commercially reasonable, market-based terms." If the eligible product developer prevails in the case, the license holder would generally be required to (1) provide to the product developer, without delay, sufficient quantities of the product, as specified, and (2) award to the developer attorney fees and costs related to the lawsuit, as well as a monetary amount, as specified. The CREATES Act would allow the Secretary to require modification to an approved REMS to accommodate different approved REMS for the RLD and generic product. It would provide the Secretary with additional flexibility to waive the requirement for a single shared system of ETASU, unless the Secretary determines that no different, comparable aspect of the ETASU would satisfy the statutory requirements. Like the FAST Generics Act, the CREATES Act also contains a limitation of liability provision. REMS Reform and Cost-Savings Although legislation aimed at reforming REMS has been discussed as a means of reducing health care spending, CRS is not aware of any formal cost estimates (from CBO or other entities) that indicate how the FAST Generics or the CREATES Act would function as a cost saving measure. Some entities have shared informal cost estimates. CBO had formally scored a similar provision from the 112 th Congress—Section 1131 "Drug Development and Bioequivalence Testing" of S. 2516 —an early version of the FDASIA legislation. Section 1131 would have generally prohibited the use of ETASU to restrict availability of a covered drug for bioequivalence testing by an eligible product developer, as specified, and it would have allowed the developer to seek authorization from the Secretary to obtain a covered drug. However, it would not have addressed the issue of developing a single, shared system REMS and unlike the FAST Generics and CREATES bills, the definition of "covered drug" under Section 1131 was narrower and would have included only drugs and biologics subject to a REMS with ETASU. The FAST Generics Act and CREATES Act seek to also limit the brand manufacturer's ability to restrict the availability of samples of drugs and biologics not subject to REMS with ETASU. In May 2012, CBO estimated that the implementation of Section 1131, with other provisions in S. 2516 aimed at reducing barriers to market entry for lower-priced drugs, would have reduced direct spending for mandatory health programs by $753 million over the 2013-2022 period. Section 1131 was ultimately not included in the final version of the bill signed into law as FDASIA. Balancing Brand and Generic Pharmaceutical Industry Concerns In July 2017, FDA held a public meeting and provided the public with the opportunity to comment "on the appropriate balance between encouraging innovation in drug development and accelerating the availability to the public of lower cost alternatives to innovator drugs." Various comments submitted to the docket have addressed the REMS issues raised in this CRS report. The generic drug industry has generally supported congressional efforts to prevent the use of restricted distribution programs from delaying generic entry, as have other stakeholders looking to increase competition to reduce drug prices. A 2014 study sponsored by the Generic Pharmaceutical Association (GPhA; now called the AAM) estimated that misuse of REMS and other restricted distribution programs costs the United States $5.4 billion annually, with the federal government bearing a third of this burden. The AAM has expressed support for the CREATES Act, stating it would "provide a clear solution to abusive, anticompetitive business practices that increase costs to the American health care system by impeding patient access to generic medicines." Opponents of changes to the REMS program argue that REMS are rare and that a forced sale provision "would undermine necessary drug safety precautions and create disincentives for the future development and marketing of higher-risk drugs, especially to treat rare disorders, due to liability concerns." At a June 2016 hearing, a witness representing brand companies testified that the CREATES Act would result in safety concerns, and that the bill would not "establish robust criteria that eligible product developers seeking to obtain such a drug must satisfy in order to protect patients and other individuals who come into contact with the drug during its distribution."

The Federal Food, Drug, and Cosmetic Act (FFDCA) authorizes the Food and Drug Administration (FDA) to regulate the safety and effectiveness of drug products sold in the United States. The statutory standard for FDA approval is that a drug is safe and effective for its intended use. FDA's determination that a drug is safe does not signify an absence of risk but rather that the drug's clinical benefits outweigh its known and potential risks. For most drugs, FDA has generally considered routine risk minimization measures to be sufficient; for example, updated labeling based on new information from postmarket surveillance. In certain cases, however, the agency has recommended or required additional measures to minimize drug risk. Early risk management programs at FDA included elements such as education for patients and providers, and restrictions on distribution. In 2007, the FDA Amendments Act (FDAAA) expanded the risk management authority of FDA, authorizing the agency to require for certain drugs, under specified conditions, risk evaluation and mitigation strategies (REMS). REMS is a required risk management plan that uses risk mitigation strategies beyond FDA-approved professional labeling. As part of a REMS, a drug manufacturer may be required to provide certain information to patients (e.g., a medication guide) and health care providers (e.g., a communication plan) or to impose restriction on a drug's distribution or use via one or more "Elements to Assure Safe Use" (ETASU). A REMS-restricted distribution program controls the chain of supply so that the drugs are provided only to patients with prescriptions from authorized physicians or pharmacies under specified conditions. Although the law prohibits the holder of an approved drug application (generally the brand company) from using ETASU to block or delay approval of a generic drug application, FDA, the Federal Trade Commission, generic drug manufacturers, and some Members of Congress have expressed concern that brand companies are using REMS to prevent or delay generic drugs from entering the market. The Director of the Center for Drug Evaluation and Research (CDER) at FDA, for example, has testified that some brand pharmaceutical companies have used REMS and distribution restrictions to impede competition by (1) withholding or refusing to sell samples of the brand drug to the generic company for purposes of bioequivalence testing and (2) prolonging negotiations related to developing a single, shared system of REMS. Effectively, withholding samples prevents the generic company from obtaining data necessary to support an application for approval, while prolonging negotiations of a single, shared system REMS delays approval of the generic application. Others argue that REMS are rare, and that FDA requires REMS with restricted distribution only for drugs that would otherwise not be allowed on the market due to safety risks. A 2014 study sponsored by the Generic Pharmaceutical Association (GPhA; now called the Association for Affordable Medicines [AAM]) estimated that misuse of REMS and other restricted distribution programs costs the United States $5.4 billion annually, with the federal government bearing a third of this burden. In the 115th Congress, legislation to keep brand companies from using REMS to prevent or delay generic drugs from entering the market has been introduced: the Fair Access for Safe and Timely Generics Act of 2017 (or the FAST Generics Act of 2017 [H.R. 2051]) and the Creating and Restoring Equal Access to Equivalent Samples Act of 2017 (or the CREATES Act of 2017 [S. 974, H.R. 2212]). Legislation aimed at reforming REMS has been discussed as a means of reducing healthcare spending, although CRS is not aware of any formal cost estimates from the Congressional Budget Office (CBO) or other entities.

Introduction The majority leader in the contemporary House is second-in-command behind the Speaker of the majority party. Typically, the majority leader functions as the Speaker's chief lieutenant or "field commander" for day-to-day management of the floor. "I'm the Speaker's agent," stated a recent majority leader. Another majority leader said: "I see it that [the Speaker] is the chairman of the board and I am the chief executive officer." Or as one Speaker put it, the majority leader's "job is to run the floor and keep monitoring committees and legislation." Elected every two years by secret ballot of the party caucus or conference, the majority leader is usually an experienced legislator. For example, Representative Richard Armey of Texas became the GOP's first majority leader in 40 years when Republicans won control of the 104 th House in the November 1994 elections. Armey began his House service in 1985, became GOP Conference chairman during the 103 rd Congress, and was one of the principal authors of the Republican "Contract with America." When Richard Gephardt, D-MO, became majority leader in June 1989, he had been in the House for more than a decade, had served as chairman of the Democratic Caucus for four years, and had been a 1988 presidential candidate. Two fundamental and often interlocking responsibilities orient the work of the majority leader: institutional and party. From an institutional perspective, the majority leader is principally responsible for exercising overall supervision of the order of business on the floor, especially as it affects the party's program. As Lewis Deschler, the late House parliamentarian (1928-1974), wrote: A party's floor leader, in conjunction with other party leaders, plays an influential role in the formulation of party policy and programs. He is instrumental in guiding legislation favored by his party through the House, or in resisting those programs of the other party that are considered undesirable by his own party. He is instrumental in devising and implementing his party's strategy on the floor with respect to promoting or opposing legislation. He is kept constantly informed as to the status of legislative business and as to the sentiment of his party respecting particular legislation under consideration. Such information is derived in part from the floor leader's contacts with his party's members serving on House committees, and with the members of the party's whip organization. From a partisan perspective, the majority leader's paramount assignment is to employ his or her talents, energy, and knowledge of procedural rules and political circumstances to insure that the party maintains majority control of the House. Each of these major responsibilities gives rise to a wide range of leadership activities. Before discussing the primary duties of the majority leader, it is worth highlighting the historical origins of this party position. Origin of the Majority Leader Position Congressional scholars assert that in 1899 Speaker David Henderson, R-Iowa, appointed Sereno E. Payne, R-NY, as the first officially designated majority leader. Prior to this date, there is neither an accurate nor complete compilation of House majority leaders. Two factors seem to account for the absence of a compilation. First, it took many decades before anything like our modern party structure emerged in the House. As a result, not until nearly the end of the 19 th century did the position of "majority leader" become a recognized party office. Second, neither official congressional sources nor party records of this early period identify a lawmaker as the majority floor leader. Several historians of the House suggest that from the chamber's early beginnings various lawmakers informally assumed the role of "floor leader." Usually, but not always, these informal party leaders were the chairs of either the Committee on Ways and Means (established in 1795) or the Committee on Appropriations (following its creation in 1865). Speakers often appointed either their allies or their principal rivals for the speakership to head these panels. Explained the late Floyd M. Riddick, a political scientist who served as parliamentarian of the Senate from 1951 to 1975: In the House, the early titular floor leaders were at the same time the chairmen of the Ways and Means Committee. Before the division of the work of that committee, the duties of its chairmen were so numerous that they automatically became the actual leaders, since as chairmen of that committee they had to direct the consideration of most of the legislation presented to the House. From 1865 until 1896 the burden of handling most of the legislation was shifted to the chairman of the Appropriations Committee, who then was designated most frequently as the leader. From 1896 until 1910 once again the chairmen of the Ways and Means Committee were usually sought as the floor leaders. During all of these years before the "Cannon revolution" of 1910, the Speaker, who appointed all members to committees, saw to it that his party opponent for Speakership, some Representative with a large following, or one of his faithful lieutenants was made the floor leader. Thus, these early titular floor leaders were appointed by the Speaker rather than chosen separately, as occurs today, by vote of the majority party caucus. ( Appendix contains a list of House majority leaders since 1899.) When the House "revolted" in 1910 against the autocratic leadership of Speaker Joseph Cannon, R-Ill., the power to designate the floor leader was taken away from the Speaker. In 1911, with Democrats in charge of the House, Oscar Underwood of Alabama became the first elected (by the party caucus) majority leader in the House's history. (Subsequently, all Democratic floor leaders have been selected in this manner.) Underwood also chaired the Ways and Means Committee and his party's committee assignment panel. The political reality was that Majority Leader Underwood's influence in the House exceeded that of the Speaker, Champ Clark of Missouri. "For the first time the leader of the House was not at the rostrum, but was on the floor." Probably no majority leader ever has matched Underwood's party power and institutional influence. (Underwood left the House for the Senate in 1915.) When Republicans reclaimed majority control of the House in 1919, Franklin Mondell of Wyoming, a high ranking member of the Appropriations Committee, became majority leader upon nomination by the GOP committee assignment panel. (Four years later the GOP Conference began the practice of electing their majority leader.) Mondell set the contemporary practice of majority leaders usually relinquishing their committee positions, and always any committee chairmanships, upon assuming this important and busy post. To be sure, there have been exceptions to the practice of majority leaders not serving on standing committees. April 15, 1929, the start of the 71 st Congress, witnessed a first-ever event that remains the practice to this day: the official announcement in the House of the selection of the majority leader. Representative Willis Hawley of Oregon, the chairman of the majority Republican caucus addressed the presiding officer: "Mr. Speaker, the Republican caucus of the House has reelected Hon. John Q. Tilson, of Connecticut, majority leader for the Seventy-first Congress." As House precedents state, "this was the first occasion of the official announcement of the selection of party leaders in the House." Separate election of the majority leader by the party caucus elevated the status and influence of the person who held this position. The majority leader soon became the "heir apparent" to the speakership. In the modern House, no Democrat has been elected Speaker without having been the majority leader immediately prior to his or her elevation. Republicans, the minority party for 40 consecutive years until the mid-1990s, do not have as well-defined a leadership succession ladder. When Speaker Newt Gingrich, R-GA., retired from the House at the end of the 105 th Congress, Appropriations Chairman Bob Livingston, R-LA., moved quickly and lined up the necessary votes to be the next Speaker. However, when Livingston announced that he planned to resign from the House for personal reasons soon after the 106 th Congress began, Republicans chose their chief deputy whip, Dennis J. Hastert of Illinois, to be the next Speaker. Unfortunately, there is scant scholarly commentary about the duties and functions that devolved upon the informal floor leaders of the pre-20 th century period. Nor are the duties and functions of today's majority leaders spelled out in any detail in the House rulebook or in party rules, although those sources make brief reference to the position. As a recent majority leader stated, "[E]ach leadership position is defined by the person who holds it. It's not defined by a job description." In short, factors such as tradition, custom, context, and personality have largely defined the fundamental institutional and party roles and responsibilities of the majority leader. Several of the most important of these two overlapping categories merit mention. However, it bears repeating that the scope of the majority leader's role in carrying out these assignments is shaped significantly by the Speaker and the sentiments of the majority party caucus or conference. Institutional The style and role of any majority leader is influenced by a plethora of elements, including personality and contextual factors, such as the closeness of his relationship with the Speaker, the size and cohesion of the majority party, whether the party controls the White House, the general political environment in the House, and the controversial nature of the legislative agenda. Despite the variability of these factors, a number of institutional assignments are now associated with the majority leader, and Members of each party expect him or her to perform them. To be sure, the majority leader is provided with extra staff resources beyond those accorded him or her as a House member to assist in carrying out these diverse leadership functions. Majority Leader Armey even established a new leadership post—"assistant majority leader"—at the start of the 106 th Congress and named two Republican colleagues as assistant majority leaders. Their assignment was to assist him on "floor scheduling, legislative and communications strategy, the policy agenda, and leadership decisions." Scheduling Floor Business Although scheduling is a collective activity of the majority party, the majority leader has a large say in shaping the chamber's overall agenda and in determining when, whether, how, and in what order legislation is taken up. Everything from setting policy priorities; drafting the schedule; consulting with Members, committee chairs, and the minority party in making up the schedule; and announcing the schedule on the floor are within the purview of the majority leader. Scheduling is a complex process and the majority leader must juggle a wide range of considerations and pressures. Five concerns illustrate the scheduling role of the majority leader. First, the majority leader commonly lays out the daily, weekly, monthly, and annual agenda of the House. For example, when the majority leader laid out the planned schedule for the 2009 legislative session, it indicated that the House would "hold votes on 137 days." It also specified that there would be "11 weeks where the House will be in session for five days. This is in keeping with a pledge by Democratic leaders who, after taking control of Congress in 2006, vowed to extend the typical workweek of three days to five days." Of course, scheduling and agenda-setting are responsibilities done in close consultation with the Speaker, majority whip, and others. The majority leader may specify in advance that certain priority bills are to be taken up prior to a congressional recess; he or she may even designate theme weeks ("reform," "high tech," "families first," and so on) for the consideration of related bills. Typically, on Thursday after the House's business for the day and week is winding down, the majority leader will announce the projected agenda for each day of the next business week, identify when votes are expected to occur, and respond to inquiries from Members about the House's program of activities. Second, a host of strategic considerations influence scheduling. For instance, with an eye toward upcoming elections, the majority leader may schedule legislation that better defines his or her party for the upcoming presidential and congressional campaigns. He or she may not schedule a bill unless there is reasonable certainty that the Senate will take floor action on it. The majority leader may also coordinate strategy on measures with the Senate party counterpart. He or she may schedule floor action at specific times—for instance, a constitutional amendment to ban flag desecration just before July 4—to maximize public attention on the issue. The majority leader may use "deadline lawmaking," indicating to Members that floor action on certain legislation must occur before the House will adjourn for a district work period. Or he or she may suggest general themes, messages, or strategies that unify party colleagues around a set of domestic and international policies. A majority leader may even propose his or her own annual legislative agenda—even if the White House is controlled by the same party—and present it to the Speaker and the party's caucus or conference. Third, majority leaders try to balance the House's workload requirements with Members' family or personal obligations. "Family friendly" scheduling aims to achieve better balance in the public and private lives of lawmakers. Fourth, majority leaders advance or delay action on measures for a variety of reasons, including whether they have the votes to achieve their objectives. To be sure, there are occasions when measures are brought to the floor, and it is unclear whether they will pass. Asked if a bill would pass, a majority leader replied: "Who knows? We're writing the bill on the floor." Fifth, majority leaders recognize that timing considerations suffuse the lawmaking process. There are timetables to meet, pressures associated with the end-of-session rush to adjourn, the electoral needs of individual Members, and a multitude of other considerations that the majority leader must address as he strives to accommodate the rank-and-file, committee chairs, the minority party, the president, and his own extended party leadership. As one majority leader put it: "You have to find that elusive grail of harmony among this most heterogeneous mix of opinionated individualists." Manage Floor Decision Making Majority leaders are active in constructing winning coalitions for their legislative priorities. To this end, a majority leader will consult with the chair of the Rules Committee to discuss procedures for considering legislation on the floor. For example, an open or restricted amendment process might be options for discussion. Or, the majority leader might decide to call up a bill under suspension of the rules procedure, which limits debate and bars any amendments. To limit policy riders on appropriations bills, the majority leader might invoke House Rule XXI, clause 2 (d). This rule grants preference to the majority leader to end consideration of an appropriations bill in the Committee of the Whole by offering a successful "motion to rise." Majority leaders engage in many other activities to promote policy success on the floor. They may, for instance, meet weekly or biweekly (more frequently, if needed) with committee chairs, ad hoc groups, or individual lawmakers to persuade them to support priority measures; woo lawmakers through the provision of various legislative services or rewards; coordinate vote counts with the party whip organization; propose changes in bills to attract support from wavering Members; reach out to lawmakers on the other side of the aisle to draft compromise legislation; craft "leadership amendments"designed to attract majority support; synchronize strategic activities with majority floor managers; and rally outside support for the party's legislative issues and political messages. Majority leaders may also take on other functions relevant to floor action. To forge winning coalitions, for instance, they engage in deal-making, appeal to Members' party loyalty, enlist allies to overcome resistance to policy-party objectives, devote considerable time and energy in promoting consensus among colleagues, and work behind-the-scenes to get things done. Majority leaders might also encourage party colleagues to deliver one-minute, morning hour, or special order speeches that spotlight the party's program and defend it against criticism from the other party. Public Spokesperson There are two interconnected dimensions associated with this role: external and internal. Externally, especially in this "24/7" news cycle and Internet era, majority leaders are national newsmakers. When he became majority leader in 1973, Thomas P. "Tip" O'Neill Jr., D-MA., said, "the media couldn't stay away ... I was interviewed constantly." Majority leaders are expected to explain and defend the actions and decisions of the House and their party to the general public. "The role of the majority leader puts you in a spokesman role," noted a recent majority leader. Accordingly, these leaders appear on the major network and cable television programs, the Sunday morning news shows, talk radio, or Internet chat rooms. Periodically, they deliver major addresses in diverse forums, and write articles or "op ed" pieces on the major issues before the House. They meet with journalists and newspaper editors. Regularly, they give news briefings (so-called pen and pad sessions) to reporters on the schedule and agenda of the House, the priorities of the majority party, legislative-executive relations, and sundry other topics. Internally, majority leaders are ready on the floor to defend their party, program, or President from criticism by the opposition. They participate in debate on measures and may make the closing argument on legislation. Majority leaders rise to defend the prerogatives of individual Members; offer critiques and rebuttals to minority party initiatives; work with committee chairmen and others to coordinate and integrate the party's communication strategy; employ floor speeches "to set the tone on a newsworthy issue or provide the proscribed leadership perspective before a major vote"; and may establish websites to provide information to House members and others. In brief, majority leaders generally function as their party's chief spokesperson on the floor and in other forums as well. Sometimes the internal and external roles coincide when majority leaders introduce legislation, monitor executive branch actions, or champion proposals nationally. For example, Majority Leader Armey and another GOP colleague traveled the country in a "Scrap the Code Tour," a "national campaign to take the tax reform debate directly to the American people." Armey also attracted national attention with respect to his legislative efforts to monitor executive branch implementation of a 1993 law designed to measure the performance of government programs. Confer with the White House Majority leaders regularly attend meetings at the White House—especially when the President is of the same party—to discuss issues before Congress, the Administrations's agenda, and political events generally. For example, the joint bipartisan congressional leadership, including the House majority leader, may meet at the White House to discuss agenda priorities for the year. There are occasions, too, when the President will journey to Capitol Hill to meet with the top leaders of Congress. There are instances as well where majority leaders can be sharp critics of the President. Majority leaders consult with executive branch officials plus scores of other individuals (foreign dignitaries, governors, mayors, and so on.) Majority leaders may also be active on international issues: brokering foreign policy compromises with the White House, championing the interests of certain nations, or criticizing some foreign governments. In general, anyone who occupies the House's number two leadership post has strengthened leverage with the White House and greater public prominence on international issues. "People are now listening to what I've been saying because I'm majority leader," declared a former holder of the post. Strategically, the role of majority leaders will be different depending on whether the President is of the same party. In general, majority leaders will strive to advance the goals and aspirations of their party's President in the Congress. If the President is of the opposite party, then the procedural and political situation is more complicated. When should the majority leader cooperate with the President? When should he or she urge the House to reject Administration policies? When should he or she propose alternatives to the President's priorities? In brief, the majority leader, the Speaker, and their other party colleagues need to determine when to function as the "governing" party in the House and when to act as the "loyal opposition." Facilitate the Conduct of Business To expedite the work of the House, a wide range of other responsibilities is typically performed by the majority leader. For example, the majority leader may ask unanimous consent that when the House adjourns that it meet again at a specific date and time. The majority leader may either appoint people to certain boards or commissions or be self-named to various commissions or boards. He or she may lead congressional delegations to different parts of the world. The majority leader may act as Speaker pro tempore; offer resolutions affecting the operations of the House, such as establishing the hour of daily meeting of the House; perform various ceremonial duties; and support initiatives to revamp or reform the internal procedures and structures of the House. In brief, the majority leader is responsible, along with other Members of the leadership, for insuring the orderly conduct of House business. Party The majority leader, former Speaker "Tip" O'Neill once said, "helps set policy and carries out the duties assigned to him by the Speaker." One of the most important duties of the majority leader is to try to ensure that his or her party remains in control of the House. After all, legislative organization is party organization. The majority party sets the agenda of the House and controls all committee and subcommittee chairmanships. Thus, along with other party leaders and Members, the majority leader works in numerous ways to help elect and reelect rank-and-file partisan colleagues, to forge unity on priority legislation, and to promote a favorable public image of the majority party. Three activities of the majority leader illustrate these points. Assist Colleagues' Reelection Campaigns Majority leaders are typically energetic campaigners on behalf of their partisan colleagues. They assist incumbents and challengers in raising campaign funds, and they travel to scores of House districts to campaign with either incumbents or challengers of their party. Majority leaders develop computer-based campaign donor lists, so they can funnel campaign funds quickly to electoral contests; establish their own "leadership PACs" to raise money and then donate money from their political action committee to candidates of their party; help to raise large sums of money so campaign ads can be run on television and elsewhere in the months leading up to the November election; and coordinate their campaign activities with congressional, national, and state party campaign organizations and encourage outside groups and allies to raise money for the party. Majority leaders assist in recruiting qualified challengers to take on incumbents. They promote get-out-the-vote drives, in part by devising strategies to energize their party's grassroots supporters. In short, majority leaders are heavily engaged in the electoral campaigns of many party candidates. Their ultimate goals: to retain their majority status and, if possible, to increase the number in their ranks. Promote the Party's Agenda Majority leaders may undertake a variety of actions to accomplish this goal. They develop legislative agendas and themes (e.g., an "innovation agenda,") that address issues important to the country and to core supporters and swing voters in the electorate. These agendas may be posted on their Web sites. A key aim of this form of "message sending" is to animate and activate their electoral base to turn out on election day. Another objective is to develop electorally attractive ideas and proposals that may enable their party to retain or retake the House, the Senate, or even the presidency. Still another is to advance policies that strengthen the nation, such as its global competitiveness in science, engineering, or other fields. The majority leader may help to organize "town meetings" in Members' districts, which publicize and promote the party's agenda or a specific priority, such as health care or tax cuts. He or she may sponsor party "retreats" to discuss issues and to evaluate the party's public image. The majority leader may also distribute reports, memorandums, briefing books, and Web videos that highlight partisan campaign issues; conduct surveys of party colleagues to discern their priorities; organize "issue teams" or "task forces" composed of junior and senior lawmakers to formulate specific party programs; and form "message groups" or "theme teams" to map media strategies to foster favorable press coverage of party initiatives and negative views of the opposition party. Sometimes the majority leader will attend partisan luncheons with Senators to better coordinate inter-chamber action on the party's legislative and message agenda. "We're having more bicameral meetings," remarked a majority leader, "so that ... we understand what each other is doing ... and what can and can't be done." Majority leaders are also named as conferees on major bills "to represent the overall interests of the [majority] leadership." In brief, the majority leader is a key strategist in promoting the party's agenda, in outlining ways to neutralize the opposition's arguments and proposals, and in determining when it is better to compromise with the other party on policy priorities or have no agreement. Encourage Party Cohesion If a party is to maintain its majority, it is generally a good idea to minimize internal factional feuds or disagreements that may undermine its ability to govern the House. One majority leader explained this job as a "combination of evangelist, parish priest, and part-time prophet. You have to be a peacemaker in the family." To forge party cohesion means, in part, that majority leaders will consult widely with the diverse factions within their party; they will argue the need for party loyalty on crucial procedural and substantive votes; they will try to offer persuasive arguments that "educate" colleagues on a measure's policy and political benefits; and they will schedule breakfasts, lunches, or dinners to keep in touch with party members and to listen to their concerns. Aiding the majority leader in these efforts is his membership on various party units, such as policy committees or the committee-on-committees. Majority leaders may also enlist the support of outsiders, such as lobbyists, to assist in building party cohesion. In fact, majority leaders may develop an external network of contacts in universities, think tanks, or consulting firms to function as an informal "brain trust" in policy development and in strategic analysis, suggesting how the majority party might mobilize the support required to enact their ideas into law. Majority leaders, then, work to boost their party's fortunes internally and externally by acting as a political cheerleader, negotiator, consensus-builder, and peacemaker. Final Observations The majority leader's duties and functions, although not well-defined and contingent in part on his or her relationship with the Speaker, have evolved to the point where it is possible to highlight the customary institutional and party responsibilities. As one majority leader said about his institutional duties: "The Majority Leader has prime responsibility for the day-to-day working of the House, the schedule, working with the committees to keep an eye out for what bills are coming, getting them scheduled, getting the work of the House done, making the place function correctly." On the party side, the majority leader added: "[Y]ou are also compelled to try to articulate to the outside world what [your party stands] for, what [your party is] fighting for, what [your party is] doing." Appendix. House Majority Leaders, 1899-2009

The majority leader in the contemporary House is second-in-command behind the Speaker of the majority party. Typically, the majority leader functions as the Speaker's chief lieutenant or "field commander" for day-to-day management of the floor. Although the majority leader's duties are not especially well-defined, they have evolved to the point where it is possible to spotlight two fundamental and often interlocking responsibilities that orient the majority leader's work: institutional and party. From an institutional perspective, the majority leader has a number of duties. Scheduling floor business is a prime responsibility of the majority leader. Although scheduling the House's business is a collective activity of the majority party, the majority leader has a large say in shaping the chamber's overall agenda and in determining when, whether, how, or in what order legislation is taken up. In addition, the majority leader is active in constructing winning coalitions for the party's legislative priorities; acting as a public spokesman—defending and explaining the party's program and agenda; serving as an emissary to the White House, especially when the President is of the same party; and facilitating the orderly conduct of the House's business. From a party perspective, three key activities undergird the majority leader's principal goal of trying to ensure that the party remains in control of the House. First, the majority leader assists in the reelection campaigns of party incumbents by, for example, raising campaign funds and traveling to scores of House districts to campaign either with incumbents or challengers of the party. Second, the majority leader promotes the party's agenda by developing themes and issues important to core supporters in the electorate. Third, the majority leader encourages party cohesion by, for instance, working to minimize internal factional disagreements that may undermine the majority party's ability to govern the House.

Introduction In the United States, 50.7 million people, or 16.7% of the U.S. population, had no health insurance for at least some of 2009. This is the highest rate of uninsurance over the past decade. In fact, during the past decade, the aggregate uninsurance rate was never less than 13.4%. Uninsured individuals are, on average, more likely to forgo needed health care than insured individuals, including services for preventable or chronic conditions. In addition, the uninsured are less likely to have a "usual source of care," or a provider to oversee individual health care. For these and other reasons, the uninsured often have worse health outcomes than the insured. Among the most likely to be uninsured in 2009 were adults between 19 and 25, Hispanics, those living in families with incomes below 200% of the federal poverty guidelines, and those in families with relatively weak attachments to the labor force. This report characterizes the health insurance status of individuals in 2009. Following a brief discussion of the data, the report examines the relationship between types of health insurance (including employment-sponsored, other private, and Medicaid) and individual characteristics (including age, other demographic characteristics, and ties to the labor market). Next, the report demonstrates the different conclusions that might be drawn from different analyses of the uninsurance data. The report then compares the likelihood that various individuals with different demographic characteristics were uninsured. The report concludes with a discussion of trends in uninsurance since 1999. The Data This report uses data from the 2010 Current Population Survey (CPS) conducted by the Census Bureau of the U.S. Department of Commerce. The CPS is a monthly survey of non-institutionalized civilian households primarily used to collect employment data. The Annual Social and Economic Supplement (ASEC) to the CPS collects information on individual health insurance status, income, and poverty. The ASEC is also known as the March Supplement, because most of the surveys are completed in March, with many questions covering the prior year. About 100,000 addresses comprise the sample households to be interviewed. Statistical techniques adjust the data to represent all households in the nation. The key variable in this report is whether each person was uninsured in 2009. More specifically, the uninsurance variable measures whether an individual lacked health insurance on any one representative day in 2009. This report, therefore, uses the term "uninsured" to mean at a point in 2009, and not necessarily over the entire year. The March Supplement to the CPS is one of several popular sources used to estimate the levels of uninsurance in the United States. Additional prominent data sources include the American Community Survey (ACS), the Medical Expenditure Panel Survey (MEPS), and the Survey of Income and Program Participation (SIPP). Each dataset gives broadly similar results, and CRS analyzes the data from the two largest data sets, the ACS and the CPS. Health Insurance Coverage: Individual Characteristics This section covers the relationships between health insurance and an individual's demographic and employment characteristics. An individual's age and many other demographic characteristics cannot be changed by policy. Public policies, however, can affect income and labor force attachments. Selected Demographic Characteristics Age Table 1 provides a breakdown of health insurance coverage by type of insurance and age in 2009, in order of increasing age. Compared with other age groups, those under age five had the highest rates of coverage (40.0%) in Medicaid, CHIP, or some other public program for low-income individuals. On the other hand, young adults aged 19 to 25 were the most likely to have gone without coverage. While half in the young-adult age group (50.1%) were covered under an employment-based plan, almost one-third (32.7%) had no health insurance. Among people aged 65 and older, 93.5% were covered by Medicare, and less than 2% were uninsured. The remainder of this section focuses on the nonelderly population because of the high insurance rates among the elderly. In addition, Medicare, private-nongroup, and military/veterans insurance are combined into an "other category" because these insurance types enroll a relatively small number of individuals in the 64-and-under age cohort. Race and Family Type Table 2 shows the rate of health insurance coverage by type of health insurance and selected demographic characteristics for people under age 65. In 2009, whites were least likely to be uninsured (14.0%), while Hispanics were most likely to be uninsured (33.9%). The rate of employment-based health coverage was highest among whites and Asians (69.1% and 63.1%, respectively), and the rate of public coverage was highest among blacks (30.3%). Although these differences are quantitative estimates of the racial differentials in insurance coverage, they in and of themselves do not provide reasons for the differences. In fact, this dichotomy is true throughout this report; while it is straightforward to estimate differences in uninsurance patterns across individual characteristics (or over time), the reasons for the differences usually remain speculative. Individuals livings in different family types have different insurance patterns. As indicated in Table 2 , people residing in two-parent families were most likely to have employment-based health insurance (68.7%) and least likely to be uninsured (13.1%). People in a family headed by a single mother were most likely to have public coverage (43.9%), compared with other family types, and those in a family headed by a single father, or a single man living alone, were most likely to be uninsured. Region of Residence Turning to regional differences, those under 65 years old were less likely to be uninsured if they lived in the Northeast or Midwest (14.2% and 15.1%, respectively) than if they lived in the South or West (22.3% and 20.3%, respectively). Employment-based health insurance covered about 65% in the Northeast and Midwest, compared with about 57% in the South and West. Poverty and Citizenship Status Income, as measured by poverty status, is a strong predictor of health insurance status. Among individuals with family incomes at least two times the poverty threshold, 12.1% went without health insurance, compared with 34.0% of the poor (i.e., those with family incomes below the poverty threshold). Only 15.6% of the poor received health coverage through employment, while 49.5% had public coverage. Of people with family incomes at least two times the poverty threshold, 77.1% were covered through an employer and 7.6% had public coverage. Finally, noncitizens had higher uninsured rates (48.0%) and lower employment-based coverage rates (34.5%) than native-born U.S. citizens (16.1% and 62.6%, respectively). Selected Employment Characteristics Table 3 shows the rate of health insurance coverage for people under age 65 in 2009 by the employment characteristics of the primary worker in the family. Families where no one worked are omitted from the table. Family members were increasingly less likely to be uninsured as the primary worker's firm size increased. For example, members of a family where the primary worker was employed by a firm with less than 10 employees were more than three times as likely to be uninsured as family members where the primary worker was employed by a firm with over 1,000 employees. Some of this difference may occur because large firms frequently face lower costs for health insurance benefits than smaller firms. This cost differential occurs because larger firms are better able to spread the risks associated with high-insurance-cost individuals across many individuals. In addition, administration and marketing costs are lower in larger firms than in smaller firms. Members of a family where the primary worker had a strong attachment to the labor force were less likely to be uninsured than others. Members of a family where the primary worker was employed full-time for a full year were about half as likely to be uninsured as those in families where the primary worker was employed full-time for only part of the year (13.7% versus 26.0%, respectively). Those who worked part-time, either for all of 2009 or for a part of it, were even more likely to be uninsured. Characterizing the Uninsured This section demonstrates that, in evaluating groups of uninsured individuals, it is important to decide on an appropriate comparison group. Although citizenship status is used as an example, the issues covered in this section are applicable to other traits as well. The conclusion is that different representations of the same data can lead to different conclusions if care is not taken when evaluating the data. Figure 1 looks at the total number of uninsured individuals and displays the percentage of uninsured individuals by citizenship status. From this picture alone, it appears that the greatest number of individuals in need of policy support are those who are native-born citizens. This is because almost 75% of the total pool of the uninsured are native-born citizens, while about 20% of the total pool of the uninsured are not citizens, with the remaining 5% being naturalized citizens. In this example, it is important to remember that all comparisons are relative to the total number of uninsured. The remaining figures, however, demonstrate that different conclusions might be drawn if the analysis compares the percentage of uninsured individuals within each group's citizenship status. These comparisons are illustrated in Figure 2 , Figure 3 , and Figure 4 for native-born citizens, noncitizens, and naturalized citizens. Figure 2 demonstrates that far more native-born citizens are insured (about 84%) than are uninsured (about 16%). Even though Figure 1 demonstrates that native-born citizens are the largest group of uninsured citizens, Figure 2 demonstrate that, of all native born citizens, 16% are uninsured. The comparison across the two measurements of noncitizens is also instructive. Figure 1 demonstrates that noncitizens comprise the smallest citizenship group of the uninsured. On the other hand, Figure 3 demonstrates that almost one half of noncitizens are uninsured. Similar disparities can be found when comparing the relative importance of uninsured naturalized citizens in Figure 1 and Figure 4 . Uninsured naturalized citizens comprise 5.8% of the pool of the uninsured but 16.1% of all naturalized citizens. This apparent paradox—that the group least likely to be uninsured makes up the largest portion of the uninsured—exists when looking at other characteristics. It comes about because the group that represents the largest share of the relevant population (i.e., native-born citizens) does not have to have the largest uninsurance rate (i.e., not citizens). In fact, as the data in Table 2 demonstrate, the total number of naturalized citizens and non-citizens (33.0 million) is less than the number of uninsured citizens (37.4 million) The difference between calculations in percentages and calculations in numbers raises difficult issues for policy makers considering policy options to reduce the number of uninsured. For example, proposals that may affect the greatest number of citizens (who comprise almost three-quarters of the pool of uninsured) may not affect the greatest number of noncitizens (of whom almost half are uninsured). The Likelihood of Being Uninsured An individual's probability of being uninsured can be measured in two ways. Table 2 shows differences in the probability of being uninsured for various broad demographic groups. For example, among those under 65, blacks were 22.5% likely to be uninsured, whereas whites were 14.0% likely to be uninsured. In other words, blacks were 8.5 percentage points more likely to be uninsured than whites. This comparison across groups is the first way to measure the probability of uninsurance. Race is only one of many factors by which individuals differ. It is possible to compare individuals who are largely identical (at least in the variables collected in the survey data), but differ along one variable of interest. This section first compares the likelihood of not having health insurance for representative individuals who are largely identical but differ by race. The section then, for each race, compares representative individuals who are largely identical but differ by age. Figure 5 compares the likelihood across races that the representative individual is uninsured. All individuals compared were assumed to be 40-year-old, native-born citizens living with a spouse and children in the Northeast. The individuals differed by race, and therefore had different probabilities of uninsurance (even though they shared other characteristics). For example, this individual faced a 10.8% likelihood of uninsurance if black, and a 8.1% likelihood of uninsurance if white. When comparing two largely identical individuals (defined as 40 years old, with children, northeasterners, and native-born citizens), blacks are 2.7 percentage points more likely to be uninsured than whites. Neither of these two measures of the likelihood of uninsurance is the "better" measure. Rather, the two measures answer different questions. When comparing all black individuals and all white individuals (see Table 2 ), blacks are 8.5 percentage points more likely to be uninsured than whites. When comparing individuals who already share basic demographic characteristics (see Figure 5 ), blacks are 2.7 percentage points more likely to be uninsured than whites. Figure 6 depicts the likelihood of representative white, black, and Hispanic individuals being uninsured in 2009 at every age between birth and age 64. Once again, these individuals were native-born citizens who lived with a spouse (or at least one parent) and children (if an adult) in the Northeast. The three uninsurance profiles have the same general shape. The individuals were least likely to be uninsured at birth but then faced an increased likelihood of uninsurance. This increasing likelihood of uninsurance became stronger beginning at about age 12 and increased throughout the individuals' teens and twenties. Once individuals reached their early thirties, however, their likelihood of being uninsured began to fall. The likelihood of uninsurance continued to fall, on average, until about age 59. Were this graph to extend beyond age 65, however, the uninsurance rate would approach zero because almost everyone would be covered by Medicare. Uninsurance over Time, 1999 Through 2009 The percentage of people without health insurance has not been constant over time. Figure 7 displays the aggregate uninsurance rate for individuals of all ages. The data reported in this section of the report are from published CPS documents. Data prior to 1999 are not consistent with more recent data. The shadowed areas represent times of economic recessions. It is not possible to predict whether the percent uninsured will increase or decrease during a recession. Individuals may lose their jobs, and thus their employment-based insurance. These employment effects would lead to an increase in the uninsurance rate because not all those who lose their employment-based coverage would extend their insurance through COBRA or purchase insurance in the individual market. On the other hand, the economic downturn may cause children and adults to become eligible for the need-based entitlement programs of Medicaid and CHIP. If the newly eligible do indeed enroll, the uninsurance rate may decrease. Because the unemployment rate is slow to recover after a recession, the effects of unemployment on uninsurance may linger past the end of the recession. Turning to the data, the uninsurance rate increased during and after the relatively short recession of the early 2000s, and during the relatively longer recession of the late 2000s. In fact, the aggregate uninsurance rate of 16.7% in 2009 was the highest reported insurance rate over the interval.

Almost 51 million people, or 16.7% of the U.S. population, had no health insurance for at least some of 2009. In fact, the aggregate uninsurance rate over the past decade was never less than 13.4%. Individuals living in poorer families, young adults between ages 19 and 25, and Hispanics were especially likely to be uninsured. On the other hand, individuals over 65, who are almost always eligible for Medicare, were the least likely to be uninsured. An extensive body of research suggests that those without health insurance are more likely to face worse health outcomes than those with insurance. This report examines the characteristics of the uninsured and those insured by private and public health insurance using data from the (March) Annual Social and Economic Supplement to the 2010 Current Population Survey (CPS). The insurance information in the 2010 CPS supplement covers calendar year 2009, the most recent year for which CPS data are available. The first part of the report compares very broad groups of individuals under age 65. Those particularly likely to be uninsured included the groups listed above, single men, children living in families headed by single men, those living in the South and West, and noncitizens. In addition, individuals living in families where the primary worker was employed by a small firm or was employed less than full-time and full-year were more likely to be uninsured than those living in a family where the primary worker was employed by a larger firm or had a full-time position for the entire year. Groups particularly likely to receive publicly funded insurance included single mothers and those in families with incomes lower than the poverty threshold. The second section of the report compares two methods of measuring the uninsured. Using citizenship status as an example, the report analyzes uninsurance both in terms of the percentage of each citizenship status in the total pool of the uninsured (e.g., about 75% of the pool of the uninsured were native-born citizens), and in terms of the percentage of each citizenship status who were uninsured (e.g., about 16% of native born citizens were uninsured). The third part of the report compares more narrow groups of "representative" individuals, who were largely similar but differed across a single dimension. For example, the specific effects of an individual's race and age on the likelihood of being uninsured are isolated. Among individuals who were 40 years old, native born, and lived with a spouse and children in the Northeast, those who were white were 8.1% likely to be uninsured, whereas those who were black were 10.8% likely to be uninsured. On the other hand, among all individuals, those who were white were 14% likely to be uninsured, whereas those who were black were 22.5% likely to be uninsured. The final part of the report examines uninsurance rates over the past 10 years. The uninsurance rate increased during and after the relatively short economic recession of the early 2000s and during the relatively longer recession of the late 2000s.

Issue Overview Japan's August 1999 agreement to engage in ballistic missile defense cooperation with theUnited States has the potential for contributing materially to the ability of the U.S. Navy to field anAsian regional defense against intermediate-range ballistic missiles, a goal that has long receivedstrong support from Congress. Although Japan has committed to research and development (R&D)cooperation on four elements of a Navy interceptor missile, Tokyo has not made a decision toacquire a missile defense capability. It is even less clear how far Japan might be prepared to movein the direction of an integrated regional missile defense cooperation arrangement. The extent ofJapan's future participation in missile defense will be governed by a number of considerations,including its threat perceptions, overall national defense strategy, regional relationships,constitutional constraints, domestic political impact, technical feasibility, and cost. The relativeimportance of these factors cannot be established with any precision -- any one or combination ofthem could have a make or break effect on Japanese decisionmaking. To date, these considerationshave had a mixed and sometimes contradictory effect on Japanese policy. Focus and Scope of This Report This report documents and analyzes Japanese perspectives on ballistic missile defense andon participation in the U.S. missile defense R&D program, with particular attention to current trendsin Japanese security thinking, major actors in the policymaking process, and political andconstitutional constraints. It notes areas of convergence as well as issues on which American andJapanese perspectives tend to diverge. Finally, the report briefly addresses a number of policyconsiderations for Congress and the Bush Administration in light of ongoing uncertainties aboutJapan's participation. For broader background on U.S.-Japan relations and security cooperation, seeIssue Brief IB97004, Japan-U.S. Relations: Issues for Congress (regularly updated). Congressional Support for An "Asian" Missile Defense Capability Since the mid-1990s, Congress has supported the development of a missile defense capability to protect forward-deployed U.S. forces in the Asia-Pacific area, regional allies, and Taiwan fromshort- and medium-range missiles, a goal that requires some level of Japanese support--if onlyhosting U.S. missile defense forces. The 1991 Persian Gulf War highlighted the threat of short-rangeScud ballistic missiles and the inadequacy of the Army's Patriot missile defense system to protectU.S. ground forces and facilities. Similar concerns have been expressed regarding the U.S. Navy'scurrent lack of a defense against both short- and intermediate-, or "theater"-range, ballistic missiles,and cruise missiles. Testimony by numerous defense and intelligence officials highlighted thegrowing threat posed by the development of intermediate-range ballistic missiles capable of carryingweapons of mass destruction (WMD) by anti-U.S. regimes ranging such as North Korea and Iraq. Congressional Reaction to China's 1996 Missile "Tests" in theDirection of Taiwan. Following China's firing of ballistic missiles in the vicinityof Taiwan during a Taiwan Strait confrontation in early 1996, Congress acted to support thedevelopment and deployment of a missile defense system explicitly oriented towards Asia and thewestern Pacific. Section 1533 of the FY1999 National Defense Authorization Act ( P.L. 105-261 ,signed into law on October 17, 1998) required the Secretary of Defense to "carry out a study of thearchitecture requirements for the establishment and operation of a theater ballistic missile defensesystem in the Asia-Pacific region that would have the capability to protect key regional allies of theUnited States," and to submit a report to Congress not later than January 1, 1999. The report wasto describe any U.S. missile defense system either currently deployed or being developed "that couldbe transferred to key allies of the United States in the Asia-Pacific region to provide for theirself-defense against limited ballistic missile attacks." It was to be submitted in both classified andunclassified versions. Congress clarified the term "key regional allies" in the conference report( H.Rept. 105-736 ), identifying these as Japan, South Korea, and Taiwan. (1) The Department of Defense (DoD) delivered a 15-page unclassified version of thecongressionally mandated Theater Missile Defense (TMD) report in May 1999. The report focusedon five ballistic missile defense systems currently under development for U.S. forces, and describedoptions for the defense of South Korea, Japan, and Taiwan against an attack by fewer than fivemissiles of under 3,500 km (2,170) range. The report assumed that the missiles would not employspecial measures to evade destruction, such as the use of decoys or altered trajectories. Theunclassified version of the DoD report addressed hypothetical architectures for each country'ssituation, but did not attempt to suggest or describe any region-wide system architecture, nor did itaddress the most challenging types of threats. (2) Changing Context of Congressional Support for Missile Defensein the 107th Congress. Congress continued to show support for developing anddeploying a "theater" level missile defense capability in 2001, but also for more ambitiousdevelopment objectives that might allow TMD systems--especially the Navy's sea-based TMDcapability to serve as a basis for an early national missile defense capability. (3) For instance, on March 28,2001, Rep. Vitter introduced two related bills expressing strong support for an Asian missile defensecapability but also for upgrading the planned speed of the Navy Theater-Wide (NTW) interceptormissile to give it the ability to intercept North Korea's Taepo Dong I missile and Iran's Shahab 5missile, and requiring the Department of Defense to conduct at least one test against an incomingmissile with the flight characteristics, including velocity, of the Taepo Dong I. (4) Rep. Vitter also introduceda companion bill, the Defense Against Regional Threats Act of 2001, Sec. 2 of which would makeit U.S. policy "to provide for deployment as soon as is technically possible of effective missiledefense systems capable of defending Israel, Japan, the Republic of Korea, Taiwan, and all membernations of the North Atlantic Treaty Organization against ballistic missile attack." Sec. 3 of the billwould make it U.S. policy "to seek continued negotiated burdensharing agreements with the nationsspecified in section 2 to share the costs of development and deployment of ballistic missile defensesystems." Both H.R. 1282/1283 appeared to reflected impatience on the part of a number of Membersof Congress at the determination of the Clinton Administration to avoid testing or deploying missiledefense systems that would violate the ABM treaty. Although neither bill went beyond referral tothe Armed Services Committee, the proposed legislation implicitly supported the decision of theBush Administration to radically revamp the U.S. BMD program, with the goal of applying variousABM technologies across a range of missions, including the early deployment of a capability todefend U.S. territory against limited attacks by intercontinental-range ballistic missiles that mightbe launched by "rogue" states. BMD, NMD, and TMD -- What is the Difference? The United States military uses the term Ballistic Missile Defense (BMD) as a genericdesignation for systems designed to defend against ballistic missiles of whatever range--fromshort-range "Scud" type missiles to intercontinental ballistic missiles (ICBMs). Thus, both TMDand National Missile Defense (NMD) systems are BMD systems. TMD systems are intended to bedeployed in a military theater of operations to defend against short-range and theater-range (up to3,500 km) ballistic missiles; NMD systems are intended to defend U.S. national territory againstcontinent-spanning missiles, i.e., ICBMs. Currently, both the U.S. Army and the U.S. Navy aredeveloping anti-missile systems for theater-wide defense, but the U.S. Defense Department haschosen the former Navy Theater Wide (NTW) anti-ballistic missile system, now designatedSea-Based Midcourse Defense (SMD), as the most appropriate system for an "Asian" TMD. Recent Bush Administration Policy Changes Related to U.S. NMD and TMDPrograms In a series of policy statements beginning with a speech by the President at the NationalDefense University on May 1, 2001, the Bush Administration indicated an intention to enlarge andredirect current BMD programs in a way that tends to erase the clear distinction between TMD andNMD. The reasoning behind this decision appears to be at least two-fold. First, the relevanttechnologies are applicable across the whole range of BMD threats. Second, and relatedly, certainprograms currently in development for lower tier threats are deemed to have the potential, if suitablyenhanced, of serving as a stop-gap, near-term NMD capability in the absence of a full-scope NMDsystem. This reasoning applies particularly to the former Navy Theater Wide (NTW) program, whichhas been the focus of U.S.-Japan TMD cooperation. One possible sea-based option would buildupon the technologies being developed in the former NTW program to develop a system that couldbe deployed on the Navy's Aegis cruisers stationed off the U.S. Pacific coast, with the mission of intercepting ICBMs in mid-course, outside the atmosphere. Another concept is to deploy a sea-basedsystem in the Sea of Japan with a capability to intercept North Korean intercontinental missiles intheir assent, or "boost" phase, when they are most vulnerable. (5) A more technologicallyambitious concept under active consideration involves deploying aircraft with laser systems capableof destroying missiles in their boost phase. This report discusses and analyses the Administration's approach to missile defense and itsimplications for U.S.-Japan cooperation on missile defense, but the report's point of departure is thetraditional delineation of types of anti-missile systems based on the characteristics of the specificballistic missile threats that they seek to counter. In other words, the main ballistic missile threat toU.S. forward-deployed forces in the Asia-Pacific region, and to Japan, South Korea, and Taiwan, isfrom short- and medium-range, or "theater" range ballistic missiles. Continuing Technological Distinctions Another reason not to lose sight of the NMD/TMD distinction is that from a technologicalperspective, the challenges involved in attacking ICBMs and theater-range missiles remain markedlydifferent. Even though some of the technology being developed in the NTW program would berelevant to the defense against strategic missiles, the design characteristics for Standard SM-3interceptor missile being developed for the NTW are deficient in speed and range for the task ofintercepting an ICBM. This is especially the case if the interceptor missile is launched from aposition that requires it to chase down an ICBM from behind. (6) Hence, if the United Statesdecides to deploy a sea-based system to protect the United States against ICBMs in their mid-courseor terminal phase, it may have to develop a more capable interceptor missile than is currently beingdeveloped to defend U.S. ships, bases, and port facilities against short-and medium-range ballisticmissiles. In addition to having a higher velocity and longer range, the job of intercepting anddestroying an ICBM may require a different kinetic kill vehicle (KKV) -- the cannister-shapedprojectile that smashes into the missile warhead. It also may need an upgraded sensor. How challenging this requirement would be is a matter of some dispute. Critics of theClinton Administration's approach to TMD argued that the designed velocity of the interceptormissile had been artificially kept below 5 km/second in order to comply with 1972 Anti-BallisticMissile (ABM) Treaty with the former Soviet Union. They asserted that with relatively minortechnical changes the planned velocity of interceptor missile could and should be upgraded to betterdeal both with medium-range missile threats as well as ICBMs. (7) Others, including somesupporters of an early national or global defense capability based on the NTW/SMD technology, areconvinced that intercepting an ICBM will require a larger and faster missile than can be achievedby upgrading the Navy's Standard missile. (8) As for other proposed "contingency" BMD systems aimed at defending U.S. territory againststrategic missiles, the relevance of the current technology cooperation between the United States andJapan is unclear. Some analysts argue that in theory, attacking missiles close to the point of launch-- as in the proposed boost-phase interceptor -- would require different sensors than those beingdesigned for the SMD. In action on the FY2002 defense authorization bill, both the House andSenate Armed Services Committees reduced the Defense Department's request for boost-phaseinterceptor testing on grounds that the concept design had not been completed. The Senate Reportnoted that "Boost-phase technology is extremely challenging ...." (9) Reportedly, the Departmentof Defense plans to seek Japanese cooperation on a Sea-based boost-phase interceptor in order togain access to Japanese sensor and early detection technology, (10) but such intention is notmentioned in the FY2003 Budget Justification of the Missile Defense Agency that was released atthe end of February 2002. (11) Cancellation of the Navy's "Lower-Tier" Missile Defense Program Until the end of 2001, the U.S. Navy had been developing two missile defense systems forshipboard deployment. Both were intended to defend against short- and medium-range ballisticmissiles, but at different points in their flight path. The Navy Area Defense (NAD) system, was tobe the Navy's "lower tier" BMD program, providing local-area defense against ballistic missiles byintercepting them within the atmosphere. The NAD was roughly analogous to the Army's Patriot-3(PAC-3), also a lower tier system to protect military forces against high value targets from short-andmedium-ballistic missiles, such as the ubiquitous Scuds and their variants. The NAD was cancelledby the Pentagon in December 2001 because of poor performance of components and related unit costincreased which exceeded limits established by Congress. The Defense Department declined to useit authority to certify the program for continued funding. (12) Cancellation of the NAD leaves the Navy, for the moment,anyway, without any program under development to provide "lower tier" defense against ballisticmissiles, and none against cruise missiles. (13) The second Navy missile defense program, now called Sea-Based Midcourse Defense(SMD), which has been the object of U.S.-Japan cooperation, remains intact and may be accelerated. There are, however, several uncertainties about the future of this system. One is technological. Thebasic building block of the SMD is the same Standard Missile that was to be employed by the NAD,but with much higher performance characteristics than the cancelled lower tier system. Also, theformer NTW had been described as "the least mature" of the various systems under development bythe Pentagon by one expert. (14) Another uncertainty arises from the determination of thePentagon's Ballistic Missile Defense Office (BMDO) -- redesignated the Missile Defense Agency(MDA) in January 2002, to acquire an early sea-based NMD capability, and the eagerness of theNavy to provide the platform for an NMD capability. These changes raise some questions aboutorganizational lines of control between the MDA and the Navy, and mission priorities. Navy plans had called for the NTW system to enter service around FY2010. As of February2002, the Pentagon anticipates that the Sea-Based Midcourse System could achieve initial capabilityfor short- and intermediate-range sea-based missile defense by about 2006, with an ICBM capabilityto come several years later. (15) In the past, these estimates have been subject to considerablechange, depending on test results and other factors. The program called Sea-Based Midcourse Defense (SMD) is designed to achieve a capabilityto intercept short- and medium ballistic missiles in mid-course or in their early terminal phase, andto defend a much larger geographic area than the canceled NAD. The SMD is designed to interceptenemy missiles at altitudes above the atmosphere (i.e., exo-atmospheric intercept) and destroy themwith a hit-to-kill kinetic kill vehicle (KKV) called the Lightweight Exo-Atmospheric Projectile(LEAP). Intercepting a ballistic missile in midcourse, i.e. above the atmosphere, requires differenttechnology than intercepting a missile in its terminal phase, when it has reentered the atmosphere. A missile within the atmosphere follows a flight path that is affected by air pressure on its reentryvehicle (nose cone with warhead), whereas a missile in mid-course--above the atmosphere--followsa more predictable ballistic trajectory. Figure 1 shows the different areas of coverage that would be provided by the now-cancelledNAD system--or any replacement terminal missile defense system, and the Sea-Based MidcourseDefense system. If the latter achieves its design objectives, an appropriately positionedAegis-equipped ship deploying the SMD could -- for instance -- shield most of Japan from an attackby a North Korean missile. Figure 1. Comparison of Coverage of Former Naval Area Defense (NAD)and AEGIS Theater Ballistic Missile Defense (Formerly Designated NavyTheater Wide (NTW) and Now Designated Sea-Based Midcourse Defense(SMD) (Source: Department of the Navy) Evolution of Japanese Interest in Ballistic Missile Defense Cooperation Japanese interest in U.S. missile defense programs dates from the mid-1980s, when theDepartment of Defense solicited participation by allied countries in the Reagan Administration'sStrategic Defense Initiative (SDI), partly in order to bolster congressional support for the program. Japan declined to participate but did partly relax its post-World War II arms export ban to open theway for sharing military and dual use technology with the United States. Subsequently, Japan sharedtechnology with the United States for several weapons systems, including portable surface-air missile(SAM) systems, naval ship construction, a ducted rocket engine, and the controversial FS-X,next-generation fighter program. The FS-X collaboration, which involved transfer of technology used in the USAF's F-16fighter, produced by what was then General Dynamics, proved a searing experience for the Japanese. It is widely accepted among students of US-Japan alliance relations that the Japanese government,backed by domestic industry and influential Diet Members, strongly preferred to develop anindigenous fighter aircraft to replace its ageing fleet of F-1 fighters, but decided reluctantly that themaintenance of smooth alliance relations required yielding to pressure from the ReaganAdministration for co-development. Among other considerations for the Nakasone government inTokyo, the Reagan Administration had imposed stiff sanctions on semiconductor imports as a resultof Japan's failure to meet the terms of a trade agreement, and Members of Congress were stronglycriticizing Japan and the Toshiba Corporation for the sale of some sensitive U.S. metal millingtechnology to the then-Soviet Union. (16) Japan had barely signed the Memorandum of Understanding on the FS-X co-production dealwhen it was whipsawed by a high profile U.S. policy debate involving industry and labor interests,Members of Congress, the U.S. Commerce Department, and others, over the wisdom of technologycooperation with the United States' main high tech competitor. Opponents of the FS-X cooperationdeal were concerned that Japan might use U.S.-supplied technology to erode the U.S. lead inaerospace production, one of the few areas of U.S. high technology dominance that had not beenconquered by Japanese industry. In early February 1989 the newly inaugurated George H. W. Bushadministration yielded to these pressures and initiated a policy review that eventually required Japanto renegotiate the terms of technology transfer in the co-development project. (17) The product of the lattercollaboration has entered service with the Japanese Air Self-Defense Force as the F-2 Fighter, afterlong delays and huge cost overruns. Negative Effect of the FS-X Joint Development Program The FS-X collaboration proved highly frustrating both to Japan and to the Department ofDefense and U.S. defense contractors because technology transfer issues had become entangled inthe political reaction to the large U.S.-Japan trade deficit. Whatever the merits of the objections ofU.S. critics, the experience created an aversion in Japan to joint development and productionagreements with the United States, and bolstered the case of proponents of national self-sufficiencyin defense production. The frustrating FS-X experience, as will be seen, could play a significant rolein future Japanese decisionmaking regarding the acquisition of a BMD capability. Japanese Participation in the WestPac Study In 1990, notwithstanding Japan's dissatisfaction with cooperation on development of the FS-X fighter, Japanese and U.S. industries initiated a major missile defense system study under theSDI initiative entitled Western Pacific Basin Architecture Study (WestPac). The Japanesegovernment kept its role to the minimum in this four-year study to avoid sensitive political issuessuch as the weaponization of space and nuclear weapons related research associated with theso-called "Star Wars" program of the Reagan Administration. Additionally, some sources say thatthe Japanese government was wary of U.S. interest in Japanese technology, and concerned that theUnited States might try to pressure Japan to purchase a missile defense capability "off the shelf" asa means of partially redressing the large U.S.-Japan trade deficit. (18) Subsequent to thecompletion of the WestPac study in October 1994, the United States and Japan embarked on a"Bilateral Study on BMD" to better understand the ballistic missile threat to Japan and to studyalternative architectures for a Japanese missile defense system. A BMD Study Office wasestablished within the Japan Defense Agency (JDA), and Japan's activities and R&D spending, whilemodest by U.S. standards, began to increase steadily. Growing Japanese Concerns About Proliferation of Ballistic Missiles in Asia One factor influencing Japan to participate in the WestPac Study was growing concern aboutChina's medium range CSS-2 and CSS-5 medium-range ballistic missiles. (19) North Korea's expandingmissile capabilities also long have been a concern to Tokyo. Even before it introduced ballisticmissiles with on-board guidance systems in the early 1990s, Pyongyang test-fired Scud-B missileswith ranges of 250 km to 300 km in the Sea of Japan. Concern about North Korea's missilecapability grew significantly with the test firing of North Korea's No-Dong 1 missile in May 1994. The No-Dong 1 was a new and more threatening ballistic missile with an estimated range of about1,000 km -- enough to threaten most of Japan, including major population areas and key U.S. andJapanese military bases. (20) North Korea's Taepo Dong-1 Missile Launch -- Its Impact upon Japan's TMDPolicy Despite pre-existing missile threats, it was North Korea's test-firing of its Taepo Dong-1ballistic missile in August 1998 that ignited public concern about the country's vulnerability toballistic missile attacks. The solid-fuel three-stage missile launching illuminated Japan'svulnerability to North Korea's missile threat, as its third stage flew over Japan and landed in thePacific Ocean. Japan's 1999 Defense White Paper dedicated separate sections to the Taepo Dongincident of 1998, and devoted five times more pages to North Korea's military affairs than previouswhite papers. (21) Subsequently, national sentiments against the missile launch and regional missile proliferationpushed the TMD issue to the center of a growing policy debate in Japanese society, where publicdiscussions of military issues generally had been avoided since the end of the World War II. In December 1998, about four months after North Korea launched a Taepo Dong-I ballisticmissile that passed over Japanese territory, the Japanese government made an internal decision toengage with the United States in cooperative research and development of a ballistic missile defensesystem. Less than a year later, in August 1999, the U.S. and Japanese governments signed amemorandum of understanding (MOU) covering a five-year program of joint research anddevelopment on the then U.S. Navy Theater Wide (NTW) ballistic missile defense program, butJapan has made no decision about acquisition of a missile defense capability and currentconstitutional interpretations appear to rule out the integration of any such Japanese capability withthat of the U.S. Navy. Implications of the Bush Administration's Redirection of the U.S. Approach to MissileDefense on U.S.-Japan Cooperation The decision of the Bush Administration in the Summer of 2001 to eliminate the distinctionbetween national missile defense and other BMD programs, and to redesignate the NTW project asthe sea-based "mid-course" defense element of a seamless BMD capability, has created additionaluncertainty in Japan about the benefits and constitutionality of participating in joint missile defensetechnology research. In particular, the Japanese government has serious qualms about theconstitutionality of cooperating on the development of technology that effectively could become partof a system to defend U.S. territory from third countries. Japan's constitution established the rightof collective self defense under international law, but disallows the exercise of that right. (See afuller discussion of this issue below.) To date these changes in the U.S. program have created consternation, but have not affectedTokyo's interest in cooperation. For the time being, Japanese officials have avoided addressing thecollective defense issue arising out of the changed U.S. missile defense strategy and haveconcentrated on protecting Japan's option to acquire a BMD capability. Towards that end, Japan hascontinued to budget funds for BMD cooperation in line with an existing five year plan, and alsocommitted funds to acquire the technology that could support a BMD capability on the two newAegis destroyers that are under construction. (22) Significance of Japanese Cooperation on BMD Japan inevitably will play a key role in the ability of the United States to deploy a BMDsystem in Asia, either to protect U.S. forces or to shield American allies and friends. The exactnature of Japan's role, however, is highly dependent on still unpredictable political and nationalsecurity policy factors. Under different scenarios, Japan's role could greatly enhance theeffectiveness of an American missile defense capability, passively support it, or, under certaincircumstances, seek to impose restraints on U.S. options. Geographical Centrality and Military Potential Japan is host to the U.S. 7th Fleet on whose AEGIS cruisers the U.S. Navy plans to deploya sea-based BMD system. Because of its location, Japan's participation would be especiallyimportant if the United States were to seek to develop an integrated regional missile defensearchitecture, since a sea-based capability against medium-range missiles, if deployed in the JapaneseIslands, could put a defensive umbrella over Japan, South Korea, and Taiwan. The Sea of Japanwould be an ideal location for the deployment of a boost-phase intercept capability to guard againstmissile launches from North Korea, while a capability deployed in or near the southern JapaneseIslands, such as the U.S. Navy Base at Sasebo, on Kyushu, would be well-positioned to interceptmissiles launched from coastal China. In addition to its favorable geographic location, Japan'ssophisticated communications infrastructure, and possession of Aegis-equipped vessels with thecapability of sharing data with U.S. counterparts, make it a potentially valuable collaborator. Figure 2. Japan and East Asia (Distances in 500 Km Increments) Potential Technological Contribution Japan's potential technological and financial contributions to the NTW program are lessclear-cut. Department of Defense officials stress that Japan has technologies that could make animportant contribution. Some non-governmental analysts with knowledge of the technologiesinvolved tend to describe the potential Japanese contribution more in terms of technology riskreduction. Reportedly, as of early 2002, the Pentagon intends to seek expanded Japanesecooperation, including research and development work on a boost-phase interceptor. The Pentagonis said to be particularly interested in Japanese sensor and early detection technology, since differenttechnology may be required for boost-phase intercept than the sensor technology employed in theNavy's upper-tier SMD system. (23) Financial Contribution Japan's financial participation in the research and development phase is modest -- only afraction of U.S. spending on the SMD program -- but Tokyo's financial contribution could besignificant if it chooses to deploy a BMD capability by purchasing U.S. missiles and othercomponents. In the words of the U.S. Missile Defense Agency budget request to Congress forFY2003, "the project leverages the established and demonstrated industrial and engineering strengthsof Japan and allows a significant degree of cost sharing." (24) Japan's financial contribution would be most important if itdecided to purchase U.S. hardware, but less so if it only participates in the research and developmentphase or uses jointly developed technology to build its own missile defense system. For fiscal year 2002, which begins April 1, 2002, the Japanese Diet has appropriated about6.9 billion yen ($53.1 million at ¥ 130/US $1) for design and trial manufacturing activities. Becauseof changes in the trial manufacturing program and budgetary constraints, the Japanese DefenseAgency (JDA) request was cut by ¥ 1.3, or about $100,000. (25) U.S. Department ofDefense spending specifically for the Japan/U.S. Cooperative BMD Research Project programelement will total $37.6 million in FY2002. For FY2003, the Defense Department has requested$31.9 million for the same program element. (26) Conflicting U.S. Perspectives on Missile Defense Cooperation with Japan Despite strong support for the program among officials concerned with alliance relationsboth in the Department of State and the Department of Defense, some in the Pentagon's MissileDefense Administration (MDA) reportedly have opposed to research and development cooperationwith Japan. Opposition in the MDA appears related to the comparatively small payoff that someexpect from Japan as compared with the bureaucratic and other complications inherent in jointbilateral cooperation. The Bush Administration and its predecessors, and the U.S. Navy, on the otherhand, have consistently viewed Japanese participation in the U.S. missile defense program as apotentially significant "alliance builder"and force capability enhancement. In response to the allegedlack of support for joint development in the then BMDO, Deputy Secretary of Defense PaulWolfowitz reportedly issued a program budget decision (PDB) on December 9, 2001, directing theorganization to continue the cooperative effort and include funding as a separate line item in theFY2003 budget. (27) (Seemore details in section on the status of the program, below.) Current Status of BMD Cooperation The North Korean missile launch brought about a breakthrough in Japan's consideration ofthe long-standing U.S. request for joint cooperation on BMD research and development. TheJapanese Defense Agency already favored cooperation, but the effect of the Taepo Dong missileflying over the main island of Honshu greatly raised the level of interest within the Japanesegovernment and among the public. Agreement on the Joint Technology Research In December 1998, the two governments agreed on the Naval Theater Wide (NTW) systemconcept as the architecture for which they would jointly conduct analysis, preliminary design, andcertain risk reduction experiments. (28) The four components selected for joint research are: lightweightnose cone; stage-two rocket engine; advanced kinetic warhead; and two-color infrared sensor. Theseare consistent with the risk reduction initiatives that have been pursued by the U.S. Navy for itsBMD systems. A substantial Japanese contribution is expected on sensors and advanced kineticwarheads. The NTW/SMD also is seen as a natural choice for the joint research, since Japan alreadypossesses four Aegis-equipped destroyers that could be upgraded with a BMD capability. (29) In fact, the Japanesegovernment has earmarked funds for two additional Aegis destroyers with enhanced electronics andradar systems in the next Mid-Term Defense Program covering fiscal years 2001-2005, with an eyetowards acquiring a sea-based TMD capability. (30) Figure 3. Japanese Participation in NTW/Sea-Based Midcourse Interceptor Missile Possible U.S. Request for Expanded Cooperation. On June 4, 2001, the Japanese press reported that the United States had asked Japan for additionalcooperation on BMD research and development related to interceptor ship-borne radar trackingtechnology. Reportedly the U.S. request was related to U.S. national missile defense, not just TMD. Because of the ban on collective self-defense and budgetary constraints, Japanese officials were saidto be "divided over how to respond" to the U.S. request. (31) As of March 2002, no concrete information about expandedBMD research and development has emerged in public sources. Accounts of the Bush-Koizumisummit meeting in mid-February suggest that the leaders discussed the issue of BMD cooperation,but only in general terms. Japanese Perspectives on TMD Because of the implications for Japan's relations with the United States and the People'sRepublic of China, which opposes many aspects of U.S.-Japan defense cooperation, the issues ofwhether Japan will acquire a missile defense capability and the extent to which such capabilitywould be integrated with that of the U.S. Navy, have assumed major national policy significance forTokyo. Because of the stakes, Japanese views on the development and deployment of a TMD systemvary widely, even within government and political circles. These differences appear deep enoughto make the political uncertainties surrounding TMD cooperation as significant as the technologicalchallenges. Japanese Government Perspectives During the early years of joint U.S.-Japan initiatives on BMD, support within theGovernment of Japan (GOJ) was tentative and sporadic, with the strongest advocacy coming fromwithin the Japan Defense Agency (JDA). However, the JDA position found increasing support afterNorth Korea's Taepo Dong launch. Some note that the Ministry of Foreign Affairs (MOFA) stilloffers only a reserved support, for it is concerned that Japan's TMD deployment would negativelyaffect the future of Japan-China relations. The Ministry of Finance (MOF) traditionally has beenespecially reluctant to commit funds for a program with no reliable long-term cost estimate norduration of the program, (32) but nonetheless agreed to a multi-year commitment once theprogram became a high priority to the Prime Minister and defense policymakers. The MOF hasagreed in principle to allow expenditures anticipated in the current Five-year Defense ProgramOutline. (33) Constitutional Considerations and the Implications of the New U.S. BMDPolicy Blurring the lines between national and theater missile defense has added to the Governmentof Japan's burden of selling TMD cooperation to a skeptical Japanese public, particularly with regardto public attitudes towards arms control and the constitution. Two aspects of the BushAdministration's new BMD strategy could have significant implications for future Japanese missiledefense cooperation. ABM Treaty. One aspect is the fact that asea-based system designed to attack ICBMs violates the 1972 ABM Treaty -- a reality graphically acknowledged by the Bush Administration's decision to exercise the U.S. right to withdraw from thetreaty. Japan was not a party to the treaty but has regarded the agreement as a fundamental pillar ofnuclear stability. The abandonment of the treaty by the United States troubled Japan, but -- ironically-- also removed one barrier to participation. Ban on Collective Defense. Second, any use ofJapanese technology for an American NMD system would violate both Japan's post-World War IIanti-nuclear policy, which forbids participation in U.S. nuclear strategy, and a long-standing legalinterpretation that Article 9 of the Japanese constitution forbids participation in collectiveself-defense. Under this interpretation, formulated by the Cabinet Affairs Legal Office in 1981, itis acknowledged that Japan has such a right under international law, but cannot exercise it becausethe constitution provides that the exercise of the right of self-defense must be limited to theminimum level necessary to defend Japanese territory. The U.S.-Japan Security Treaty is deemed constitutional under this interpretation becauseJapan's responsibilities relate only to the defense of Japan itself. Japan is not obligated under theU.S.-Japan Defense Treaty to participate in the defense of the United States or U.S. forces, let aloneparticipate in security cooperation involving third countries. (34) Thus, under present andforeseeable circumstances, only a system that is designed for the defense of Japanese territory andis not in violation of the ABM Treaty would appear to be able to pass political and constitutionalmuster. Japanese officials, political leaders, and opinion makers have universally expressed concernabout the new U.S. approach to missile defense. During a visit to Japan in early May 2001 to briefJapanese leaders on the Bush Administration's new policy, Deputy Secretary of State RichardArmitage reportedly received an ambiguous response. Japanese leaders expressed their"understanding" of the U.S. position -- a classic Japanese formulation for avoiding assent. Japaneseofficials appeared to agree with the view of Japanese defense analysts who complained thatsupporting the U.S. initiative would link Japan to U.S. global nuclear strategy in a way that wasincompatible with Japan's non-nuclear principles. (35) For the time being, the Japanese government has indicated that the new Bush Administrationstrategy will not affect joint research and development activities on the NTW interceptor, and alsothat Japan's stance may be more relaxed than originally suggested. In a May 9, 2001 press article,a senior official of the Japan Defense Agency (JDA) reportedly explained, "We can understand U.S.thinking about regarding NMD and TMD as a comprehensive package, but our position will notchange: we will only carry on joint research on the TMD." The same article expressed the Japanesegovernment's position that Japan could give no more than "moral support" by expressing"understanding" of the U.S. NMD program, since it was for the purpose of defending the UnitedStates and not Japan. (36) The Director General of the Japan Defense Agency (JDA), told reporters on May 11 that "The UnitedStates has just completed producing a blueprint, and it is too early to assess it at this point."Reportedly, however, a senior official of the JDA judged that regardless of the decision of the BushAdministration not to distinguish between NMD and TMD, it was a "fact" that there was "a cleardifference in technologies between long- and short- range missiles." In any event, the official said,Japan's research cooperation would continue. (37) Political Parties(38) The stance of Japan's political parties on missile defense cooperation underscores the depthof feeling against missile defense cooperation, especially at present, when Koizumi's LiberalDemocratic Party (LDP) depends on two coalition allies to sustain its legislative program. Throughout most of the post-World War II era, the long-ruling LDP was the only political party inJapan that supported a strong military capability and the alliance with the United States. The partyfractured in July 1993 and currently lacks a majority in the upper house of the Diet (parliament) andonly a bare majority in the lower house. (See Figure 4 .) The Koizumi-led LDP retains power byvirtue of a coalition with the New Komeito and the tiny New Conservative Party, an LDP splintergroup. Several bi-election victories in October 2001 allowed the LDP to regain a majority in the480-seat Lower House, but the party still lacks a majority in the Upper House, which is less powerfulbut still necessary to pass legislation. Consequently, it remains dependant on its two coalitionpartners to be assured that legislation will pass. Stance of the LDP and its Coalition Allies. Themissile defense issue is a sensitive one for the LDP-led coalition government. The LDP itselfgenerally remains broadly supportive of the U.S.-Japan alliance, but an ideologically nationalist wing increasingly has expressed the desire for a more self-sufficient defense posture. The party'smainstream factions appear to have become increasingly more conservative as a result of defectionsby centrist members and seat losses in urban areas, a development with mixed implications forU.S.-Japan alliance relations. Generally, the LDP works closely with officials in the Ministry ofForeign Affairs and the Japan Defense Agency, both of which are strongly pro-alliance, but itspositions are constrained by the need to placate its New Komeito coalition ally, a small but awell-organized and disciplined party that is affiliated with the Buddhist Soka Gakkai ("ValueCreation Society") organization. The New Komeito generally supports the status quo on domesticsocial issues but traditionally has strongly opposed the expansion of the role of the Japanese military. Both the tiny Conservative Party, which is currently part of the governing coalition, and thesmall Liberal Party, headed by a conservative former LDP leader, Ichiro Ozawa, support missiledefense cooperation. Ozawa has progressively lost public and political support since he played a keyrole in splitting the LDP in 1993 and later splitting the successor non-LDP coalition, but hiswell-articulated defense and foreign policy positions command considerable respect. His position,which seems colored by his own political agenda, is that the line against collective defense shouldbe addressed directly via constitutional change, rather than by a formal or de facto reinterpretation. Beginning with the North Korean Taepo Dong launch in August 1998, and continuing sincethe September 11, 2001, terrorist attacks on the United States, a number of political parties havebegun to re-examine their defense policy positions. Several have agreed on the necessity for somemeasures to strengthen alliance cooperation and Japan's own defense capabilities, but not necessarilyto the extent of acquiring a BMD capability. The New Komeito, for instance, reportedly hasacknowledged the possible deterrent value of BMD-related technology cooperation with the UnitedStates. (39) Ambiguous Stance of the Opposition DemocraticParty. The leading opposition party, the Minshuto, has kept its missile defensepolicy ambiguous. As it consists of both former members of the LDP and the Japan Socialist Party(JSP), the Minshuto is careful not to create an internal rift over the TMD issue. The attitude of the Minshuto could be the most uncertain factor in Japan's decision on the deployment of a missiledefense system. Parties on the Left. The strongest opponents ofmissile defense cooperation include the Japan Communist Party and the Japan Social DemocraticParty (JSDP), formerly the Japan Socialist Party (JSP). Japan's major opposition party until the early1990s, the Socialists have abandoned their past opposition to the alliance but still oppose theexpansion of the role of the Self-Defense Forces. Despite their efforts to adjust to the post-Cold Warera, the Socialists have steadily lost support and are now a marginal political force. Figure 4 (Prepared by Mark Manyin, Foreign Affairs, Defense, and TradeDivision, CRS) Japanese Industry Despite some bitter experiences in defense technology cooperation with the United States,notably negative impact of cooperation on the FS-X fighter program noted above, Japanese defenseindustry appears generally enthusiastic about joint cooperation on missile defense. Apart from thegoal of acquiring valuable technology, Japanese defense contractors are eager to find new businessafter more than a decade of little or no national economic growth. (40) Believing that Japan alone is unlikely to develop its own BMDsystems, companies that engage in defense work reportedly see cooperation with the United Statesas a rare opportunity for large-scale contracts. (41) This applies especially to Japan's largest defense contractors,notably including Mitsubishi Heavy Industries, the primary BMD contractor, and electronicscompanies that produce related equipment such as Aegis radar components, satellites, andtelecommunications gear. Because of the FS-X experience, Japan's defense industry is expected to prefer licenseproduction or co-production to preserve its industrial base, and oppose off-the-shelf purchase fromthe United States. At one point some manufacturers of civilian, dual-use high technology reportedlywere uneasy about cooperation on the BMD systems out of concern that such cooperation may harmtheir corporate image. (42) With the deepening of Japan's economic slump, however, and changing public attitudes towardsdefense issues, these concerns are not likely to deter industry participants. Media/Public Opinion Since the Taepo Dong launch, the Japanese media have shown unprecedented interest incovering BMD-related issues. The Yomiuri Shimbun , a daily paper with the largest circulation, and Sankei Shimbun, and the Nihon Keizai Shimbun are three major newspapers that traditionallysupport the country's military programs. Their positions on BMD are no exception. In the aftermath of North Korea's Taepo Dong launch, the Yomiuri editorially urged thegovernments of Japan and the United States to expedite their cooperation on BMD research anddevelopment. (43) Morerecently, following ambiguous indications that North Korea might be prepared to give up its missiledevelopment program, the Yomiuri editorialized that North Korea's existing shorter-range Nodongmissiles also were a problem that Japan had to deal with, even if some countries objected to Japan'sacquisition of a missile defense capability. (44) The Sankei has advocated Japan's timely participation in theBMD deployment to deter missile attacks and provide the public with a greater sense ofsecurity." (45) On the opposition side is Asahi Shimbun , another major daily newspaper in Japan with amore "liberal" stance and more critical view of government actions and policies than most of themajor newspapers. Asahi has repeatedly warned that participating in the U.S. BMD program wouldgreatly strain Japan's relationships with China and Russia. (46) Media support for missile defense appeared to soften somewhat following President Bush'sMay 1, 2001, speech outlining the Administration's more comprehensive concept of national missiledefense. Predictably, the Asahi pointedly underscored the discomfort of Japanese officials aboutblurring the distinctions between BMD and NMD by the United States, and editorialized that Japanshould clearly reject the U.S. missile defense proposal. (47) Even the generally conservative Yomiuri indicated a morecautious stance, noting the costs and technological challenges of the joint BMD project, and callingon the Japanese government to seek additional information from the United States about its revisedapproach to missile defense. (48) Going against this trend, the Nihon Keizai Shimbun , Japan'scounterpart to the Wall Street Journal , noted various objections to acquiring a BMD capability butconcluded that on balance "missile defense will help promote nuclear disarmament." The NihonKeizai Shimbun noted the Bush Administration's announcement that it would unilaterally makereductions in the U.S. nuclear arsenal, and also argued that missile defense, if effective, would"potentially make the possession of nuclear weapons meaningless." (49) Acute concern about a growing missile threat to Japan has been increasingly evident amongthe Japanese public. A January 2000 poll by the Office of Prime Minister indicated high levels ofconcern about the situation on the Korean Peninsula (56.7%) and arms control regarding weaponsof mass destruction and missiles (35.2%). (50) Nevertheless, there seems to be a persistent lack of consensuson the desirability of cooperation with the U.S. on BMD development. A poll by the United StatesInformation Agency, published in November 1998, and taken shortly after North Korea's TaepoDong launch, showed that only 43% of the respondents supported cooperating with the United Statesin the development of a ballistic missile defense system, while 32% opposed to it. (51) Subsequently, when asimilar question was posed in May 2000, 41% of the respondents favored cooperating with the U.S.on BMD development, 46% opposed, and 14% answered "I don't know." (52) Among other objections,many Japanese citizens have indicated apprehension about both the substantive and symbolicimplications of the deployment of a BMD in terms of the role and status of Japan's Self-DefenseForces. Key National Interest Considerations of Japanese Policymakers The extent of future cooperation with the United States on BMD is one of the most importantforeign and security policy decisions facing Japanese policymakers. In addition to being importantto the future of the U.S.-Japan alliance, cooperative research and the deployment of a BMD systemwould have major ramifications for Japanese security and its relations with China and other Asianneighbors, as well as with Russia. U.S.-Japan Alliance Considerations The Japanese Government appears to place alliance considerations high on the list of reasonsfor taking a positive stance towards missile defense cooperation with the United States. Some U.S.analysts portray missile defense cooperation as "a solid alliance-builder" with Japan," albeit only if"properly carried out." (53) Whether Japanese officials fully share this view is uncertain, butclearly the goal of strengthening the alliance has been a significant factor in their decision to pressahead with the program despite public criticisms that have been leveled at the Bush Administration'srevised missile defense policy. Joint development also has been seen as an opportunity for Japanto favorably respond to some congressional demands for greater responsibility in burden-sharing byTokyo. Conflicting Concerns About China Although normally unspoken in public, the potential ballistic missile threat from Chinaappears to be both a fundamental reason for Japan's desire to acquire a BMD capability and the mainsource of its cautious approach to the participation in the U.S. plan. Some believe that possessionof a BMD capability could devalue the role of theater ballistic missiles in regional conflict andcounter or even deter the further development and modernization of Chinese missiles. Others in Japan have registered concerns that the BMD program may destabilize theMainland's relations with Taiwan, as well as Japan, and trigger a regional arms race. China has beenadamantly opposed to the inclusion of Taiwan in the area covered by U.S.-Japan DefenseCooperation Guidelines and the BMD. Should the Bush Administration make progress inrestraining North Korea's ballistic missile program, the Chinese missile threat will stand out as themost obvious motive for Japanese cooperation on the development of a BMD system -- a fact thatcould induce new strains in Sino-Japanese relations. Thus far, however, although North Korea hasagreed to suspend tests of its long-range Taepo Dong missiles, Pyongyang has failed to respond toBush Administration statements of intent to hold unconditional discussions on missile and otherissues. Also, since the September 11 attacks, China has tended to downplay its opposition to theU.S. missile defense program in the interests of putting U.S.-China relations on a more cooperativefooting. The relaxation of tensions in U.S.-China relations has had the effect of also taking someof the edge off Sino-Japanese relations. Other Foreign Policy Considerations Strains in Japan's relations with China are just part of a wider problem of reassuring Asianneighbors about Japan's intentions. Regional reaction was muted towards Japan's decision to sendships to the Indian Ocean to provide logistical support to U.S. forces participating in the anti-terroristcampaign in Afghanistan, but Japan has not succeeded in putting to rest regional concern that itaspires to play a larger military role. Much of this concern stems from Japan's failure to overcomelingering resentment of its colonial role and aggression in World War II. Continued Friction in Japan-South KoreaRelations. Japan seemed to make a breakthrough in its relations with South Koreain October 1998, during an October 1998 visit to Tokyo by South Korean President Kim Dae Jung,when the late Prime Minister Keizo Obuchi's gave Japan's first written apology for its pastaggression. Since that time, however, a number of incidents have kept Japan-South Korean relationson edge, including a visit to the Yasukuni War Memorial by Prime Minister Junichiro Koizumi inAugust 2002. As a beneficiary of U.S. presence in the region, South Korea may eventually condone theintroduction of a U.S.-Japan BMD capability that would shield U.S. bases in Japan against a NorthKorean missile threat. To date, however, South Korean leaders and media commentators havecontinued to express suspicion of Japan's interest in missile defense. South Korea's own preferred response to North Korea's ballistic missile capability has beento develop missiles capable of attacking North Korean missile sites, rather than supporting thedeployment of a BMD system. Since 1979, this strategy has been constrained by a commitment tothe United States that South Korea would not deploy missiles of more than 180 kilometers (112miles) range -- enough to attack North Korean targets near the Demilitarized Zone (DMZ) but notenough to reach Pyongyang. In mid-2000, however, reportedly after five years of negotiations, theClinton Administration agreed to allow South Korea to develop missiles with ranges up to 300kilometers (186 miles) and corresponding payloads of up to 500 kilograms. The U.S. StateDepartment formally announced the policy change in mid-January 2001. (54) Reportedly the UnitedStates also agreed that South Korea could conduct research on missiles with up to 500 kilometersrange. (55) Thus far, South Korea appears not to have acted on the agreement because of President KimDae Jung's "Sunshine" policy that seeks North-South engagement (56) Nonetheless, because ofcontinuing criticism of Japan by both North and South Korea, and the aspirations of Koreans forreunification, the apparent desire of Seoul to develop an offensive ballistic missile capability isanother source of Japanese uneasiness. Concerns about Perceptions of Japan's Southeast AsianNeighbors. Japan is also aware of negative ramifications that deployment of aBMD system could have on its diplomatic profile in Asia, especially among its Association ofSoutheast Asian Nations (ASEAN) neighbors. As past victims of Japanese World War IIaggression, many of the countries of Southeast Asia still harbor fears of Japanese remilitarization. Hence, many if not most countries in Southeast Asia view the U.S.-Japan alliance in a favorablelight, for it signifies a continuing U.S. engagement in regional security and deters Japan fromre-emerging as an independent military power. In this respect, joint deployment of a BMD systemwould tend to be less worrisome to most Southeast Asian countries than would Japan's acquisitionof an independent capability, but some Japanese policymakers are concerned that even this wouldbe unduly provocative, and would partly negate Tokyo's effort to improve its relations in the contextof a de facto rivalry with China for influence in an area Japan once viewed as its "backyard." Legal and Constitutional Constraints Foreign Japan-watchers and the Japanese themselves have given great attention to theconstitutional issue, especially the question of whether the constitution can be reinterpreted to allowfor collective defense arrangements, or whether the seriousness of the question requires aconstitutional revision. A number of study groups within the Diet have considered the issue, butwithout coming to any clear conclusions. Generally, however, a large majority of the Japaneseofficials and the public have taken the position that reinterpreting the constitution to allow forcollective defense is a step too far. Prime Minister Koizumi himself has argued for a more flexibleinterpretation, but this appears to be a minority view even within his own party. Many among theJapanese public are less concerned about collective defense, per se, than with the concomitantexpansion of the roles of the Japanese military. From this perspective, Article 9 is viewed as a kindof Talisman protecting Japan from the revival of militarism. Possible Bellwether for the Future? Japan's Response to the U.S.War on Terrorism. One aspect of Japan's response to the request of the UnitedStates that Japan "show the flag" with logistical support of U.S. forces deployed in the Indian Oceanafter the September 11 terrorist attacks, could be a bellwether of how much effect the constitutionalissue has on future Japanese BMD cooperation. After first indicating that the government wouldsend an Aegis destroyer as part of a small naval contingent that it sent to the Indian Ocean in October2001, Prime Minister Koizumi was forced to give way to vocal objections from within the LDP, theNew Komeito, a coalition partner, and the opposition Democratic Party that sending an Aegis shipwould be unconstitutional. Critics argued that because the Aegis ship would be establishing a datalink with U.S. Aegis ships, Japan would be a party to any military action by those ships. Perhaps themost significant aspect of this opposition was that within the LDP objections to sending an Aegisdestroyer came from a number of leaders generally viewed as politically conservative, if notnationalistic. (57) The maintenance of this line of argument against deploying Aegis ships could be fatal to anumber of possible BMD cooperation scenarios, but it remains to be seen if the position will stand. Some analysts and commentators have suggested that when the current six-ship naval contingent isrotated home, an Aegis destroyer will be sent with the relief force. From this perspective, Koizumi'sretreat was just a tactical one, temporarily saving the face of his critics, but without being deflectedfrom his ultimate purposes. Alternatively, Koizumi's forced retreat on this issue may accuratelyreflect what is politically possible for the foreseeable future. Ban on the Use of Outer Space for MilitaryPurposes. Some in Japan oppose participation in the U.S. BMD program ongrounds that joint research and development goes against a 1969 parliamentary resolution on thepeaceful use of space that prohibits the SDF's direct use of space for killing, injuring or destruction. For now, this issue seems to be resolved in favor of BMD. The Japanese government declared inDecember 1999 that the Japanese involvement in the NTW program is in accordance with the upperhouse resolution on the peaceful use of outer space. (58) Since North Korea's August 1998 Taepo Dong missile launch, public opinion generally hasbeen supportive of the deployment of an independent national reconnaissance system, (59) but the employment ofspace-based sensors raises questions about the militarization of space, which Japan has pledged toavoid. Ban on Arms Exports. Japanese critics also arguethat participation in the U.S. BMD program violates a long-standing ban on arms exports. TheJapanese government also has asserted that military technology transfer deriving from the jointresearch would stay within the preexisting lawful framework of military technology transfer to theUnited States. (60) However, exports of military hardware and components are viewed by some as going beyond currentpolicy. Consequently, some LDP members with defense industry ties reportedly have called for achange in Japan's current ban on arms exports to make sure that Japanese contractors can participatein the production of BMD components for export to the United States. (61) Cost Concerns Acquisition of a BMD capability would present a major a financial challenge to today'sJapan, which is struggling with a faltering economy and proportionately the largest public fiscal debtin the industrialized world. Although climbing for most of the 1990s, Japan's military budgets beganleveling off around 1998. The share of the research and development budget has been shrinking inrelation to the procurement budget. (62) BMD procurement would have to compete for funds with theplanned procurement of such systems as F-2 fighter aircraft, air-refueling tankers, two new AEGISdestroyers (which could serve as platforms for an eventual BMD system), a replacement for Japan'sfleet of PC-3 maritime reconnaissance aircraft, and information gathering satellites. The costs of Japan's participation in research and development related to four parts of theStandard-3 interceptor missile are relatively small, but acquisition of a BMD capability wouldunquestionably present the Koizumi government and the JDA and Self-Defense Forces (SDF) withmajor defense budget decisions. In both FY2001 and FY2002, the Japanese government allowedless than a 1% increase in defense spending. Japan's prolonged economic slump has seriouslylimited new arms acquisitions. Some analysts estimate that it could cost Japan as much as $50billion over a number of years to develop and deploy a robust ballistic missile defense. (63) Considering that Japan'sFY2001 budget for procurement for military hardware only totaled ¥ 767 billion (about $7.1 billionat then prevailing exchange rates), and that the entire budget was less than $40 billion, the JDAlikely will face extremely difficult choices in deciding between BMD and other weapons systemmodernization programs. Japanese officials say that the current Five-Year Defense Outline that began with FY2001has sufficient funding for currently planned procurement programs only. Because the five-year plantraditionally does not allow for major revisions, Japanese officials indicate that a procurementdecision could not take place until about FY2006. (64) A decision by Japan to acquire a BMD capability would have costs and significance far inexcess of the U.S. decision to push forward with missile defense, even though the actual monetarycost to Japan would be far less, both in comparative and absolute terms. Practically speaking, inview of other acute spending priorities and budgetary constraints associated with its mountain of badloans, unfunded liabilities of hundreds of quasi-governmental corporations and pension funds, risingand unprecedented levels of unemployment, and falling tax revenues, Japan cannot opt foracquisition of a BMD capability without jettisoning the informal 1% of GDP limitation on defensespending. To do so, however, would likely generate significant criticism from both Japan'sneighbors and a large section of the Japanese public. A decision not to deploy a BMD system would likely have its own set of costs for U.S.-Japansecurity relations. Because a BMD system deployed in Japan could help protect U.S. troopsstationed in Japan, as well as Japanese lives and assets, many in the Congress and the ExecutiveBranch, and among the U.S. public, tend to see Japan's participation in BMD as a fully warrantedexercise in alliance burden-sharing. Currently, Japan's burden-sharing in the form of host-nationsupport of U.S. forces amounts to $4 to $5 billion annually, taking into account direct support,foregone revenues, and in-kind contributions. (65) However, the host-nation support (HNS) -- also is in decline. During a presidential visit to Japan in July 2000, President Clinton and Prime Minister Mori agreedthat Japan would reduce by $30 million its annual host-nation support of U.S. troops stationed inJapan. (66) This cut is largely symbolic, but the simple fact that it was deemed politically necessary bythe Japanese government underscores the difficulties that may be encountered in seeking to financethe cost of acquiring and deploying a BMD capability. Likewise, U.S. efforts to hold the reductionto the absolute minimum indicate the limits of American sympathy for the Japanese government'spolitical situation. Implications for U.S. Policy As the U.S. BMD program progresses, a number of uncertainties concerning Japan's futureparticipation are likely to emerge as executive branch and congressional concerns. Assumingdevelopment proceeds as U.S. planners hope, Japan may have to address the issue within the currentterm of the Bush Administration. Japan's decisions are not likely to have a significant impact on theU.S. program, but could affect the size and effectiveness of a U.S. BMD capability in Asia, as wellas on U.S.-Japan alliance cooperation more generally. Japanese decisions either for or against the acquisition of a BMD capability raise separatesets of subsidiary issues. The following discussion analyzes some implications of alternateoutcomes. 1) Burden-Sharing Issues. Because the Japanesecommitment on the U.S. BMD project to date is only for technology research on four specificcomponents for Sea-Based Midcourse Defense, the U.S. Department of Defense anticipates asignificant, but not crucial, Japanese technological contribution. If Japanese cooperation ends at thejoint technology research level, however, Japan still will be a major beneficiary if a BMD capability-- assuming, as is likely, that such a capability is deployed with the U.S. 7th fleet, home-ported inJapan. If Japan does not develop or deploy the system with the United States, what kinds ofcompensation, if any, would the United States expect of Japan? At the moment, this is still a hypothetical question. A number of signs indicate that Japanwants to acquire a BMD capability. These indicators include not only the funds that the Japanesegovernment is committing to cooperative R&D, but also the fact that two new Aegis destroyers andfunds for the most current radar and communications suite have been included in the current fiveyear defense plan. If, however, Japan decided not to acquire a BMD capability, the decision wouldplay into the broader issue of defense burden-sharing. At a minimum, a decision not to acquire aBMD capability could revive congressional concerns about whether Japan is shouldering enough ofthe burden of regional stability and its own defense. 2) Utility of a Jointly Deployed U.S.-Japan BMD Capability toU.S. Military Operations in the Event of a Regional Conflict. Although theJapanese government has rarely issued objections to the U.S. military's joint operations with Japanin the past, prior to the recent response to the U.S.-led anti-terrorist campaign in Afghanistan, suchactivities have been carefully restricted to training exercises having limited objectives such assea-lane defense, air defense, or peacekeeping support. Current rules of engagement governing theoperations of the Japanese Navy rule out activities that could be construed as combat support of U.S.forces for any missions not involving the defense of Japanese territory. If a missile defense capability were deployed on Japan's Aegis destroyers and a conflicterupted on the Korean Peninsula on between China and Taiwan, the United States might put pressureon Japan to deploy some missile defense capability outside its own territory. Under prevailingJapanese rules of engagement and constitutional interpretations, a favorable Japanese response wouldappear all but impossible. Less clear is whether in a crisis situation the exchange of real-time data between JapaneseAegis ships equipped with a BMD capability could pass political or constitutional muster. Forinstance, could Japanese ships equipped with the Sea-Based Midcourse System back up moreforward-deployed U.S. units with supplementary target information? Presumably they could, so longas Japanese territory or U.S. bases in Japan were possible targets of a missile attack. Under currentJapanese constitutional constraints, however, the U.S. military would likely find it prudent not tocount on Japanese participation in anything short of a clear and present threat to Japanese territory. The example of Prime Minister Koizumi reversing his decision to send an Aegis-equipped destroyerto the Indian Ocean is a case in point. In summary, an integrated binational BMD capability could be highly useful in situations thatalso threatened Japanese territory, but might be of little utility to U.S. forces in situations outsideJapanese territorial waters or not involving an attack on Japanese territory. In these cases, U.S.forces presumably would have to operate independently. Since BMD capable ships are beingdesigned to be self-supporting, if necessary, these limitations are not critical, but they raise questionsabout the ultimate value to U.S. security of a Japanese BMD capability. Japanese perspectives on the limits of the collective security ban are in flux, and PrimeMinister Koizumi has speculated in public that Japan might have to have a more open mind abouta situation involving an attack on U.S. military forces in the region. (67) While campaigning forthe LDP presidency, Koizumi said that he would give high priority to constitutional revision, butsince taking office he has given first priority to his call for the direct election of the Prime Minister,and appears to have downgraded the urgency of revising Article 9, while calling for continueddiscussion of the issue. The Prime Minister's caution may reflect repeated polls consistently showingthat 70% or more of the respondents oppose revising Article 9. (68) 3) Impact of Japan's active involvement in regional deploymentof a BMD system on U.S. operational flexibility. Given the historical mistrust ofJapan's intentions and programs among its Asian neighbors, a highly visible involvement by Japanin missile defense, were it otherwise possible, could have negative implications for U.S. securityinterests in Asia. China, for instance, might see an integrated U.S.-Japan BMD capability as morethreatening to its interests than a U.S. system alone, because of the implication that Japan is joininga de facto collective security arrangement that is aimed at China, especially in a confrontationinvolving Taiwan. China and other neighboring countries may be less than convinced that Article9 will continue to inhibit Japan's participation in collective security with the United States, especiallybecause the restriction has become the target of nationalist opposition in Japan. Thus for China,North and South Korea, and some Southeast Asian countries, an integrated U.S.-Japan BMD systemcould be viewed as symbolizing the remilitarization of Japan under the cloak of alliance cooperationwith the United States. To the extent that joint BMD deployment generated fears of a rearmedJapan, it could detract from the acceptability of a U.S. BMD capability. On the other side of the equation, Japan's neighbors are likely to regard an independentJapanese BMD with even greater concern. For some of Japan's neighbors, such as South Korea, aJapanese capability firmly linked to that of the United States would seem more desirable. China, onthe other hand, opposes both deployment options. 4) Command, control, communication, and intelligence (C³I)issues. These could be critical issues in the case of an integrated U.S.-JapaneseBMD capability. To what degree would the United States be dependent on the decision-makingcapability of the Japanese Cabinet, which has yet to develop effective crisis managementcapabilities? Would, some ask, Japan allow a U.S. commander to control the "button" that wouldactivate a joint system? This would be most unlikely, according to Japanese sources? (69) A similar dilemma could arise if U.S. and Japanese missiles were integrated into a jointsensor and command and control system. In scenarios that do not involve the defense of Japaneseterritory, such as the deployment of U.S. BMD systems to protect Taiwan, the question arises as towhether Japan could or would allow the involvement of jointly operated satellite and command andcontrol facilities. Several defense commentators and private analysts have suggested that thisproblem could be circumvented by the creation of a joint command and control system that wouldalso allow either party to act independently, if necessary. (70) Japanese officials and defense analysts are well aware of the inadequacy of their current crisismanagement and C³ capabilities. Prime Minister Koizumi reportedly hopes to succeed where hisrecent predecessors have failed in getting the Diet to approve legislation giving him the emergencypowers necessary for crisis decisionmaking. As of early 2002, however, the prospects for theintroduction of such legislation remain doubtful. Conclusions The United States and Japan have shared concerns about the proliferation of ballistic missilesin Asia and, therefore, a shared interest in the theater missile defense. The technological andfinancial contributions that Japan may bring into cooperative research on the Sea-Based MidcourseSystem element of the U.S. BMD program are potentially significant, although not critical. Japancontinues to keep its options open regarding the acquisition and deployment of a BMD capability. Subject to flexible enough rules of engagement and crisis management capabilities, Japan'spossession of an operationally compatible BMD capability would contribute importantly to theability of U.S. military forces to deploy an effective missile defense system in the Asian region, asseems to be envisioned by BMD supporters in Congress and the Bush Administration. Also, the veryfeasibility of deploying a BMD system in Asia depends on the availability of bases in Japan, mostnotably the U.S. naval base at Yokosuka, on Tokyo Bay, which is the home port for the U.S. SeventhFleet. Considering the wide range of issues that the Japanese government must resolve beforeproceeding with a decision to acquire a BMD capability, the future of an interoperable U.S.-Japancapability cannot be taken for granted, let alone an integrated binational system. On the positiveside, Japanese defense officials seem clearly to be leaning in the direction of at least a national BMDcapability that would be interoperable with that of the United States. Even if Japan does opt toprocure and deploy an operationally compatible BMD system, however, it remains highlyquestionable whether Japan will agree to an integrated command and control arrangement. Atpresent, a substantial majority of the Japanese public appears opposed to constitutional changes thatwould allow collective self-defense, either for missile defense or other purposes. Senior Bush Administration officials, most notably Deputy Secretary of Defense Armitage,have expressed a strong desire for Japan to address the constitutional constraints. Were Japan toamend or reinterpret Article 9, however, Japanese policy would still be based on its national interestperceptions. Thus any decision by Japan to opt for joint deployment of a BMD capability would itself raise additional foreign policy issues for Japan and operational challenges for U.S. forces. Several of these foreign policy issues are trilateral rather than bilateral. For instance,Japanese policy could turn on the evolution of U.S. relations with the PRC and Taiwan, and whetheror not the United States succeeds in negotiations to eliminate the North Korean missile threat. NorthKorea's Taepo Dong launch of August 1998 provided an important public relations asset to BMDsupporters in Japan. On the other hand, a number of indicators suggest that the main concern amongdefense analysts and planners in Japan, and those in the political world who think about suchmatters, is fear that China may one day threaten Japan with ballistic missiles. From this perspective,a missile defense capability is one means to counter China's rising military power. It is difficult to assess the impact of future political change on Japanese decisionmakingconcerning BMD cooperation, especially regarding any matters touching on the constitution. Ingeneral, political change since the split in the LDP in July 1993 seems not to have had muchperceptible impact on the trend towards a more assertive defense posture and increased U.S.-Japansecurity cooperation. Because of the steady decline of the Social Democratic Party of Japan (SDPJ),the two most likely alternatives to the status quo are a revitalized Democratic Party of Japan (DPJ),which remains divided between former members of the SDPJ and more conservative defectors fromthe LDP, and the more nationalistic wing of the LDP, as represented by Shintaro Ishiharo, thepopular, iconoclastic Governor the Tokyo Metropolitan Prefecture. For different reasons, neitherof these alternatives to the political status quo has been enthusiastic about missile defensecooperation with the United States. What stance they would take were they to attain power isdifficult to forecast with any confidence. Another imponderable at this time is the longer term prospect for retaining U.S. bases inJapan. At present, the principal targets of public opposition to U.S. bases in Japan are facilities inOkinawa whose training and other operations have a large impact on the environment and qualityof life. These mainly involve the U.S. Marines stationed there. In general, U.S. Navy and Air Forcebases receive less criticism. Nonetheless, some of the same groups that support a defense buildupand closer alliance relations are ambivalent about hosting a major U.S. military presence more thanfive decades after the end of the U.S. post-World War II occupation. Already, Okinawans havesucceeded in getting the Japanese government to "relay" their desire to put a fifteen year limit on useby the U.S. Marines of a proposed replacement for the current Futenma Marine Air Station. Fornow, issues concerning U.S. access to bases in Japan are limited to Okinawa, and to forces that donot relate to BMD. Should this situation change, it would become more difficult for the United Statesto maintain an "Asian" BMD capability. (71) Japan's involvement in joint development of the SMD element of the U.S. missile defenseprogram represents considerable progress by Japan towards greater alliance burden sharing, but itsfull implications remain to be seen. Neither Japan's participation in joint research and development,nor a decision by Japan for or against acquisition or deployment of a BMD capability, are likely tohave critical impact on the development of a U.S. missile defense capability or on the deploymentof an American sea-based capability in Asia. Nonetheless, Japan's participation in the research anddevelopment phase is viewed by U.S. officials as possibly contributing important technology, anda decision by Tokyo to acquire a BMD capability could have considerable foreign policy significancefor the United States and important military implications. Given the prevailing uncertainties aboutJapanese policy and the implications of its future decisions, Congress may decide to considercarefully the assumptions of the Administration and the terms of any further steps in BMDcooperation with Japan. Part of such consideration could be obtaining additional information on thethreat perceptions of the Japanese Defense Agency (JDA) and Self-Defense Forces (SDF), thepossible implications of a change in the perceived threat from North Korea's missiles, the attitudeof Japanese political leaders and Ministry of Foreign Affairs policymakers towards China, Japan'sfiscal situation and defense budget trends, public and political attitudes towards U.S.-Japan securitycooperation and U.S. bases in Japan, and the prospects for constitutional revision and the acquisitionof emergency powers by the Japanese national command authorities.

The issue of missile defense cooperation with Japan intersects with several issues of directconcern to Congress, ranging from support for developing a capability to protect U.S. regionalforces, Asia-Pacific allies, and Taiwan, from Chinese short- and medium-range missiles, tocountering a possible future threat to U.S. territory from long-range missiles developed by NorthKorea. Japan's current participation in the U.S. ballistic missile defense (BMD) program dates fromAugust 1999, when the Japanese government agreed to conduct cooperative research on fourcomponents of the interceptor missile being developed for the then U.S. Navy Theater-Wide (NTW)anti-missile system--a sea-based "upper tier" (exo-atmospheric) capability against short- andmedium-range missiles up to 3,500 kilometers. In the spring of 2001, the Administration changed the context of the cooperative researcheffort when it reorganized and redirected the U.S. missile defense program to emphasize theemployment of specific technologies across the entire spectrum of missile defense challenges, butespecially to gain a limited, near-term capability to defeat missile attacks on U.S. territory by "rogue"states. The Pentagon redesignated the NTW program as the Sea-Based Midcourse System, with agoal of developing a capability for attacking missiles of all ranges in the initial or middle phases oftheir flight path. This change added to an already complex list of Japanese policy concerns, byputting Japan in the position of possibly cooperating in the development of technology that couldbecome part of an American national missile defense capability -- a step that many Japanese see astransgressing a constitutional ban on "collective defense." Thus far, the Administration's program change has not deterred Japan from cooperativeresearch on missile defense, but the policy shift has unsettled Japanese leaders and created additionalpolitical obstacles to bilateral BMD cooperation. The new U.S. approach has been criticized in theJapanese press and the Diet (parliament), both because of the potential violation of the implied banon "collective defense" contained in Article 9 of Japan's U.S.-imposed "Peace Constitution," and alsobecause the Bush initiative requires the United States to withdraw from the U.S.-RussianAnti-Ballistic Missile (ABM) treaty, which Tokyo has long regarded as an important element ofstrategic stability. An integrated U.S.-Japan BMD capability aimed at protecting third countrieswould raise the same constitutional issues. Japan has not made a decision regarding the acquisition of a missile defense capability. Japanese policymakers and defense firms generally are enthusiastic about missile defensecooperation, but the political parties, the media, and the general public are split over the issue. Proponents view BMD cooperation as a means to counter a perceived North Korean missile threat,and perhaps a Chinese threat as well. Other Japanese are fearful of aggravating relations with Chinaor triggering an Asian missile race. Even groups in Japan favoring BMD cooperation are concernedabout the large costs associated with the still-unproven technology. The popular Koizumiadministration seems inclined to finesse the constitutional issue, if possible. Japan's future stancewill likely depend on regional developments and how the issue plays out in the currently unstablepolitical environment.

Introduction Online service providers (OSPs) and Internet service providers (ISPs) provide critical infrastructure support to the Internet, allowing millions of people to access online content and electronically communicate and interact with each other. The potential for computer users to infringe intellectual property rights using the Internet, specifically copyrights, could expose "intermediary" service providers to claims of secondary liability, such as contributory and vicarious copyright infringement. Concerned about this significant legal vulnerability of service providers, Congress passed the "Online Copyright Infringement Liability Limitation Act," Title II of the Digital Millennium Copyright Act (DMCA) of 1998, in an effort to adapt copyright law to an evolving digital environment. The act added a new Section 512 to the Copyright Act (Title 17 of the U.S. Code), which provides limitations on the liability of OSPs and ISPs against claims of copyright infringement arising from their users' activities on their digital networks. The act's legislative history indicates that Congress wanted to provide service providers with "more certainty ... in order to attract the substantial investments necessary to continue the expansion and upgrading of the Internet." At the same time, Congress desired to preserve "strong incentives for service providers and copyright owners to cooperate to detect and deal with copyright infringements that take place in the digital networked environment." The DMCA therefore includes several conditions that the service provider must satisfy in order to qualify for § 512 "safe harbor" protection from most infringement liability, and requires that the service providers' activities be encompassed within one of four specified categories of conduct. The safe harbors correspond to the following four functional operations that might otherwise constitute copyright infringement: (1) transitory digital network communications, (2) system caching, (3) storage of information on systems or networks at direction of users, and (4) information location tools. One federal district court assessed the "dual purpose and balance" of § 512 in the following manner: Congress created tradeoffs within the DMCA: service providers would receive liability protections in exchange for assisting copyright owners in identifying and dealing with infringers who misuse the service providers' systems. At the same time, copyright owners would forgo pursuing service providers for the copyright infringement of their users, in exchange for assistance in identifying and acting against those infringers. A public interest group has praised the importance of the DMCA's safe harbor provisions to the development of the Internet: Without these protections, the risk of potential copyright liability would prevent many online intermediaries from providing services such as hosting and transmitting user-generated content. Thus the safe harbors have been essential to the growth of the Internet as an engine for innovation and free expression. Although all four safe harbors will be described at the beginning of this report, the primary focus for the rest of the report will be on the third category that encompasses the function of many popular Internet businesses today: "storage of information on systems or networks at direction of users." This safe harbor is essential to the business model of most ISPs and OSPs that permit user generated content (UGC) to be stored or shared using their networks. Background Copyright is a federal grant of legal protection available to the creator or owner of certain original works of creative expression, including books, movies, photography, art, and music. A copyright holder possesses several exclusive legal entitlements under the Copyright Act, which together provide the holder with the right to determine whether and under what circumstances the protected work may be used by third parties. The grant of copyright permits the copyright holder to authorize or refuse to authorize others to exercise the following exclusive rights: the reproduction of the copyrighted work; the preparation of derivative works based on the copyrighted work; the distribution of copies of the copyrighted work; the public performance of the copyrighted work; and the public display of the copyrighted work, including the individual images of a motion picture. Therefore, a party desiring to reproduce, adapt, distribute, publicly display, or publicly perform a copyrighted work must either (1) obtain the permission of the copyright holder (usually granted in the form of a license agreement that establishes conditions of use and an amount of monetary compensation known as a royalty fee); (2) comply with the terms of compulsory licenses established by law; or (3) assert that such use falls within the scope of certain statutory limitations on the exclusive rights such as the "fair use" doctrine—but the validity of such claim may be subject to the judgment of a federal court. Each exclusive right of a copyright holder is potentially subject to licensing; for example, a third party wishing to reproduce a copyrighted work as well as publicly perform the work must negotiate separate licenses from the copyright holder to engage in the different activities. Unauthorized use of a copyrighted work by a third party in a manner that implicates one of the copyright holder's exclusive rights constitutes infringement. The copyright holder may file a lawsuit in federal court against an alleged infringer for a violation of any of the exclusive rights conferred by copyright. The Copyright Act provides several civil remedies to the copyright holder that is harmed by infringement, including the possibility of obtaining injunctive relief, actual damages suffered by the copyright owner due to the infringement, statutory damages, and costs and attorney fees. The rights conferred by a copyright do not last forever. Copyrights are limited in the number of years a copyright holder may exercise his/her exclusive rights. In general, an author of a creative work may enjoy copyright protection for the work for a term lasting the entirety of his/her life plus 70 additional years. At the expiration of a term, the copyrighted work becomes part of the public domain. A work in the public domain is available for anyone to use without the need to seek prior permission of the creator of the work. Secondary Liability for Copyright Infringement Someone who directly infringes a copyright is not the only party potentially liable for infringement; one who significantly "aids and abets" another party's commission of a direct infringement may also be sued by the rights holder for indirect , or secondary, infringement. The concept of secondary infringement has its roots in tort law and the notion that one should be held accountable for directly contributing to another's infringement. The federal courts have recognized secondary infringement liability in copyright and trademark law, while the Patent Act contains provisions that expressly authorize it. Because online service providers often solely provide the means for their users to upload and distribute content, rather than providing the content themselves, service providers are more likely to be charged with secondary infringement liability rather than sued for direct infringement. In copyright law, there are three common theories of indirect infringement liability: contributory, vicarious, and inducement liability. For contributory copyright infringement liability to exist, a court must find that the secondary infringer "with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another." "Vicarious" infringement liability in copyright law is possible where a defendant "has the right and ability to supervise the infringing activity and also has a direct financial interest in such activities." In 2005, the U.S. Supreme Court expressly adopted a relatively new theory of secondary infringement in copyright cases referred to as "inducement liability." In Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd. , the Court articulated the standard for inducement liability: [O]ne who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties. ... [M]ere knowledge of infringing potential or of actual infringing uses would not be enough here to subject a distributor to liability. ... The inducement rule, instead, premises liability on purposeful, culpable expression and conduct... User Generated Content and the Internet Copyright protection extends to electronic documents, videos, photos, music, and other copyrightable subject matter that may be accessible via the Internet. Uploading and downloading copyrighted works without the authorization of the copyright holders is generally a violation of the copyright holders' exclusive rights to control, respectively, the distribution and reproduction of their works. However, the fair use doctrine may apply to materials that are posted on websites—that is, someone accused of online copyright infringement may be able to assert fair use to escape liability; as explained above, however, a federal court would need to determine whether the use of such material on a website qualifies as a fair use. Several types of Internet technologies enable the storage and sharing of "user generated content" (UGC), which is digital content (such as documents, photographs, music, and video) that is supplied by Internet end-users. Many Internet businesses rely on their users to upload and share UGC to further interest in and usage of their websites or software. In most cases, the UGC is protected by copyright (whether owned by the user or a third party), although online posting or sharing of the material may be authorized by the copyright holder (for promotional purposes, for example), the copyright holder may not object to the posting, or the particular unauthorized activity could nevertheless qualify for a liability defense such as "fair use." A commonly used UGC technology is the "cyberlocker" or "file hosting service," which provides online storage in the Internet "cloud" for users' digital files. After users have uploaded their files to the online storage location, they may access them from mobile devices or other computers as well as share them publicly or with designated friends and coworkers. Dropbox, Google Drive, YouTube, Facebook, and Instagram are all examples of such cyberlocker services. Although these services all require their users to agree to "Terms of Use" or "Terms of Service" that specifically prohibit the uploading of copyrighted content which they do not have the legal right to post, users often violate these terms by engaging in the unauthorized uploading and sharing of copyrighted music files, television shows, and movies. Safe Harbor Provisions Limitations on liability, often called "safe harbors," shelter service providers from copyright infringement suits. The DMCA's safe harbor provisions, codified at 17 U.S.C. § 512, do not confer absolute immunity, but they do significantly limit service providers' liability based on the specific functions they perform. The safe harbors correspond to four functional operations of a service provider: (1) transitory digital network communications, (2) system caching, (3) storage of information on systems or networks at direction of users, and (4) information location tools. Eligibility Threshold for Any Safe Harbor For protection under any of the safe harbor provisions, a party must first meet the statutory definition of a "service provider." The DMCA provides two distinct definitions, one applicable to the first safe harbor category and the second applicable to all of the others. Under § 512(a), the transitory communications provision, "service provider" is narrowly defined as "an entity offering the transmission, routing, or providing of connections for digital online communications, between or among points specified by a user, of material of the user's choosing, without modification to the content of the material as sent or received." The remaining three subsections utilize a broader definition of "service provider," applicable to "a provider of online services or network access, or the operator of facilities therefor." For example, this definition encompasses providers offering "Internet access, e-mail, chat room and web page hosting services." After a party qualifies as a service provider under one of the applicable definitions, there are still two additional threshold requirements that the provider must satisfy: The service provider must have adopted, reasonably implemented, and informed its users of a "repeat infringer" policy for the termination of the accounts of subscribers who are repeat copyright infringers. The provider must accommodate, and not interfere with, "standard technical measures" that are used by copyright owners to identify or protect their works, such as digital watermarks on photographs or digital rights management technologies embedded in videos. In addition to the three threshold criteria listed above, a service provider must satisfy the specific requirements of the particular safe harbor in question, which are described in the section below. Note that qualification for any one of these safe harbors is limited to the criteria detailed in each safe harbor provision, and qualification under one safe harbor category does not affect the eligibility determination for any of the other three. Requirements for Each Safe Harbor § 512(a) Transitory Digital Network Communications When a service provider acts as a data conduit at the request of a third party by "transmitting, routing, or providing connections for, material through a system or network controlled or operated by or for the service provider," it will be shielded from liability for copyright infringement. This safe harbor also protects the service provider for any intermediate and transient storage of the material in the course of conveying the digital information. However, qualification for this safe harbor is subject to several conditions, including the following: Data transmission occurs through an automated technical process without selection of the material by the service provider. The service provider does not determine the recipients of the material. Intermediate or transient copies stored on the provider's system or network must not be accessible to anyone other than the designated recipients, and such copies must not be retained on the system longer than is reasonably necessary. The provider must not have modified the content of the transmitted material. § 512(b) System Caching The second safe harbor category limits ISP liability when it engages in "caching" of online content for purposes of improving network performance. Caching helps to reduce the service provider's network congestion and increase download speeds for subsequent requests for the same data. For example, subscribers to a service provider may transmit certain material to other users of the provider's system or network, at the direction of those users. The service provider may, via an automated process, retain copies of this material for a limited time "so that subsequent requests for the same material can be fulfilled by transmitting the retained copy, rather than retrieving the material from the original source on the network." Immunity for service providers that utilize system caching is provided on the condition that the ISP complies with the following: The content of cached material that is transmitted to subsequent users is not modified by the service provider. The provider complies with industry standard rules regarding the refreshing, reloading, or other updating of the cached material. The provider does not interfere with the ability of technology that returns "hit" count information that would otherwise have been collected had the website not been cached to the person who posted the material. The provider must impose the same conditions that the original poster of the material required for access, such as passwords or payment of a fee. The provider must remove or block access to any material that is posted without the copyright owner's authorization, upon being notified that such material has been previously removed from the originating site, or that the copyright owner has obtained a court order for the material to be removed from the originating site or to have access to the material be disabled. § 512(c) Information Residing on Systems or Networks at Direction of Users This safe harbor, which is the primary focus of this report, protects against copyright infringement claims due to storage of infringing material at the direction of a user on ISP systems or networks. Such storage includes "providing server space for a user's website, for a chat room, or other forum in which material may be posted at the direction of users." The conditions placed on receiving the benefit of this safe harbor are as follows: The service provider lacks actual knowledge of the infringing material hosted or posted on its system or network. In the absence of actual knowledge, the service provider is "not aware of facts or circumstances from which infringing activity is apparent." Upon obtaining either actual knowledge or awareness of infringing material, the service provider must "act[] expeditiously to remove, or disable access to, the material." Where the provider has the right and ability to control the infringing activity, it must not derive a financial benefit directly attributable to that activity. Upon receiving proper notification of claimed infringement, the service provider must act "expeditiously" to remove or block access to the material. The service provider must designate an agent to receive notifications of claimed infringement. The contact information for this agent must be filed with the Register of Copyrights and also be displayed to the public on the service provider's website. Copyright owners must adhere to a prescribed procedure to inform the provider's designated agent of claimed infringement. To constitute effective notification, the copyright owner must "comply substantially" with the statutory requirements of § 512(c)(3): 1. The notification is in writing, signed physically or electronically by a person authorized to act on behalf of the owner of the copyright allegedly infringed. 2. The notification identifies the material that is claimed to have been infringed and provides sufficient information allowing the service provider to locate the material. 3. The complaining party includes a statement, under penalty of perjury, that the party has a "good faith belief" that the use of the material is not authorized by the copyright owner, and that the information in the notification is accurate. § 512(d) Information Location Tools The fourth safe harbor classification immunizes service providers that provide users access to websites that contain infringing material by using "information location tools" such as hypertext links, indexes, and directories. The conditions attached are substantially similar to those that apply to the "system storage" safe harbor provision discussed above, § 512(c), including lack of actual or constructive knowledge requirements, notice and take-down procedures, and absence of direct financial benefit. The rationale for protecting service providers under this provision is to promote development of the search tools that make finding information possible on the Internet. Without a safe harbor for providers of these tools, the human editors and cataloguers compiling Internet directories might be overly cautious for fear of being held liable for infringement. Takedown Notices One condition common to three of the four categories is the requirement that upon proper notification by the copyright owner of online material being displayed or transmitted without authorization, a service provider must "expeditiously" remove or disable access to the allegedly infringing material. This "notice and takedown" obligation does not apply when the service provider functions as a passive conduit of information under § 512(a), but is a condition that must be met to obtain shelter under the remaining three safe harbor provisions. As indicated by the eligibility conditions in each subsection of § 512(b)-(d), the notice and takedown procedure varies slightly for each. To prevent abuse of the notice and takedown procedure, § 512(f) provides damages, costs, and attorneys' fees to any service provider that is injured by a knowing, material misrepresentation that an item or activity is infringing. For example, any person who sends a "cease and desist" letter to a service provider, with the knowledge that the claims of copyright infringement are false, may be liable to the accused infringer for damages. Limited Injunctive Relief Still Possible As noted earlier, the DMCA's safe harbor provisions do not confer absolute immunity from legal liability for copyright infringement. Although they ensure that qualifying service providers are not liable for monetary damages, service providers may still be liable for certain injunctive relief. For example, in the case of service providers that provide either (1) system caching, (2) storage of information on systems or networks at direction of users, or (3) information location tools, the court may grant injunctive relief with respect to a service provider in one or more of the following forms: an order restraining the service provider from providing access to infringing material or activity residing at a particular online site on the provider's system or network; an order restraining the service provider from providing access to a subscriber or account holder of the service provider's system or network who is engaging in infringing activity and is identified in the order, by terminating the accounts of the subscriber or account holder that are specified in the order; such other injunctive relief as the court may consider necessary to prevent or restrain infringement of copyrighted material specified in the order of the court at a particular online location, if such relief is the least burdensome to the service provider among the forms of relief comparably effective for that purpose. Judicial Interpretations of the § 512(c) Safe Harbor Since the enactment of the DMCA, many online service providers have been the target of infringement lawsuits by large companies that own copyrighted content, particularly recorded music, television shows, and motion pictures. These lawsuits typically accuse the service provider of direct, vicarious, and contributory copyright infringement, as well as inducement of infringement. The cases often begin by the service provider asserting a DMCA safe harbor as an affirmative defense that limits its infringement liability; as an affirmative defense, the service provider has the burden of establishing that it meets the safe harbor's eligibility requirements. If this burden is satisfied, courts often find for the defendant on summary judgment. It is important to keep in mind that a service provider's inability to qualify for a safe harbor does not mean that it is presumptively liable for copyright infringement; rather, the copyright holder must still prove its infringement claim. Through the many cases in which the § 512(c) safe harbor is asserted as protecting a service provider from some forms of infringement liability, the federal courts have had an opportunity to interpret the statutory language and evaluate the scope of the safe harbor's application. What follows is a discussion of these cases. Burden of Policing Infringement Section 512(m) expressly provides that the DMCA's safe harbor provisions are not conditioned upon a service provider "monitoring its service or affirmatively seeking facts indicating infringing activity." The federal courts generally agree that the DMCA imposes the duty to police infringement on the copyright holders, not the service providers. In Perfect 10, Inc. v. CCBill LLC , the Ninth Circuit Court of Appeals explained that The DMCA notification procedures place the burden of policing copyright infringement—identifying the potentially infringing material and adequately documenting infringement—squarely on the owners of the copyright. We decline to shift a substantial burden from the copyright owner to the provider... The district court in Viacom International, Inc. v. YouTube, Inc., agreed with the Perfect 10 appellate court, remarking that placing the burden on the copyright holder to monitor for infringing activity makes sense, as the infringing works in suit may be a small fraction of millions of works posted by others on the service's platform, whose provider cannot by inspection determine whether the use has been licensed by the owner, or whether its posting is a "fair use" of the material, or even whether its copyright owner or licensee objects to its posting. Definition of "Storage" In Viacom International, Inc. v. YouTube, Inc., the large media conglomerate Viacom argued (among many other things) that YouTube, the most popular video-sharing website, did not qualify for the § 512(c) safe harbor because it replicates, transmits, and displays videos, rather than merely "stores" the UGC. The district court disagreed with Viacom's proposed narrow definition of "storage," and explained that the statutory definition of "service provider" is defined as "a provider of online services or network access, or the operator of facilities therefor," and includes "an entity offering the transmission, routing, or providing of connections for digital online communications." Thus, the court held that the "collateral scope" of "storage" includes YouTube's offering of software functions that facilitate user access to the UGC, which include reproduction, display, or performance of the videos. Repeat Infringer Termination Policy In Ellison v. Robertson, the defendant service provider was denied safe harbor protection for failure to meet the threshold eligibility requirements under § 512(i), the "repeat infringer termination policy" provision. Stephen Robertson had electronically scanned and converted into digital files several science fiction novels written by Harlan Ellison, without authorization of the copyright owner. Robertson then uploaded and copied the files onto newsgroups that are carried by several ISPs, including America Online, Inc. (AOL). Once Ellison learned of the infringing activity, he e-mailed a notice of copyright infringement pursuant to the DMCA notification procedures. AOL, however, claimed never to have received the notice. Receiving no response, the plaintiff then filed a copyright infringement suit against AOL and other parties. The Ninth Circuit Court of Appeals reversed the district court's conclusion that AOL qualified for a safe harbor limitation of liability. The appellate court found "at least a triable issue of material fact" regarding AOL's threshold eligibility for safe harbor under § 512(i). First, the court explained that § 512(i)(1)(A) has three separate requirements for a service provider to fulfill: Adopt a policy that provides for the termination of service access for repeat copyright infringers in appropriate circumstances. Inform users of the service policy. Implement the policy in a reasonable manner. The court determined that there was "ample evidence in the record" to suggest that AOL failed to satisfy the last of these requirements. Because AOL had changed the e-mail address to which infringement notifications were being sent and did not close the old e-mail account or forward the messages to the new address, "AOL allowed notices of potential copyright infringement to fall into a vacuum and to go unheeded." This fact alone provides a basis for a reasonable jury to find that AOL did not "reasonably implement[]" a policy against repeat infringers. Notification Requirement In ALS Scan, Inc. v. RemarQ Communities, Inc. , the Fourth Circuit Court of Appeals considered whether a service provider is eligible for protection when it is alerted to infringing activity by "imperfect notice" that does not strictly comply with the notification procedures specified in § 512(c)(3). ALS Scan holds the copyrights to over 10,000 "adult" photographs which were posted on newsgroups that were operated by the service provider RemarQ Communities. Upon discovering that RemarQ's servers contained infringing material, ALS Scan sent a "cease and desist" letter to RemarQ, requesting deletion of two specific newsgroups that contained the photographs. However, the district court in ALS Scan found that the notice was "fatally defective" in complying with § 512(c)(3) because ALS Scan never provided RemarQ with a "representative list" of the infringing photographs. Nor did it identify the pornographic photographs with "sufficient detail" to enable RemarQ to locate and disable access to them. In reversing the district court's ruling granting summary judgment in favor of RemarQ, the court of appeals held that ALS Scan had "substantially complied" with DMCA notification requirements because its notice letter identified by name the two RemarQ newsgroup sites "created solely for the purpose of publishing and exchanging ALS Scan's copyrighted images" and also referred RemarQ to website addresses where RemarQ could find pictures and names of ALS Scan's adult models. Thus, the court of appeals held that since RemarQ was provided with a notice that substantially complied with the DMCA, the service provider could not rely on a claim of defective notice to maintain the safe harbor defense. Actual Knowledge of Infringement The DMCA requires a service provider to remove or disable access to material upon obtaining "actual knowledge that the material or an activity using the material on the system or network is infringing." (A service provider may also choose to ignore its actual knowledge of infringement, but doing so would render it ineligible for safe harbor protection.) A mere "generalized awareness" of infringement, even if it may be prevalent throughout its digital network or system, does not impose a legal duty on a service provider to monitor or search for infringements. Rather, a service provider must have "knowledge of specific and identifiable infringements of particular individual items" before the legal duty is triggered. The Second Circuit Court of Appeals in Viacom International, Inc. v. YouTube, Inc. reasoned that "the nature of the removal obligation itself contemplates knowledge or awareness of specific infringing material, because expeditious removal is possible only if the service provider knows with particularity which items to remove." In Corbis Corp. v. Amazon.com, Inc., the federal district court determined that the electronic commerce company Amazon.com had qualified for safe harbor with regard to infringing activity allegedly occurring in its zShops third-party vendor service. Corbis, a company that licenses art images and celebrity photographs, had sued Amazon, claiming that several hundred images in which it had a "copyright interest" were being copied, displayed, and sold through Amazon's zShops sites. Amazon sought liability protection under the § 512(c) safe harbor. The court found that Amazon did not have actual knowledge that material on its network is infringing because Corbis, prior to filing the lawsuit, had never attempted to notify Amazon about the alleged infringing conduct of zShop vendors. Thus, the court explained, Corbis missed its opportunity to provide "the most powerful evidence of a service provider's knowledge–actual notice of infringement from the copyright holder." In UMG Recordings, Inc. v. Shelter Capital Partners LLC , Universal Music Group (UMG), one of the largest recorded music and music publishing companies, sued Veoh Networks, an operator of a website that allowed users to share videos with others. First, the Ninth Circuit Court of Appeals observed that UMG had not notified Veoh of any specific infringing video on its system and thus, like Corbis Corporation, the failure to use the formal DMCA notice protocol "stripped it of the most powerful evidence of a service provider's knowledge." UMG argued, however, that Veoh, by hosting a category of copyrighted content such as "music videos" for which it had no license from any major music company, had actual knowledge of the infringing material on its website. The appellate court rejected this proposition, holding that with only the "general knowledge that one's services could be used to share infringing material," a service provider lacks actual knowledge of infringement. "Red Flag" Apparent Knowledge of Infringement In the absence of "actual knowledge" that materials or activities on their system or network are infringing, a service provider has an obligation to "expeditiously" remove or disable access to infringing content when it becomes "aware of facts or circumstances from which infringing activity is apparent." The service provider's duty to remove material upon obtaining an "awareness" of apparent infringing activity is the so-called "red flag" provision of the DMCA and it is distinct from the "actual knowledge" requirement discussed in the previous section. In Perfect 10 Inc. v. CCBill LLC, the Ninth Circuit Court of Appeals disagreed with the plaintiff's allegation that the defendants (who provided web hosting services to other websites) had received notice of apparent infringement from "red flags" such as websites that were named "illegal.net" and "stolencelebritypics.com." The appellate court explained that "[w]hen a website traffics in pictures that are titillating by nature, describing photographs as 'illegal' or 'stolen' may be an attempt to increase their salacious appeal, rather than an admission that the photographs are actually illegal or stolen. We do not place the burden of determining whether photographs are actually illegal on a service provider." The appellate court in Viacom International, Inc. v. YouTube, Inc. described the difference between actual knowledge and "red flag knowledge" as being "between a subjective and an objective standard:" [T]he actual knowledge provision turns on whether the provider actually or "subjectively" knew of specific infringement, while the red flag provision turns on whether the provider was subjectively aware of facts that would have made the specific infringement "objectively" obvious to a reasonable person. The red flag provision, because it incorporates an objective standard, is not swallowed up by the actual knowledge provision under our construction of the § 512(c) safe harbor. Both provisions do independent work, and both apply only to specific instances of infringement. Willful Blindness The doctrine of willful blindness is used widely within the federal judiciary in criminal law cases involving criminal statutes that require proof that a defendant acted knowingly or willfully, in order to hold defendants accountable so that they "cannot escape the reach of these statutes by deliberately shielding themselves from clear evidence of critical facts that are strongly suggested by the circumstances." The Supreme Court has previously explained that "persons who know enough to blind themselves to direct proof of critical facts in effect have actual knowledge of those facts." In a case examining induced patent infringement liability, Global-Tech Appliances, Inc. v. SEB S.A., the Supreme Court described a two-part test for the willful blindness doctrine: 1. The defendant must subjectively believe that there is a high probability that a fact exists. 2. The defendant must take deliberate actions to avoid learning of that fact. The Court believed that these two requirements of the willful blindness doctrine provide "an appropriately limited scope that surpasses recklessness and negligence." The differences between these three standards, according to the Court, are as follows: "[A] willfully blind defendant is one who takes deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known the critical facts." "[A] reckless defendant is one who merely knows of a substantial and unjustified risk of such wrongdoing." "[A] negligent defendant is one who should have known of a similar risk but, in fact, did not." The Second Circuit Court of Appeals in Viacom International, Inc. v. YouTube, Inc. was the first appellate court to consider the application of the common law willful blindness doctrine in the DMCA context. The court acknowledged that the DMCA does not expressly mention willful blindness. Nevertheless, the court held that the doctrine could apply in certain circumstances "to demonstrate knowledge or awareness of specific instances of infringements under the DMCA," for example, if a service provider makes deliberate efforts to avoid obtaining knowledge of specific infringing activity. The Ninth Circuit Court of Appeals in UMG Recordings, Inc. v. Shelter Capital Partners LLC also agreed with the Viacom appellate court that "a service provider cannot willfully bury its head in the sand to avoid obtaining such specific knowledge." However, in the case at hand, the court found "no evidence that Veoh acted in such a manner," but instead noted that "Veoh promptly removed infringing material when it became aware of specific instances of infringement." "Right and Ability to Control" Infringing Activity Section 512(c)(1)(B) specifies that for a service provider to be eligible for the safe harbor applicable to online storage functions, the provider must not receive a "financial benefit directly attributable to the infringing activity" that it has the "right and ability to control." The federal courts have held that the ability of a service provider to remove or block access to materials posted on its website or stored on its network is not enough to prove that the service provider had the "right and ability to control" the infringing activity. Instead, the courts have required evidence of "something more" than the service provider's technical ability to remove or block infringing materials, which demonstrates the service provider's ability to exert "substantial influence on the activities of users." For example, the federal district court in Perfect 10, Inc. v. Cybernet Ventures, Inc. found the requisite control where the service provider had established a monitoring program by which its webmasters received "detailed instructions regard[ing] issues of layout, appearance, and content." The service provider also forbade certain types of content and refused access to users who failed to comply with its instructions. In addition, the appellate court in Viacom International, Inc. v. YouTube, Inc. suggested that "inducement of copyright infringement under Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd. , which "premises liability on purposeful, culpable expression and conduct," might also rise to the level of control under § 512(c)(1)(B). Recent Legislative Activities Some copyright holders, particularly those who create and distribute music, television programs, and movies, have publicly expressed frustration with what they consider to be an "outdated" § 512 and would like Congress to require service providers to have more responsibility in preventing infringing activity. In the 113 th Congress, the House Judiciary Committee, Subcommittee on Courts, Intellectual Property, and the Internet, held a hearing on March 13, 2014, specifically regarding § 512 of the Copyright Act, in which it heard testimony from witnesses about the degree to which the safe harbor is, or is not, operating well. House Judiciary Committee Chairman Goodlatte expressed concern about what he referred to as a "whack-a-mole game by copyright owners" who have to deal with repeated unauthorized postings of their content. He explained the issue as follows: By most accounts, good faith service providers have acted expeditiously in responding to Section 512 notices by removing or disabling links to infringing content. However, copyright owners are increasingly facing a scenario that simply wasn't anticipated during the enactment of 512 – the need of copyright owners to send a voluminous amount of notices seeking removal of infringing content followed by the almost immediate reappearance of the same infringing content. At the hearing, content owners argued that § 512, as currently written and interpreted by the courts, places too much burden on copyright owners to police infringing activity online, whereas service providers urged Congress to keep the current DMCA framework unchanged and instead rely upon voluntary industry agreements and private industry solutions (such as content filtering systems) to address any infringement problems.

Congress passed the Digital Millennium Copyright Act (DMCA) in 1998 in an effort to adapt copyright law to emerging digital technologies that potentially could be used to exponentially increase infringing activities online. Title II of the DMCA, titled the "Online Copyright Infringement Liability Limitation Act," added a new Section 512 to the Copyright Act (Title 17 of the U.S. Code) in order to limit the liability of providers of Internet access and online services that may arise due to their users posting or sharing materials that infringe copyrights. Congress was concerned that without insulating Internet intermediaries from crippling financial liability for copyright infringement, investment in the growth of the Internet could be stifled and innovation could be harmed. The § 512 "safe harbor" immunity is available only to a party that qualifies as a "service provider" as defined by the DMCA, and only after the provider complies with certain eligibility requirements. The DMCA's safe harbors greatly limit service providers' liability based on the specific functions they could perform: (1) transitory digital network communications, (2) system caching, (3) storage of information on systems or networks at direction of users, and (4) information location tools. In exchange for the shelter from most forms of liability, the DMCA requires service providers to cooperate with copyright owners to address infringing activities conducted by the providers' customers. The safe harbor thus reflects a "grand bargain" between creative content-producing industries and Internet companies that seeks to both promote investment in the Internet and protect copyright holders' intellectual property rights. The DMCA expressly states that a service provider is not required to actively monitor its service for infringing activity. However, § 512 requires a service provider, upon proper notification by the copyright owner of online material being displayed or transmitted without authorization, to "expeditiously" remove or disable access to the allegedly infringing material. In addition, a service provider must remove or disable access to material upon acquiring actual knowledge that materials or activities on its system or network are infringing (for example, actual knowledge can be obtained by the copyright holder's notification) or when the service provider becomes aware of facts or circumstances from which infringing activity is apparent (so-called "red flag" knowledge). Service providers that meet the eligibility conditions of the § 512 safe harbor are thus shielded from liability for unknowingly hosting content that infringes copyrights, whereas § 512 provides copyright holders a simple and cost-effective procedural mechanism for remedying online infringement of their intellectual property rights. Courts have found that the burden of actively monitoring online copyright infringement lies on copyright holders. This report focuses primarily on the third safe harbor functional category, "storage of information on systems or networks at direction of users," which includes any website that stores digital content that users have uploaded for public consumption or for sharing purposes, such as popular social media and online services YouTube, Facebook, Dropbox, Flickr, Google Drive, and Blogger. The report will describe and analyze the statutory language establishing the safe harbor as well as discuss federal court cases that have considered the scope and application of the DMCA safe harbors and the extent to which online service providers can be held indirectly liable for copyright infringement committed by their users.

Characteristics of the Epidemic in the Region1 Although the AIDS epidemic in the broader Latin America and Caribbean region is not as pervasive as in Africa, over 1.8 million people were estimated to be living with HIV in the region in 2007, including 230,000 in the Caribbean and 1.6 million in Latin America. Moreover, the adult prevalence rate in several countries in the Caribbean and Central America are among the highest outside of sub-Saharan Africa. In terms of sheer numbers, Brazil accounts for about one-third of those living with HIV in Latin America, but its prevalence rate of 0.5% (2005) is low compared to many countries in Central America and the Caribbean. Furthermore, Brazil's active prevention efforts have lowered prevalence among the high risk groups—intravenous drug users and homosexuals—and the government's extensive antiretroviral (ARV) treatment program has lowered death rates. In contrast, the mode of transmission in several Caribbean and Central American countries has been primarily through unprotected heterosexual contact, which has made it more difficult to contain the epidemic because it affects the general population. The estimated adult infection rate in the Caribbean was 1.0% in 2007, with the epidemic claiming an estimated 11,000 lives during the year and 19,000 lives in 2006. An estimated 17,000 adults and children in the region became infected in 2007. AIDS remains one of the leading cause of death among adults in the Caribbean aged 15-44 years. The Caribbean countries with the highest prevalence or infection rates in 2006 were Haiti, the Bahamas, Belize, Guyana, and Trinidad and Tobago, with rates between 2% and 4%; and Barbados, the Dominican Republic, Jamaica, and Suriname, with rates between 1% and 2%. Haiti and the Dominican Republic account for three-quarters of the region's infected population. The U.S. Agency for International Development (USAID) notes that Haiti's poverty, conflict, and unstable governance have contributed to the rapid spread of AIDS over the years. In both countries, however, there are indications that the epidemic could be reaching a turning point because of prevention efforts. Nevertheless, trends in both countries suggest the need to protect against a resurgence of the epidemic. In Haiti, there are been declining infection levels in Port-au-Prince and other cites, and the declines appear to be associated with some protective behavioral changes (an increase in condom use and a drop in the number of sexual partners) although AIDS mortality has also been a factor. In the Dominican Republic, where there has been a large increase in the use of condoms by commercial sex workers, the epidemic appears to have stabilized. However, workers on sugar cane plantations (bateyes) continue to have high prevalence rates, with rates up to 12% found among males aged 40-44. In Central America, Honduras has the highest prevalence rate of 1.5% (with AIDS related diseases the second leading cause of death in the country), while El Salvador, Guatemala, and Panama have rates just under 1%. The epidemic in Central America is concentrated in large urban areas, although some rural areas have been hard hit. In Honduras, the Garifuna community (descendants of freed black slaves and indigenous Caribs from the Caribbean island of St. Vincent) concentrated in northern coastal communities has been especially hard hit by the epidemic, with over 8% and 14% of the population infected. Although unprotected heterosexual sex has been the main mode of HIV transmission in most countries in Central America and the Caribbean, sex between men is a factor in epidemics in both regions. In Belize, Costa Rica, El Salvador, Guatemala, Nicaragua, and Panama, high HIV infection rates are found among men who have sex with men. In many cases, men who have sex with men also report having female sexual partners. In Central America, bisexuality has been a significant bridge for HIV transmission into the wider population in Central America. High prevalence rates have also been found among female sex workers in El Salvador, Honduras, and Guatemala. In Honduras, however, recent studies have shown that increased condom use by sex workers and men who have sex with men has reduced prevalence rates in the major cities of Tegucigalpa and San Pedro Sula. In the Caribbean, stigma and widespread homophobia (which drives people away from HIV services), have been significant factors in the spread of HIV. Although the share of HIV infections in the Caribbean attributed to sex between men is about 12%, homophobia and stigma could hide a higher percentage. In recent years, human rights organizations have criticized Jamaica for pervasive homophobia and targeted violence against gay men that has also carried over to violence against people living with HIV and organizations providing HIV/AIDS education and services. In June 2004, Jamaica's leading gay rights activist, Brian Williamson, was murdered, while in November 2005, Steve Harvey, a noted Jamaican AIDS activist, was murdered in what some news reports have characterized as a hate crime. UNAIDS condemned the murder and called on the Jamaican government to address homophobia and other causes of stigma and discrimination that are fueling the spread of HIV. In September 2006, the Jamaican government launched an anti-stigma media campaign to combat discrimination associated with those infected with HIV. Consequences of the Epidemic The AIDS epidemic in the Caribbean and Central America has begun to have negative consequences for economic and social development in the region. In 2001, the Pan American Health Organization (PAHO) maintained that the AIDS epidemic threatened to undo many of the health gains made in Latin America and the Caribbean. In the Caribbean, which is the second most affected region in the world, AIDS is one of the leading causes of death among adults aged 15-44 years. Life expectancy and infant mortality have already been affected in some countries. UNAIDS reported in 2004 that in Haiti, life expectancy was 10 years lower than it would be without the epidemic. In 2006, it reported that life expectancy in the Dominican Republic was estimated to be three years lower than without the AIDS epidemic and that AIDS mortality in Trinidad and Tobago would reduce the country's overall population by 2010. As the epidemic has continued, already-strained health systems in the region have been further burdened with new cases of AIDS. As a result of the epidemic, there are reportedly some 250,000 AIDS orphans in the Caribbean (with 200,000 of those in Haiti) and some 73,000 AIDS orphans in Central America. According to the World Bank, continued increases in HIV prevalence in the Caribbean will negatively affect economic growth. The epidemic, according to the Bank, will have a negative impact on such economic sectors as agriculture, tourism, lumber production, finance, and trade because of lost productivity of economically active adults with the disease. In particular, the labor market in the region will be dealt a shock because of deaths from AIDS. The Prime Minister of St. Kitts and Nevis, Denzil Douglas, maintains that the epidemic threatens to cripple the labor force just as the region needs to become more competitive in world markets amid the momentum toward hemispheric free trade. Looking ahead, the World Bank warned in 2001 that "what happened in Africa in less than two decades could now happen in the Caribbean if action is not taken while the epidemic is in the early stages." A 2004 report by the Pan Caribbean Partnership Against HIV/AIDS maintained that the epidemic is taking its greatest toll on younger people who traditionally have been the most productive human resources. The U.S. government has viewed the HIV/AIDS epidemic not only as a humanitarian crisis, but also as a national security issue because of its negative impact on economic development and political stability abroad. Under Secretary of State for Global Affairs Paula Dobriansky warned in 2002 that the disease was spreading in regions close to home, particularly Central America and the Caribbean. Scott Evertz, former Director of the White House Office of AIDS Policy, warned in 2002 that AIDS problems abroad could jeopardize the health of Americans, and described the Caribbean as "our third border." USAID Assistant Administrator for Latin America and the Caribbean Adolfo Franco testified in 2005 that migration from the region can contribute to the risk of HIV in the United States, citing statistics that Caribbean immigrants account for 46% of all immigrants testing HIV positive in New York City. Response to the Epidemic The response to the HIV/AIDS epidemic in the Caribbean and Central America has involved a mix of support by governments in the region, bilateral donors (such as the United States, Canada, and European nations), regional and multilateral organizations, and nongovernmental organizations (NGOs). Many countries in the region have national AIDS programs that are supported through these bilateral, regional, and multilateral programs. The World Bank has provided significant support to combat HIV/AIDS in Latin America and the Caribbean, with Brazil becoming the first country in the region to receive such assistance. In June 2001, the Bank approved a $155 million lending program for the Caribbean to help countries finance their national HIV/AIDS prevention and control projects. Under this program, the Bank has approved loans to Barbados (2001), the Dominican Republic (2001), Jamaica (2002), Grenada (2002), St. Kitts & Nevis (2003), Trinidad & Tobago (2003), the Caribbean Community's (CARICOM) Pan Caribbean Partnership Against HIV/AIDS (PANCAP) (2004), Guyana (2004), St. Lucia (2004), and St. Vincent (2004). In March 2005, the World Bank approved an $8 million Central America regional project to manage and control the epidemic. The Inter-American Development Bank has supported HIV/AIDS activities in such countries as the Bahamas, Belize, Guatemala, Guyana, Haiti, Honduras, Jamaica, Nicaragua, Suriname, and a regional program through CARICOM. Moreover, its assistance to support health infrastructure in the region has been important for HIV/AIDS treatment and care programs. The Global Fund to Fight AIDS, Tuberculosis, and Malaria has begun funding programs throughout Latin America and the Caribbean, with about $484 million or almost 10% of disbursed funding worldwide going to this region as of early 2008. Beneficiaries in Central America and the Caribbean include Belize, Costa Rica, Cuba, the Dominican Republic, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Nicaragua, Panama, and Suriname as well as multi-country programs for CARICOM, the Caribbean Regional Network of People Living with HIV/AIDS (CRN+), and the Organization of Eastern Caribbean States (OECS). (See the Global Fund's website at http://www.theglobalfund.org/en/ . For more on the Global Fund, see CRS Report RL33396, The Global Fund to Fight AIDS, Tuberculosis, and Malaria: Progress Report and Issues for Congress , by [author name scrubbed].) Looking broadly at the entire Latin American and Caribbean region, the commitment to stem the epidemic has grown considerably, and the region has made progress in the treatment and care of people infected with HIV/AIDS. Nevertheless, the quality and scope of surveillance, prevention, and treatment programs in the region vary because of unequal socioeconomic development and high population mobility. Access to ARV drugs has improved significantly in a number of countries, although universal access to treatment in poorer resource-limited countries could take years to achieve. Brazil has been a model in the developing world in terms of offering antiretroviral treatment to all people living with HIV, and the survival rate of AIDS patients in the country has risen significantly because of this. AIDS mortality has also declined in other countries providing universal coverage for ARV treatment, including Argentina, the Bahamas, Barbados, Costa Rica, Cuba, and Panama. According to a joint 2007 report issued by UNAIDS, UNICEF, and the WHO, some 355,000 people were receiving ARV treatment in Latin America and the Caribbean in 2006 , or 72% of those needing it. The report also cautioned, however, that coverage declined slightly in the second half of 2006, and suggested that the increase in need is not being matched by an increase in the number of people being treated. In a number of smaller poorer countries in the region, particularly in the Caribbean and Central America, the percentage of people receiving ARV treatment is much less than the regional average. In Haiti, almost 37% of those needing ARV treatment were receiving in 2006, while in neighboring Dominican Republic 36% of those needing treatment were receiving it. Other countries where less than 50% of those in need of ARV treatment were receiving it include El Salvador, Honduras, and Trinidad and Tobago. While these number are low compared with the regional average, they also reflect a large increase in ARV treatment for these countries. In Haiti, Partners in Health, a non-profit organization affiliated with the Harvard Medical School, initiated a program in 1998 to provide ARV treatment to patients in several impoverished rural villages in the Central Plateau region of the country. The project, which expanded to other parts of Haiti, demonstrated that even in severely impoverished countries with little health infrastructure, there can be sustained treatment for people with HIV. Regional and multilateral institutions in the Caribbean support a regional approach in dealing with the epidemic in part because governments are either too small or too poor to respond adequately. Minimal infrastructure, weak institutional capacity and poverty have hampered efforts to respond to the epidemic in several countries. In order to overcome these difficulties, the Caribbean Community (CARICOM) has coordinated a regional approach to combat AIDS. In 1998, the CARICOM Secretariat chaired a Caribbean Task Force on HIV/AIDS that developed a strategic plan for the region. In February 2001, CARICOM launched the Pan Caribbean Partnership Against HIV/AIDS (PANCAP), a coalition established to involve government, business, and the international community in support of the strategic plan to combat AIDS. In 2002, CARICOM and the Partnership developed a 2002-2006 strategic framework and a plan of action to respond to the epidemic. The Pan American Health Organization and its Caribbean Epidemiology Center (CAREC) have provided technical assistance to help implement the strategic plan, and donors have included UNAIDS and the World Bank and bilateral donors such as the United States. In Central America, there have been several notable regional efforts, including an initiative to protect vulnerable populations from the epidemic. Various regional meetings have brought together government officials and non-governmental organizations. Central American nations were also successful in negotiating significant price cuts with drug companies for antiretroviral drugs. U.S. Policy Within the federal government, overall U.S. support to combat the HIV/AIDS epidemic in Latin America and the Caribbean is provided though programs administered by several U.S. agencies, including the Centers for Disease Control and Prevention (CDC), the National Institutes of Health (NIH), the Department of Labor, the Department of State, and the U.S. Agency for International Development (USAID), which has been the lead agency fighting the epidemic abroad since 1986. Most funding for such programs is included in annual appropriations measures for Foreign Operations and for the Departments of Labor, Health and Human Services, and Education. In addition to support provided by U.S. agencies, the United States also provides contributions to multilateral efforts to combat AIDS, such as the Global Fund to Fight AIDS, Tuberculosis and Malaria described above. The United States is also a major financial contributor to such multilateral institutions as the World Bank and the Inter-American Development Bank that fund HIV/AIDS projects in the region. (For more, see CRS Report RL33485, U.S. International HIV/AIDS, Tuberculosis, and Malaria Spending: FY2004-FY2008 , by [author name scrubbed].) U.S. government funding to combat HIV/AIDS in the Caribbean and Central America has increased in recent years. Foreign aid to the region rose from $11.2 million in FY2000 to $33.8 million in FY2003. Because of the inclusion of Guyana and Haiti in the President's Emergency Plan for AIDS Relief (PEPFAR), largely funded through the Global HIV/AIDS Initiative (GHAI) foreign assistance account, assistance to the region for HIV/AIDS increased from $47 million in FY2004 to an estimated $139 million for FY2008. For FY2009, the Administration requested $139 million, with $92 million for Haiti and $20 million for Guyana through the GHAI account. The balance of the request for other countries is through the Child Survival and Health (CSH) foreign assistance funding account. (See Table 1 ). In the Caribbean, USAID provides HIV/AIDS assistance through both bilateral and regional programs, and is an active member of the Pan Caribbean Partnership Against HIV/AIDS. As part of its Caribbean regional program, USAID has initiated a program focusing on Caribbean countries that do not have a permanent USAID presence: Trinidad and Tobago, Suriname, St. Kitts and Nevis, St. Lucia, St. Vincent and Grenadines, Grenada, Antigua and Barbuda, Dominica, and Barbados. The program, implemented through NGOs, governments, CARICOM, and CAREC, is aimed at expanding education and prevention programs and improving the effectiveness of health delivery programs. USAID Missions in the Dominican Republic, Jamaica, Guyana, and Haiti provide bilateral HIV/AIDS assistance. In the Dominican Republic, USAID funds NGOs that provide prevention information to vulnerable groups, support people with HIV, and work in the policy arena to reduce stigma and discrimination. The Mission also provides assistance for mother-to-child transmission prevention, voluntary counseling and testing, and prepackaged therapy programs. It also collaborates with the Dominican Republic's Presidential HIV/AIDS Council and other donors to promote widespread societal participation in HIV prevention. In Jamaica, USAID provides assistance to the Ministry of Health in support of a strategic plan to combat the epidemic, including support to target Jamaica's high-risk adolescent population. USAID has also focused on fighting stigma and discrimination against people living with AIDS in Jamaica. In Guyana, USAID supports prevention, treatment, and care activities, including support for voluntary counseling and prevention of mother-to-child transmission. Prevention activities will be scaled up as a result of increased assistance under PEPFAR. In Haiti, USAID has provided support for education and prevention activities aimed at high risk groups, people living with HIV/AIDS, programs to prevent mother-to-child transmission, and the marketing of condoms. As a result of increased assistance under PEPFAR, assistance for prevention, treatment, and care activities, including ARV treatment, is being scaled up. In Central America, USAID funds HIV activities in Honduras, Guatemala, El Salvador, Nicaragua, Belize, and Panama. In Honduras, which has the largest program, USAID supports both the public and private sector, including support to local NGOs working with populations that have high rates of HIV prevalence and support for the promotion and marketing of condoms. USAID's Central America regional program is involved in prevention activities focused on high-risk groups and mobile populations that cross borders, support for improved public HIV/AIDS programs, and support for comprehensive care for people living with HIV/AIDS. Among its prevention activities, USAID has funded a condom social marketing and behavioral change program focusing on high-risk populations. The CDC's Global AIDS Program (GAP) (under the U.S. Department of Health and Human Services) also has collaborative agreements with developing countries that help support research and formulate preventative and care efforts. It is involved in three program elements: primary prevention; surveillance and infrastructure development; and care, support, and treatment. To date in the Caribbean, the CDC has funded programs in Haiti and Guyana, and since 2002 it has funded a Caribbean regional program supporting the Caribbean Epidemiology Center (CAREC) based in Trinidad and Tobago. It has plans in 2008 to fund programs in Jamaica and the Dominican Republic. In Central America, the CDC has funded a regional program since 2003, and in 2008 it has plans to fund programs in Honduras and Nicaragua. NIH has funded international research efforts worldwide focusing on such areas as vaccine research, prevention of disease transmission, research on women and AIDS, prevention and treatment of HIV infection in children, prevention and treatment of opportunistic infections, and capacity building and training of foreign scientists. In the Caribbean and Central America, NIH has funded research studies and/or training programs for most countries in the region. The Department of Labor has funded HIV/AIDS workplace education and prevention projects in Belize, the Dominican Republic, Guyana, Haiti, Jamaica, and Trinidad and Tobago. Legislative Initiatives For several years, some Members of Congress have wanted to expand the Caribbean countries that would benefit from increased assistance under PEPFAR beyond Haiti and Guyana, arguing that high mobility in the region necessitates a regional approach in combating the epidemic. Members and Caribbean leaders have expressed concerned that other Caribbean countries will be overlooked. Caribbean officials maintain that targeting specific countries rather than the entire region could be disastrous given the significant travel among Caribbean islands, as well as the annual visits of millions of American tourists. Other Members note that the legislation does not preclude the President from designating additional Caribbean countries. In the 110 th Congress, H.R. 848 (Fortuño), introduced February 6, 2007, would add 14 Caribbean countries to those countries targeted as focus countries under PEPFAR. The additional countries are Antigua & Barbuda, Barbados, the Bahamas, Belize, Dominica, Grenada, Jamaica, Montserrat, St. Kitts & Nevis, St. Vincent and the Grenadines, St. Lucia, Suriname, Trinidad & Tobago, and the Dominican Republic. In the 109 th Congress, similar language had been included in Section 2516 of S. 600 , the Foreign Affairs Authorization Act for FY2006 and FY2007, but final action on the measure was not taken before the end of the Congress. In the 108 th Congress, similar language was included in both the House-passed FY2004-FY2005 Foreign Relations Authorization Act, H.R. 1950 (Section 1818), and the Senate Foreign Relations Committee's reported FY2005 Foreign Relations Authorization Act, S. 2144 (Section 2518), but no final action was taken on these measures. In the second session of the 110 th Congress, legislation is being considered to reauthorize U.S. assistance to combat HIV/AIDS worldwide during FY2009-FY2013. In May 2007, the President announced his attention to work with Congress for the reauthorization of PEPFAR, calling for $30 billion over five years beginning in FY2009. On April 2, 2008, the House approved H.R. 5501 (Berman), a PEPFAR reauthorization bill that authorizes $50 billion from FY2009 to FY2013 to fight AIDS, tuberculosis, and malaria overseas. Significantly for the Caribbean, Section 102 of the bill would add 14 Caribbean countries as focus countries, the same countries set forth in H.R. 848 noted above. The Senate version of the PEPFAR reauthorization bill, S. 2731 (Biden), reported by the Senate Committee on Foreign Relations on April 15, 2008, would also authorize $50 billion over FY2009-FY2013, to fight AIDS, TB, and malaria, but would not designate the additional 14 Caribbean countries as focus countries. Appropriations for HIV/AIDS assistance to the Caribbean and Central America are funded largely through the annual State Department, Foreign Operations, and Related Agencies appropriations measure. For further information, see CRS Report RL33485, U.S. International HIV/AIDS, Tuberculosis, and Malaria Spending: FY2004-FY2008 , by [author name scrubbed].

The AIDS epidemic in the Caribbean and Central America has begun to have negative consequences for economic and social development in several countries, and continued increases in HIV infection rates threaten future development prospects. In contrast to other parts of Latin America, the mode of HIV transmission in several Caribbean and Central American countries has been primarily through heterosexual contact, making the disease difficult to contain because it affects the general population. The countries with the highest prevalence or infection rates are Belize, the Bahamas, Guyana, Haiti, and Trinidad and Tobago, with rates between 2% and 4%; and Barbados, the Dominican Republic, Honduras, Jamaica, and Suriname, with rates between 1% and 2%. The response to the AIDS epidemic in the Caribbean and Central America has involved a mix of support by governments in the region, bilateral donors (such as the United States, Canada, and European nations), regional and multilateral organizations, and nongovernmental organizations (NGOs). Many countries in the region have national HIV/AIDS programs that are supported through these efforts. U.S. government funding for HIV/AIDS in the Caribbean and Central America has increased significantly in recent years. Aid to the region rose from $11.2 million in FY2000 to $33.8 million in FY2003. Because of the inclusion of Guyana and Haiti as focus countries in the President's Emergency Plan for AIDS Relief (PEPFAR), U.S. assistance to the region for HIV/AIDS increased from $47 million in FY2004 to an estimated $139 million in FY2008. For FY2009, the Administration requested almost $139 million in HIV assistance for the Caribbean and Central America, with $92 million for Haiti and $20 million for Guyana. In the 110th Congress, H.R. 848 (Fortuño), introduced February 6, 2007, would add 14 Caribbean countries to the list of focus countries under PEPAR. The additional countries are Antigua & Barbuda, Barbados, the Bahamas, Belize, Dominica, Grenada, Jamaica, Montserrat, St. Kitts & Nevis, St. Vincent and the Grenadines, St. Lucia, Suriname, Trinidad & Tobago, and the Dominican Republic. In the second session of the 110th Congress, the language of H.R. 848 was included in PEPFAR reauthorization legislation, H.R. 5501 (Berman), approved by the House on April 2, 2008. The Senate version of the PEPFAR reauthorization, S. 2731 (Biden), which was reported by the Senate Committee on Foreign Relations on April 15, 2008, does not have a similar provision expanding the list of Caribbean countries that are focus countries. This report, which will be updated periodically, examines the characteristics and consequences of the HIV/AIDS epidemic in the Caribbean and Central America and the response to the epidemic in the region. Also see CRS Report RL33485, U.S. International HIV/AIDS, Tuberculosis, and Malaria Spending: FY2004-FY2008, by [author name scrubbed]; CRS Report RL33396, The Global Fund to Fight AIDS, Tuberculosis, and Malaria: Progress Report and Issues for Congress, by [author name scrubbed]; and CRS Report RL33771, Trends in U.S. Global AIDS Spending: FY2000-FY2008, by [author name scrubbed].

Introduction Every 10 years, through the apportionment and redistricting processes within each state, Congress and the states attempt to create a U.S. House of Representatives that reflects a fair representation of the people of the United States. It is, generally, a complex, volatile, and highly political process, but one that, with a single exception, has occurred in various forms for over 200 years (since 1790), and, for some, represents, along with free elections, the clearest indication that the United States is a representative democracy. U.S. congressional districts (currently set at 435) are reallocated among the 50 states based on population counts from the national census taken at the beginning of each decade. Once the reapportionment of seats among the states is complete, congressional district boundaries are subject to change by state governments in all states with more than one district. The goals of the redistricting process within states are that each congressional district shall be represented by a single Member; nearly equal in population within each state; and moderately unequal in population among states. The U.S. Constitution (Article 1, Section 2 as amended by the 14 th Amendment, Section 2) requires that "representatives shall be apportioned among the several states according to their respective numbers, counting the whole number of persons in each state, excluding Indians not taxed." The requirement that districts must be apportioned among states means district boundaries cannot cross state lines. The Constitution, also in Article 1, Section 2, sets a minimum size for the House of Representatives (one Representative for each state) and a maximum size for the House (one Representative for every 30,000 persons). Congress is free to choose a House size (with the concurrence of the President) within these boundaries. The single-member district is now the norm in the United States House of Representatives. States with more than one Representative are divided into districts that are each represented by one Member. There have been exceptions to this practice, especially prior to 1842, when a number of states elected Representatives on a "general ticket" or "at-large" basis by having them listed on a statewide ballot. The United States has also implicitly rejected the concept of proportional representation by party for Congress by adopting the single-member district standard. Once districts are allocated among the states based on population (apportionment), the actual redrawing of district lines (redistricting) is carried out by each state. This process is usually completed by the state legislatures, but a number of states provide for nonpartisan or bipartisan commissions to draft the plans. Although the technology has changed, the process of redistricting in the 21 st century is likely to be much the same as it was in the 20 th century. Line-drawers use information from the census (and other data, such as voting patterns and voter registration figures) to plot district boundaries on maps. As legal requirements have changed and technology has improved for analyzing data, many districts are created using smaller and more complicated geographic units or entities. Rather than using whole counties, cities, towns, or other natural geographic features to delineate districts as in the past, line-drawers now use geographic units created by the Census Bureau for statistical purposes. These "census tracts" and the smaller "blocks" are used because, as very small geographical units, they facilitate the precision necessary to make districts absolutely equal in population. During the 1980s and 1990s the redistricting process moved from calculators and paper maps to computerized databases and mapping software. Whereas pre-1980s technology limited the number of competing plans that could be drawn, computerized redistricting often increased the number of plans that were presented to districting bodies in the states. During this period, however, the immense size of computerized map and census data files tended to limit participation of groups outside state government to those with relatively sophisticated computer technology. Today, with the advancement of personal computer technology as well as access to relatively inexpensive advanced geographic information systems (GIS) computer software, a variety of groups and individuals are capable of producing sophisticated district maps and participating in the redistricting process depending on state laws and procedures. Federal Law Controls a State Process: Rules for Congressional Redistricting Congressional redistricting traditionally has been a state function, but the federal government has intervened in the process through statutory law and judicially imposed rules stemming from challenges to state-crafted plans. Currently, the redistricting process is dictated by a set of federal court rulings, federal statutory laws, state constitutions, state laws, and state court rulings. The following "rules" may constrain the drawing of the boundaries of congressional districts (and, to a large extent, state legislative district boundaries as well): 1. equality of population size for districts within each state with two or more districts—U.S. Constitution, Article I, Section 2; 2. protection of the rights of racial and language minorities against vote dilution—Voting Rights Act of 1965 as amended, 42 U.S.C. Section 1973c; 2a. race cannot be only factor used in districting—U.S. Constitution, 14th Amendment, Section 1, the "equal protection clause"; 3. geographic compactness of districts—(17 states require this in congressional districting); 4. contiguity of districts—(22 states require this in congressional districting); 5. preservation of the boundaries of political subdivisions (minimize the splitting of county and towns boundaries between congressional districts)—(18 states require this in congressional districting); 6. maintenance of "communities of interest"—(13 states require this in congressional districting); 7. protection of political incumbents—(7 states allow for this in congressional districting, but 5 states prohibit this.); 8. maintenance of current political representation by preserving the "core" of congressional districts—(7 states require and 3 states allow for this in congressional districting); and 9. the promotion of electoral competition or prohibition of partisan considerations within congressional districts—(7 states require this in congressional districting). , Historical Congressional Statutory Intervention While the U.S. Constitution clearly authorizes the apportionment of the seats of the House of Representatives based on population counts, there is little or no guidance as to how this apportionment actually is to be accomplished, much less anything about the redistricting process. Presently, congressional redistricting is governed primarily by judicial interpretation of fundamental constitutional rights, rather than by federal statutory law (with the exceptions of Voting Rights Act standards and the law requiring that Members of Congress be elected from districts) and by state constitutional and statutory laws. This was not always true. Congressionally imposed standards providing that districts be compact, contiguous, and essentially equal in population existed throughout most of the 19 th and early 20 th centuries, until 1929. Congress first passed federal districting standards in 1842, when it added a requirement to the Apportionment Act of that year that Representatives "should be elected by districts composed of contiguous territory ... no one district electing more than one Representative" (5 Stat. 491). The Apportionment Act of 1872 added another requirement to those first set out in 1842, saying that districts should contain "as nearly as practicable an equal number of inhabitants" (17 Stat. 492). A further requirement of "compact territory" was added when the Apportionment Act of 1901 was adopted, stating that districts must be made up of "contiguous and compact territory and containing as nearly as practicable an equal number of inhabitants" (26 Stat. 736). Although these standards were never enforced if the states failed to meet them, this language was repeated in the 1911 Apportionment Act and remained in effect until the adoption in 1929 of the Permanent Apportionment Act, which did not include any districting standards (46 Stat. 21). After 1929, there were no congressionally imposed standards governing congressional districting until 1967, when the requirement that Members be elected from geographically based districts, rather than elected from at-large statewide positions, was re-imposed (81 Stat. 581, codified at 2 U.S.C. 2c). Malapportionment and Gerrymandering Malapportionment is the term used to describe the lack of equal representation by population within a state. Malapportioned congressional districts have existed in the United States since the First Congress, with the degree of malapportionment varying over time. The series of court cases beginning in 1962 with Baker v. Carr (369 U.S. 186) relating to political equality were attempts at minimizing malapportionment in congressional and state legislative redistricting (see below). As noted above, the purpose of the apportionment and redistricting processes is to create "fair" representation. The "rules" for redistricting (see below for a discussion) are, in part, meant to assist (or constrain) in this process and to minimize "the deliberate manipulation of district boundaries to enhance the electoral prospects of a particular political interest." In general, "enhancing the electoral prospects of a particular political interest" is often referred to as gerrymandering, combining the name of Massachusetts Governor Elbridge Gerry with the term "salamander," describing the shape of the boundaries of a state legislative district drawn to favor Gerry's political party in the 1800-1812 redistricting cycle. While some consider any construction of district boundaries to be, by its very nature, gerrymandering, the term usually implies an attempt to manipulate district boundaries to favor one's own group interests. This is usually accomplished using two techniques: "packing" and "cracking." "Packing" occurs when potential voters with similar expected voting behavior (e.g., Democrats, Republicans, African Americans, Hispanic Americans, etc.) are deliberately concentrated into fewer congressional districts. "Packing" of more than a majority of any such group into a congressional district creates "wasted votes," as it only takes 50% plus one vote to elect a preferred candidate in the American system of single-Member, winner-take-all congressional elections. By concentrating more like-minded voters into fewer districts with super-majorities, rather than distributing smaller majorities across multiple districts, the group of like-minded voters will be able to elect fewer of their preferred candidates. "Cracking" is the opposite of "packing" and occurs when like-minded voters are deliberately distributed among several districts such that there is no chance of a majority of these individuals in any one district. This dilutes the group's voting strength, and means that the group of like-minded voters is less likely to elect a candidate of its own choice. "Cracking" disperses like-minded voters, while "packing" concentrates them. Traditionally, gerrymandering has been used to describe what is now termed "partisan gerrymandering." Partisan gerrymandering, as the name implies, is the process of manipulating the drawing of district boundaries to enhance the electoral chances of one political party above and beyond what would be expected based on statewide (or nationwide) partisan distribution of support. This is sometimes referred to as "partisan bias." "Racial gerrymandering" has two meanings. The first refers to the attempts by white legislatures to structure congressional districts so that minority voting strength was diluted, often using "cracking" (generally pre-Voting Rights Act as amended in 1982). The second meaning refers to the creation of oddly shaped congressional districts for the sole purpose of creating distinctly racial districts within a state (post- Shaw v. Reno , 509 U.S. 630 (1993)). A third type of gerrymandering has been labeled "bipartisan" or "incumbent gerrymandering." Simply put, this is a redistricting plan that favors incumbents, often without regard for their partisan affiliation, and aims to maintain the status quo with respect to the partisan distribution of seats within a state and to protect incumbents. It should be noted that, with the exception of both types of racial gerrymandering, both partisan and bipartisan forms of gerrymandering are currently legal, and, in some cases, allowed specifically by law. Brickner summarizes the positives and negatives about gerrymandering: While often criticized, gerrymandering can serve beneficial purposes. It can enhance minority representation by optimizing the proportion of minority voters in particular election districts. It can promote political stability by limiting the number of highly competitive districts in which turnovers are likely. And it can protect incumbents by avoiding district boundaries that group multiple incumbents together. Taken to its extreme, however, gerrymandering can serve less desirable purposes. It may be used to lock in undue partisan advantage for a decade (often the purpose of partisan gerrymandering). Or it may be used to eliminate all serious electoral competition (often the purpose of incumbent gerrymandering). Or it may be used to weaken the electoral strength of particular interest groups (often for the purposes of racial gerrymandering). While most expert commentators on redistricting consider gerrymandering to be, by its very nature, "unfair" and a distortion of representation, a few would not reject all forms of partisan or incumbent gerrymandering as completely unredeemable. Gelman and King, for example, have shown that gerrymandering can have some positive (or, at least, some non-negative) effects. For example, they show that the act of redistricting, in and of itself, increases electoral responsiveness over and beyond what it had been prior to redistricting. And, while gerrymandering biases the election system in favor of the party in control of districting over that of the party not controlling the process, any type of redistricting reduces partisan bias as compared to an electoral system without redistricting. Redistricting (whether partisan or bi-partisan) tends, on average, to increase electoral responsiveness by "shaking up the political system in combination with the many constraints on the mapmakers" (see below) and by "creating high levels of uncertainty" for all participants, according to Gelman and King. According to their analysis, "no matter how fair or biased the electoral system is to begin with, the typical redistricting plan, whether Democratic, Republican, or bi-partisan controlled, will produce a fairer electoral system initially." Re-establishment of the Rules and Constraints by the Federal Courts Political Equality—"One Person, One Vote" By tradition, courts initially stayed out of the "political thicket" of redistricting, arguing that such matters were "political questions," best left to the legislatures. Beginning in 1962, with the landmark Baker v. Carr decision (369 U.S. 186), the Supreme Court set a new course, which has led to more than 40 years of cases to establish a standard that congressional districts should be equal in population. Five censuses have been taken since the Supreme Court declared "the command of Art. I, § 2, that Representatives be chosen 'by the People of the several states' means that as nearly as is practicable one man's vote in a congressional election is to be worth as much as another's." States generally endeavor to redistrict once a decade, so one would expect that new districts would be enacted to take effect in the second Congress following a census in each decade. This was not true in decades immediately following the Baker v. Carr decision and the subsequently related decisions ( Wesberry v. Sanders ), as the courts began developing new population standards for congressional districts. Court actions caused one or more states to alter their district boundaries in 12 of the 20 Congresses that have convened since 1964. The theme of the Supreme Court's decisions pertaining to congressional district population requirements has been to impose ever more strict equal population requirements. For the purposes of congressional redistricting, the population equality rule appears to be paramount. States may take the chance of varying from the near absolute equality of district sizes, but unless they do so for important and well-founded reasons, it is likely that, if challenged in the courts, the states will be forced to redraw the districts. Currently, population equality of congressional districts within a state, as a standard of redistricting, appears, for the most part, to trump all of the other standards. Protecting Racial and Language Minorities32 from Vote Dilution—The Voting Rights Act of 1965 The Voting Rights Act of 1965 was enacted to ensure racial minorities the right to vote in elections. In 1982, Congress amended Section 2 of the Voting Rights Act to prohibit election laws that had the effect of reducing minority voting power (vote dilution). More broadly, Sections 2 and 5 of the act affect congressional redistricting, but how they are interpreted can have a significant impact on redistricting as illustrated by the post-1990 Census experience of the states. In its 1986 Thornburg v. Gingles decision, the Supreme Court recognized that the Voting Rights Act as amended required that race be taken into account during the redistricting process in order to prevent the dilution of minority votes. Further, the Court specified that, in order for a minority to prove that its ability to elect one of its own had been diminished by redistricting (under Section 2) it had to be large enough to comprise a majority of a district, and live relatively close together; politically cohesive; and able to prove that bloc voting by the erstwhile majority usually defeated the minority's candidate. Further, the Voting Rights Act (in Section 5, as interpreted by the U.S. Department of Justice and the courts) established the rule of "no retrogression," which, in part, required that after redistricting, a minority group could not be worse off with respect to its voting power than it was before (although, as the Court subsequently ruled, this did not require the minority group to be better off). In the post-1990 congressional redistricting cycle, the states (for the most part) and the Department of Justice attempted to implement the goals of the Voting Rights Act and interpreted this to mean that what have been characterized as "majority-minority" districts would be created whenever possible. This effort resulted in some of the most peculiarly shaped districts in history, as line-drawers searched for ways to connect minority group members together while also complying with the population equality rule (as well as, in many cases, promoting and protecting partisan interests). 14th Amendment, the Equal Protection Clause Some of these post-1990 census districts were shaped in such an unusual looking manner that some described the process to create such peculiar looking districts as "racial gerrymandering." It also brought about a reaction from the Supreme Court. On June 28, 1993, the Supreme Court (in a 5-4 split opinion) ruled that oddly shaped districts that concentrate a minority population may be a signal that congressional districts have been improperly drawn. Justice O'Connor delivered the Court's opinion in Shaw v. Reno , saying, in part, ... we believe that reapportionment is one area in which appearances do matter. A reapportionment plan that includes in one district individuals who belong to the same race, but who are otherwise widely separated by geographical and political boundaries, and who may have little in common with one another but the color of their skin, bears an uncomfortable resemblance to political apartheid. It reinforces the perception that members of the same racial group—regardless of their age, education, economic status, or the community in which they live—think alike, share the same political interests, and will prefer the same candidates at the polls. Thus, while the Voting Rights Act as amended requires states to take race into account during the redistricting process to assure that racial and language minorities experience no vote dilution nor retrogression in representation, districts, according to the view of the majority of the Court, cannot be drawn taking race solely into account, as this would violate the equal protection clause of the 14 th Amendment. Further, according to the Court, there is no requirement in the Voting Rights Act to maximize the number of majority-minority districts. Thus, protecting racial and language minorities has become another criterion for redistricting within limits, and appears to be second only to the population equality standard in importance. Traditional Districting Principles The phrase "traditional districting principles" was first coined by Justice Sandra Day O'Connor in Shaw v. Reno . Others have taken the phrase and expanded or contracted the list of "principles" to fit their needs. Apparent violation of these "traditional districting principles" was, according to the Court's view, a potential indicator that all was not right with the districting process, and that the district plan needed to be scrutinized to determine whether or not "racial gerrymandering" had occurred. The plaintiff's burden is to show, either through circumstantial evidence of a district's shape and demographics or more direct evidence going to legislative purpose, that race was the predominant factor motivating the legislature's decision to place a significant number of voters within or without a particular district. To make this showing, a plaintiff must prove that the legislature subordinated traditional race-neutral districting principles, including but not limited to compactness, contiguity, and respect for political subdivisions or communities defined by actual shared interests, to racial considerations. In general, the phrase refers to the set of "rules" used by states, historically, to draw district boundaries, whether congressional, state legislative, or local. The set of rules may be explicit in law, implicit in past behavior, or a mixture. It is not so much that the opinions of the Supreme Court have been meant to promote "traditional districting principles." It is the lack of evidence of the use of "traditional districting principles" in the districting process and evidence that racial considerations alone are the basis for the mapping of district boundaries that raises concerns about the districting process violating the equal protection clause. The concept of "traditional districting principles" generally implies that a "fair" district would be "compact" in size, making it easy for voters to know which district they lived in and who represented them. A "fair" district would be drawn so it was "contiguous," where one could go from one end of the district to another without leaving the district. A "fair" district would show "respect for community," by attempting to limit the splintering of communities, providing a single representative for each community. Similarly, a "fairly" drawn district would attempt to "respect existing political boundaries," and not split cities, towns, or counties unnecessarily. Traditional districting principles might be construed as having a geographic component (compactness, contiguity) and a political component (preservation of political subdivisions and "communities of interest," preservation of the cores of prior districts, and, consequently, the protection of incumbents). Geographical Principles—Contiguity and Compactness—Does Shape Really Matter? A congressional district (or state legislative district or school district, etc.) can be considered contiguous if none of the geography included within the district is entirely separated from the remainder of the district by intervening territory assigned to another district. Exceptions are often made for islands, separated by water. As noted above, contiguity was one of the first standards (along with single-member districts) established by congressional statute for congressional districts in the 1842 Act of Apportionment (5 Stat. 491), but not included as a requirement in the Permanent Apportionment Act of 1929 (46 Stat. 21). Further, according to the NCSL, contiguity, as a requirement for the drawing of congressional district boundaries, was included in the constitutions or laws of 22 states for the 2000-2002 redistricting cycle. Historically, up until the political equality requirement was re-imposed and enforced by the Court, most congressional districts outside urban areas have been contiguous mostly because the district boundaries followed county boundaries. As Brunell notes, the principle of contiguity is relatively non-controversial, and is, in part, implied by the single-member district standard. Jeremy Buchman has summarized what are thought of as some of the possible benefits of contiguity in the redistricting process: it promotes geographic "cognizability" by incumbents, challengers, and voters; supports the appearance of fairness; hinders the gerrymanderer; and provides an easily applied rule for the courts. Blatant violations of contiguity are readily apparent, but the violation of the spirit of the principle by the use of "point contiguity" is often a sign of some type of gerrymandering. Redistricting scholar Bernard Grofman filed an affidavit in the North Carolina 12 th Congressional District case in which he asserted that the proposed redistricting should be rejected on the grounds that it was non-contiguous. It has, however, been noted by several redistricting scholars that the contiguity requirement alone is not likely to discourage a determined "gerrymanderer." Further, as Engstrom points out, more recent court decisions have made the meaning of contiguous more confusing. The meaning of contiguous is overwhelmingly clear in comparison with attempts to define or describe compactness . Like Justice Potter Stewart's definition of pornography, compactness, as criteria for constructing congressional or state legislative districts, may only be knowable when it is seen. From a geographic perspective, compactness is usually "defined" by reference to shapes (e.g., most compact shape is a circle, followed by a square or rectangle), or references to geographic measures such as geographic dispersion, perimeter measures, and population measures. Webster's New World College Dictionary (4 th ed.) defines "compact" as "closely and firmly packed or put together; dense; solid; taking little space; arranged neatly in a small space." According to Buchman, compact districts allegedly offer three benefits: they (1) promote better communications between representatives and constituents; (2) enhance "voter knowledge of one's representatives and 'political neighbors,' thus facilitating community organization"; and (3) "insofar as it promotes the perception that the resulting congressional districting patterns are fair," add legitimacy to the redistricting process. In addition, compactness has also been defended as a preventive measure against gerrymandering. Compactness as a criterion for districting can also be defended because judges can easily apply the standard. There appear to be three schools of thought about the role that compactness has to play in the drawing of congressional district boundaries. First, there are those who hold that the concept, despite the U.S. Supreme Court's rulings, is relatively meaningless because there is no accepted operational definition or measure that does not have its shortcomings. Second, there are those who think that next to political equality, the compactness of districts is the most effective way of preventing gerrymandering. And third, there are those who believe that compactness, despite its shortcomings, may still be useful, along with other criteria, as a way of minimizing the opportunities for the gerrymanderer. And, despite what some experts say, the fact is that because of U.S. Supreme Court decisions with respect to redistricting and district shapes, as well as state constitutional and legal requirements, shape still matters when it comes to redistricting. Exactly how it matters, however, appears to remain a mystery to many. Political Principles—Preservation of Political Subdivisions and "Communities of Interest," Preservation of the Cores of Prior Districts, and, Consequently, the Protection of Incumbents As with the geographic principles discussed above, districting according to the political principles of preserving political subdivision boundaries (i.e., not splitting county, city, or township boundaries when constructing congressional boundaries) and "communities of interest" (attempting to minimize splitting neighborhood boundaries, traditional group boundaries, etc.) and preserving the cores of previous congressional districts are thought by some to prevent, or at least minimize the impact of, attempts at gerrymandering. As noted by Altman, county boundaries, along with contiguity and compactness criteria, as the basis for the construction of congressional district boundaries have historically been state requirements. It appears that it is the fact that many states had such a requirement that makes Altman note that "most congressional districts were contiguous…; and, with the exception of districts in large urban areas…, most congressional districts during this period [presumably, 1842-1963] were composed of whole counties." Courts have recognized that preserving political boundaries is a valid consideration for redistricting. The splitting of county and city boundaries has primarily occurred as a result of the political equality requirement in the post- Baker v. Carr era and as a result of the Voting Rights Act redistricting requirements. Nineteen states required that the preservation of political subdivision boundaries be a factor in congressional redistricting, and one state allowed it to be a factor in the 2000 redistricting cycle. Districts should not be drawn completely arbitrarily, but, as the Supreme Court has specified, districts should contain "communities defined by actual shared interests." For the 2000 redistricting cycle, nine states required and one state allowed the preservation of communities of interest to be used in congressional redistricting. It has been noted, however, that the concept of "communities of interest" can be difficult to define, and, consequently, making use of such an intangible concept in the actual constructing of boundaries may be difficult and arbitrary. Brickner suggests that aside from making it somewhat more difficult to gerrymander a district, preserving "communities of interest" and political subdivision boundaries may make it "easier for a member to serve a homogenous district"; "undivided communities of interest may find strength in numbers"; they may make it easier to represent from a logistical standpoint ("fewer local officials to appease, parades to march in, and town halls to attend"); and, they can reduce the "complexity of running elections for a district office" as most election administration in this country is based on a "county-by-county or town-by-town basis." The strict promotion of the preservation of political subdivision boundaries and "communities of interest" may, however, run counter to the requirement for districts that are equal in population. Some type of trade-off is usually necessary, and currently, boundaries and "communities of interest" generally place second to political equality. The courts have recognized the need to preserve the core of prior districts as legitimate redistricting criteria, as well as the avoidance of contests between incumbents. In both cases, it appears that using these criteria enhances the continuity of representation. In the 2000 redistricting cycle, seven states required preserving the core of prior districts and three states allowed for such preservation. However, no state required the protection of incumbents; seven states allowed it, but five states prohibited such protection altogether. There is criticism, however, of the whole notion of protecting incumbents. Michael McDonald has pointed out that there is some evidence that such protection is widespread. More so than partisan gerrymandering, incumbency protection has, for some, promoted calls for drawing congressional districts in a manner that enhances political competition and encourages elected officials to be more responsive to their constituents. Promoting Political Competition Political philosopher Dennis Thompson has written that "a competitive struggle for the people's vote is for many political scientists and political theorists the very definition of democracy." Many feel that electoral competition promotes voter turnout, is important in translating the desires of the voters into public policy, and promotes accountability and responsiveness of representatives. It has also been shown that competitive districts can produce more moderate candidates, which, some might argue, contributes to reducing the ideological polarization in Congress. It has been noted by many that electoral competition in congressional races appears to be in steady decline. Many blame gerrymandering, both partisan and incumbency, for this decline. Others believe, however, that redistricting has had little or nothing to do with causing a decline in the competitiveness of congressional elections. For them, the evidence points to causes such as incumbency, and all that that implies (financial advantages, name recognition, etc.), as well as the fact that Americans are living in more homogenous communities than in the past. Also, it should be noted that political competition has been declining in Senate elections as well, but redistricting cannot be having an effect in that case. Regardless, there is no doubt that partisan competition in congressional elections has declined and reformers believe that using the redistricting process to help create competitive congressional districts may prove successful. At this time, however, only a few states even mention promoting political competition in their redistricting process, although a few other states have provisions that would prevent districts from being drawn that favor one party or another in the redistricting process. On the other hand, some students of the redistricting process argue that the promotion of partisan competition through the redistricting process has little chance of succeeding given (1) the power of incumbency and (2) the accepted and required rules of districting. Others have gone so far as to question whether the promotion of politically competitive districts is a goal worth pursuing. Brunell points out, for example, that the more competitive a district, the larger the group that is not represented by any winning candidate. A Member who is elected by a vote of 52% to 48% (a relatively competitive district) represents only 52% of the voters, while a Member who is elected by a vote of 75% to 25% represents 75% of the voters. Brunell has argued that packing congressional districts with partisan supporters in proportion to statewide political strength would eliminate the problems of gerrymandering, make most voters happy with the results and make them more supportive of the political system, and produce a better representative outcome. Who Draws the Lines? As noted above, the responsibility for redistricting congressional districts is in the hands of the states, and, in most states, this authority lies with the state legislatures. However, in a few instances, usually due to the efforts of reform groups, the role of drawing the congressional, state legislative, and other local boundaries has been, seemingly, taken out of the hands of the politicians in the state legislature and given over to an "independent" commission. State Legislators As noted above, the authority for drawing the new boundaries for congressional districts resides with the states. For the bulk of the states (43), this authority primarily lies with the state legislature (with and without gubernatorial approval), which was the traditional authority for drawing congressional and state legislative district boundaries. And each state's legislature will perform this function in its own way. For the 2010-2012 redistricting cycle, there appears to be a good deal of transparency in the process, judged by an examination of the websites of the state legislatures or the state's special redistricting websites. This apparent transparency may be due to the increased usage by states of the Internet, public and press demand for such transparency, or changes in state laws over the decade. To the extent that state legislatures are able and willing to participate in partisan gerrymandering, based on the results of the 2010 state legislative elections, it would appear that the Republican Party (by having 11 state legislatures switch to Republican control and retaining the control of 14 other state legislatures) is in a better position to influence the drawing of congressional district boundaries as compared to the Democratic Party (no state legislature switched control to the Democratic Party and the party retained the control of 16 state legislatures). Nine states saw their state legislatures change to divided-party control, remain in such split control as a result of the election, or remain in that status by virtue of there being no state legislative election. Commissions—Bipartisan or Nonpartisan? As was mentioned earlier, one of the ways that a few states have chosen to produce their redistricting plans is to place the process in the hands of a commission. In many cases, the goal for the creation of such commissions appears to be either minimizing partisan gerrymandering or promoting redistricting reform by creating districts that are more competitive and responsive to citizens and less likely to enable incumbents to retain their position for decades. As noted by the NCSL, if, when, how, and under what limitations the states have given this authority to commissions is different for each state. For example, some states have commissions that only redistrict congressional districts, some only redistrict the state legislative districts, and some do both. Some states have commissions that only function if the state legislature fails to agree on a redistricting plan. Some commissions have complete control of the process, while the results of some commissions must be agreed to by either the state legislature or the governor, or both. In addition, the selection process for the commission members will vary from state to state, as will the number of members. Some commissions are clearly bipartisan, while others might be, depending on the partisan characteristics of those selecting the membership of the commissions. Generally, two states are currently considered to have non-partisan redistricting commissions: Arizona and California. Aside from the institutional arrangements of the redistricting commissions, some states will impose goal requirements for the creation of the election districts. This is not unique to states having redistricting commissions, but appears to occur more frequently when the laws adopting commissions are developed. Specific redistricting goals may be part of the constraints that state legislatures must face when developing redistricting plans, although, unlike commissions, the legislatures could remove such constraints unless they were imposed by referenda. Many have suggested that allowing non- or bi-partisan redistricting commissions to draw congressional district lines will lead to congressional elections that are more competitive and reduce partisan polarization within Congress. Critics of legislatively drawn districts have argued that current redistricting procedures allow elected officials effectively to choose their constituents, violating democratic principles. Limited congressional turnover and declining numbers of competitive congressional races are offered as evidence by these critics that redistricting procedures require reform—that is, non- or bi-partisan redistricting commissions. A number of "good government" groups, including regular endorsements from Common Cause and the League of Women Voters, have been identified with supporting the adoption of redistricting commissions. For the 2010-2012 redistricting cycle, seven states require congressional redistricting plans to be drawn by commissions (Arizona, California, Hawaii, Idaho, New Jersey, Washington, and Montana, which has only one congressional seat for this cycle). In addition, two states specify that a state commission is the backup mechanism for the creation of a new congressional map if the state legislature fails to agree on a map by a specified date. Proposed Congressional Legislation There is little question that the U.S. Congress has the authority to pass federal legislation affecting the redistricting standards of congressional districts. As noted above, there is a long history of such legislation. 93rd-107th Congresses For much of the period of time since the early 1970s (93 rd Congress), proposed federal legislation relating to the redistricting process focused on three areas related to redistricting. First, legislation was introduced requiring states to redistrict using some type of redistricting commission rather than allowing state legislatures to develop congressional redistricting plans. In addition, legislation mentioned specific standards that had to be used. Second, legislation was introduced that only specified specific standards or restrictions on redistricting. And, third, legislation was introduced that specified the exact schedule for the provision of census counts to the states, so that they would be able to redistrict by the first election after census figures were announced. Only this third series of proposed laws subsequently became law. Commissions In the 93 rd Congress, Representative James M. Hanley of New York introduced identical bills, H.R. 5042 and H.R. 10925 . Both proposed requiring each state to create a five member bi-partisan redistricting commission, specified that district population counts could differ by no more than 1%, specified that the commission must take communities of interest into account and minimize splitting county and city boundaries, and required that any challenges to the redistricting plans within a state fell under the jurisdiction of the federal courts. In the 95 th Congress, he introduced a more limited proposal, H.R. 14262 , which required only the five member redistricting commission. In the 96 th Congress, Representative James M. Hanley reintroduced H.R. 14262 as H.R. 2653 . Also in the 96 th Congress, Senator John Danforth of Missouri introduced S. 596 , which required each state to have a redistricting commission, specified that districts within states could not have a population difference of more than 2%, prohibited the dilution of the voting strength of any racial or language minority group, and required public hearings of the commission. Changing Just the Standards In the 97 th Congress, Representative Robert McClory of Illinois introduced H.R. 5529 . The proposed legislation would, among other things, have prohibited the drawing of "boundaries of districts for: (1) the purpose of favoring any political party or individual." In the 98 th Congress, Representative Matthew J. Rinaldo of New Jersey introduced a similar bill as H.R. 3468 , which also authorized "any qualified voter in a particular congressional district to bring an action in district court to enforce State compliance with such boundaries." In addition, the bill "prohibited the court from invalidating certain State-drawn district boundaries unless it found that substantial compliance with statutory standards had not been achieved." Scheduled Transmission of Census Data to States for Purpose of Redistricting As a result of the fact that many state legislatures, either by state constitutions or by state statutes, were often responsible for redistricting congressional and state legislative districts on a fixed schedule, the fact that the U.S. Census Bureau had no such requirement to supply census counts to the state by a specified date led state governments to complain to their Representatives in Congress. As a result, in the 93 rd Congress, Representative Harold L. Runnels from New Mexico and Representative Richard C. White of Texas introduced proposed legislation to require the U.S. Census Bureau to transmit the necessary census counts and demographic data to the states by a specified time schedule ( H.R. 9290 by Representative Runnels, and H.R. 11869 and H.R. 13340 by Representative White). No bill passed in the 93 rd Congress. In the 94 th Congress, however, Representative White introduced H.R. 1753 (also the identical bill H.R. 5035 ) that became law as P.L. 94-171 (89 Stat. 1023). Texas Redistricting: 2001 and 2003 In the 2001 redistricting process in Texas, as that state's legislature was unable to come to an agreement, state courts were forced to draft the redistricting plan. Rather than make major changes, the courts kept most of the cores of the existing districts, equalized the population, and added the two additional seats that Texas was due because of population growth. However, with respect to the state legislature, the impact of the redistricting plan in the 2002 election was dramatic. The state legislature went from a divided legislature, with Democrats controlling the Texas Senate and Republicans controlling the State House, to two chambers strongly held by a single party. As a result of this partisan rearrangement and concerns by many Republicans that the 2001 redistricting plan failed to recognize the proper electoral strength of the Republican party within Texas, it was determined by the Republican-controlled state legislature that a second redistricting process would occur. The drama of this whole process was played out in the national media. Partly as a result of the situation in Texas (as well as in a few other states), three relevant bills were introduced in the 108 th Congress. Each bill essentially prohibited states from redistricting more than one time in a 10-year period unless ordered to by a court judgement ( H.R. 2090 introduced by Representative Maxine Waters of California, H.R. 3856 introduced by Representative Gene Green of Texas, and H.R. 5101 introduced by Representative Carolyn B. Maloney of New York). Representative Waters re-introduced her bill from the 108 th in the 109 th Congress as H.R. 830 . In addition, in both the 109 th and the 110 th Congresses, the same two proposals were introduced, which went beyond restricting the number of times a state could redistrict in the same decade. In the 109 th , the two bills were H.R. 2642 and the companion bill, S. 2350 , introduced by Representative John S. Tanner and Senator Tim Johnson, respectively, and H.R. 4094 , introduced by Representative Zoe Lofgren. In the 110 th , the same bills were re-introduced as H.R. 543 and S. 2342 and H.R. 2248 . The Tanner/Johnson proposal, among other things, prohibited states from carrying out more than one redistricting per decade except under court order, much as the earlier legislation had done. In addition, though, the proposal required that any redistricting that occurred must be based on a plan developed by an independent redistricting commission established by the state, or the state's highest court. The proposal required that each state establish an independent commission, specified how the members were to be selected, and delineated the eligibility requirements for each member. The proposal further specified the criteria that the commission must use to develop the plan, including "one person, one vote," equal district size, adherence to any requirements from the Voting Rights Act of 1965, continuity of counties, parishes, municipalities, and neighborhoods, compactness of the districts, and contiguity. State commissions were prohibited under the proposal from using information on the voting history of the population of a district (unless required by state law to create competitive districts), information on the partisan affiliation of the population of the district, and information about the addresses of the residences of the incumbents of the House. The Lofgren proposal was very similar to the legislation proposed by Representative Tanner and Senator Johnson. However, the Lofgren proposal included a provision for expedited judicial review of any plans as well as a section on the availability of a private right of action. For both bills, and in both Congresses, no action was taken on any of the proposals. 111th Congress Again in the 111 th Congress, Representative Tanner and Senator Johnson reintroduced their proposal as H.R. 3025 and S. 1332 , as did Representative Lofgren in reintroducing her proposal as H.R. 5596 . Again, there was no action on either bill other than committee referral. In addition, Representative Devin Nunes from California introduced H.R. 6250 , a bill that not only specified standards that states were required to use in the redistricting of congressional districts within the states, but also specified the order in which the standards were to be applied by the redistricting agency. The required standards were political equality, contiguity, appropriate provisions of the Voting Rights Act of 1965 as amended, no vote dilution of the voting strength of any group, and compactness. The bill also specified that the actions of redistricting were to be transparent and involve the public. Activity on the Nunes proposal was limited to the assignment to committee. 112th Congress Representative John Tanner chose not to seek reelection to the 112 th Congress. In honor of his work in the area of redistricting reform, Representative Heath Shuler reintroduced the Tanner bill in the 112 th Congress as H.R. 453 , renaming it the "John Tanner Fairness and Independence in Redistricting Act." Senator Johnson reintroduced his duplicate bill as S. 694 , but, did not change the name of the proposed act. Representative Lofgren reintroduced her bill as H.R. 590 . In addition, Representative Jim Cooper introduced H.R. 419 , the "Redistricting Transparency Act of 2011." The bill proposes that states be required to allow for public participation in the congressional redistricting process by establishing an official state redistricting website, allowing for submission of plans by the public, allowing the public to respond to final districting plans, and requiring for full public notification of the final plans by the appropriate state districting authority. Representative Earl Blumenauer introduced proposed legislation, H.R. 3846 , that would take the congressional redistricting process out of the hands of the states, entirely. The "National Commission for Independent Redistricting Act of 2012," as its name implies, establishes a 14-member bi-partisan commission, not more than 7 of whom may be from the same political party. Members are appointed by the House leadership (Speaker, minority leader—four each) and the Senate leadership (majority and minority leaders—three each). At the time of appointment, a member of the commission cannot be an appointed or elected official of the federal government, and the appointee must certify in writing, under penalty of perjury, that he or she will not seek any elected office until three years after the date the commission terminates its existence. Members will serve for the life of the commission. According to the proposed act, the National Commission will produce a redistricting plan for each state (a map, a detailed statement of why "the plan will best serve the public interest," and "the assumptions, scenarios, and alternatives considered in" developing the plan) not later than two years after the President publishes the apportionment of seats for the House of Representatives based on the most recent census figures. In producing such plans, the commission must consider the following criteria: to the extent possible, population equality between districts in the state; consistency with the applicable provisions of the Voting Rights Act of 1965 as amended; to the "greatest extent possible," maintenance of the geographic continuity of the political subdivisions of the state (in the following order of priority: counties or parishes, municipalities, neighborhoods within the same district); geographical compactness; and geographical continuity. The bill restricts the use of information about the voting history of the population of any district, prohibits the use of information about the partisan affiliation of the population of the district, and prohibits the use of the addresses of incumbents or potential challengers in the districting process. The bill also requires the ability of the public to participate at certain stages and also requires transparency in the whole process. It should be noted that, if enacted, Representative Blumenauer's bill would provide a major change in the redistricting process, but if the pattern relating to the impact of bi-partisan commissions is correct, it would likely not lead to major changes in the makeup of the House membership. None of the bills addressing redistricting has received any action other than referral to the appropriate committee or subcommittee thus far in this Congress. Conclusion and Summary The apportionment process determines the number of seats in the House of Representatives that will be assigned each state, based on population counts. The redistricting process determines where those seats are geographically located within each state. Redistricting draws the maps. Redistricting is a state process that is governed by federal law. Much of this law is judicially imposed because, in 1929, Congress let lapse its standards requiring districts to be made up of "contiguous and compact territory and containing as nearly as practicable an equal number of inhabitants." If Congress chooses to legislate again in this area, its mandate will come from Article I, Section 4 of the Constitution, granting the authority to Congress to change state laws pertaining to congressional elections. The goal of redistricting is to draw boundaries around geographic areas such that each district results in "fair" representation. An effort to favor one group of interests over another by using the redistricting process to distort this fairness is referred to as gerrymandering. Aside from distorting representation, it is believed by some that such gerrymandering diminishes electoral responsiveness by minimizing political competition among the parties. Many of the "rules" or criteria for drawing congressional boundaries are meant to enhance fairness and minimize the impact of gerrymandering. These rules, standards, or criteria include assuring population equality among districts within the same state, protecting racial and language minorities from vote dilution while at the same time not promoting racial segregation, promoting geographic compactness and contiguity when drawing districts, minimizing the number of split political subdivisions and "communities of interest" within congressional districts, and preserving historical continuity in the cores of previous congressional districts. Most redistricting is currently done by state legislatures. Some believe that allowing redistricting to be the purview of state legislators promotes, at best, status quo districts protecting incumbents and, at worst, blatant partisan gerrymandering, which can lead to a decade of one-party dominance. Reform efforts mostly have aimed at taking the redistricting task from state legislatures and assigning it to independent redistricting commissions. Efforts at creating these commissions have been successful at the state level. However, efforts to enact federal legislation to create such commissions within all states have proved less successful.

The decennial apportionment process determines the number of seats in the House of Representatives for which each state qualifies, based on population counts (for more on the apportionment process, see CRS Report R41357, The U.S. House of Representatives Apportionment Formula in Theory and Practice, by [author name scrubbed]). The redistricting process determines where those seats are geographically located within each state. Apportionment allocates the seats by state, while redistricting draws the maps. Redistricting is a state process governed by federal law. Much of this law is judicially imposed because, in 1929, Congress let lapse its standards requiring districts to be made up of "contiguous and compact territory and containing as nearly as practicable an equal number of inhabitants." If Congress chooses to legislate again in this area, its authority will come from Article I, Section 4 of the Constitution, granting the authority to Congress to change state laws pertaining to congressional elections. The goal of redistricting is to draw boundaries around geographic areas such that each district results in "fair" representation. An effort to favor one group of interests over another by using the redistricting process to distort this fairness is often referred to as gerrymandering. Aside from distorting representation, it is believed by some that such gerrymandering diminishes electoral responsiveness by minimizing political competition among the parties. Many of the "rules" or criteria for drawing congressional boundaries are meant to enhance fairness and minimize the impact of gerrymandering. These rules, standards, or criteria include assuring population equality among districts within the same state; protecting racial and language minorities from vote dilution while at the same time not promoting racial segregation; promoting geographic compactness and contiguity when drawing districts; minimizing the number of split political subdivisions and "communities of interest" within congressional districts; and preserving historical stability in the cores of previous congressional districts. Most redistricting is currently done by state legislatures. Some believe that allowing redistricting to be the purview of state legislators promotes, at best, status quo districts protecting incumbents and, at worst, blatant partisan gerrymandering that can lead to a decade of one-party dominance. Reform efforts mostly have aimed at transferring the redistricting task from state legislatures to independent redistricting commissions. Efforts at creating these commissions have been successful at the state level; however, proposed federal legislation (for the 112th Congress, see H.R. 453, H.R. 590, H.R. 3846, and S. 694) to create such commissions within all states has not been successful.

The Department of the Treasury This report examines FY2016 appropriations for the Treasury Department and its operating bureaus, including the Internal Revenue Service (IRS). More specifically, it describes the President's budget request for Treasury in FY2016 and the current status of legislation in the House and Senate to fund the agency. In addition, the report discusses policy issues raised by the budget request and the appropriations bills in the House and Senate. The Treasury Department performs a variety of critical functions. Foremost among them are protecting the nation's financial system against illegal activities, such as money laundering and terrorist financing; collecting tax revenue and enforcing tax laws; managing and accounting for the federal debt; administering the federal government's finances; regulating certain financial institutions; and producing and distributing coins and currency. Organizational Structure and Functions At its most basic level of organization, the Treasury Department is a collection of departmental offices and operating bureaus. In general, departmental offices formulate and implement policy initiatives and manage Treasury's day-to-day operations, while operating bureaus handle specific tasks and duties assigned to Treasury, mainly as a result of statutory mandates. In the past decade, the bureaus have accounted for more than 95% of the Treasury Department's funding and workforce. With one exception, the bureaus and offices can be divided into those engaged in financial management and regulation and those engaged in law enforcement. In recent years, the Comptroller of the Currency, U.S. Mint, Bureau of Engraving and Printing, Bureau of the Fiscal Service, and Community Development Financial Institutions Fund have been involved in the management of the federal government's finances or the supervision and regulation of key elements of the U.S. financial system. By contrast, law enforcement has been central to the duties handled by the Alcohol and Tobacco Tax and Trade Bureau, Financial Crimes Enforcement Network, and the Treasury Forfeiture Fund. The advent of the Department of Homeland Security in 2002 sharply curtailed Treasury's direct involvement in law enforcement. Arguably, the exception to this simple dichotomy is the IRS, whose main responsibilities encompass both the collection of tax revenue and the enforcement of tax laws and regulations. The operating budgets for most Treasury bureaus and offices are funded largely through annual discretionary appropriations. This is the case for the IRS, Bureau of the Fiscal Service, Financial Crimes Enforcement Network, Alcohol and Tobacco Tax and Trade Bureau, Office of the Inspector General, Treasury Inspector General for Tax Administration, Special Inspector General for the Troubled Asset Relief Program, and Community Development Financial Institutions Fund. However, funding for the Treasury Franchise Fund, the U.S. Mint, the Bureau of Engraving and Printing, and the Office of the Comptroller of the Currency comes exclusively from the fees they receive for the services and products they provide to the public and other government agencies. Treasury Appropriations Accounts Treasury appropriations are distributed among 10 accounts, which are described below. Departmental Offices (DO) The Departmental Offices account covers the salaries and other expenses of offices in Treasury that formulate and implement policies dealing with domestic and international finance, terrorist financing and other financial crimes, taxation, and the state of the domestic economy. Funding is also provided through DO for the Treasury's financial and personnel management, procurement operations, and information and telecommunications systems. Department-wide Systems and Capital Investments Program (DSCIP) The Department-wide Systems and Capital Investments Program account pays for investments in new technology and capital improvements aimed at modernizing Treasury's administrative processes and increasing the efficiency of its overall operations. Office of Inspector General (OIG) The Office of Inspector General account covers the salaries and other expenses related to the audits and investigations conducted by OIG staff. These evaluations are intended to improve the efficiency and effectiveness of Treasury's operations and programs; prevent waste, fraud, and abuse; and inform the Treasury Secretary and Congress about problems or shortcomings in those activities. Treasury Inspector General for Tax Administration (TIGTA) The Treasury Inspector General for Tax Administration account pays for salaries and other expenses related to the audits and investigations conducted by TIGTA staff. These evaluations focus primarily on the efficiency and effectiveness of IRS programs and operations. TIGTA's investigations are also intended to deter or prevent fraud and waste in IRS programs and operations, and to recommend changes in those activities to solve problems or remedy deficiencies. Special Inspector General for the Troubled Asset Relief Program (SIGTARP) The Special Inspector General for the Troubled Asset Relief Program account pays the salaries and other expenses related to the audits and investigations into the management and effectiveness of TARP conducted by SIGTARP staff. The office was established by the same law that created TARP: the Emergency Economic Stabilization Act ( P.L. 110-343 ). Financial Crimes Enforcement Network (FinCEN) The Financial Crimes Enforcement Network account covers the salaries and other expenses related to the activities of FinCEN, whose main responsibility is to protect the domestic financial system from illicit uses, such as money laundering and terrorist financing. The statutory basis for this role is the Bank Secrecy Act (BSA, P.L. 91-508). FinCEN administers key provisions of the act by developing and implementing regulations and other guidance and working with private financial institutions and eight federal agencies to ensure the financial industry complies with the BSA's strict reporting requirements for financial transactions. Bureau of the Fiscal Service (BFS) The Bureau of the Fiscal Service account funds two operations functions that up until FY2014 were handled by two separate bureaus with separate appropriations accounts: the Financial Management Service and the Bureau of Public Debt. As a result of a consolidation of the two bureaus that began in FY2015, the BFS account covers the salaries and other expenses related to developing and implementing payment policies and procedures for federal agencies, collecting debts owed to those agencies and state governments, and providing financial accounting, reporting, and financing services for the federal government and its agents. In addition, the BFS account covers the salaries and other expenses related to the federal government's public debt operations and the sale of U.S. bonds Alcohol and Tobacco Tax and Trade Bureau (ATTB) The Alcohol and Tobacco Tax and Trade Bureau account pays for the salaries and other expenses related to the activities of ATTB, which was established by the Homeland Security Act of 2002 ( P.L. 107-296 ) . ATTB enforces certain laws governing the domestic sale and production of alcohol and tobacco products. It also has jurisdiction over the federal consumer safety laws governing the use of alcohol and tobacco products. Community Development Financial Institutions Fund (CDFIF) The Community Development Financial Institutions Fund account funds the activities of community development financial institutions (CDFIs). These institutions, which include community development banks, credit unions, and venture capital funds, provide grants, loans, and equity investments for affordable housing projects, small businesses, and community development projects in eligible areas. In addition, the CDFIF administers the Bank Enterprise Award (BEA) program and the New Markets tax credit. Since its creation in 1994, the CDFIF has awarded at least $2.1 billion to community development financial institutions, community development entities (CDEs), and depository institutions insured by the Federal Deposit Insurance Corporation through the CDFI Program; the Native American CDFI Assistance Program; and the BEA program. In addition, the fund has allocated $40 billion in New Markets tax credits to CDEs since the credit was created in 2000. Internal Revenue Service (IRS) The Internal Revenue Service account covers the salaries and other expenses related to the enforcement of federal tax laws and the collection of revenue. Two critical components of the IRS's operations and programs are the services it offers taxpayers to help them understand and meet their tax obligations, and the measures it takes to improve voluntary taxpayer compliance and punish those who violate the law. Some appropriated funds are used to develop or upgrade business operations and information systems, as part of an ongoing effort by the IRS to improve the effectiveness and efficiency of taxpayer services and enforcement. Table 1 shows the enacted appropriations for Treasury's accounts in FY2015, the President's FY2016 request, and the amounts recommended for FY2016 by the House and the Senate Appropriations Committees. FY2016 Treasury Appropriation Accounts: Current Status and Issues for Congress This section examines the Obama Administration's FY2016 budget request for the Treasury Department and the enacted amount for the year. In addition, it discusses selected policy issues raised by the budget request or the provisions in those bills. These details are provided for each of the Treasury appropriation accounts (which number 9 or 10, depending on whether funding for the Office of Terrorism and Financial Intelligence (TFI) is counted as a separate account or folded into the DO account). Departmental Offices Budget Request The President's FY2016 budget request for the Treasury Department included $332 million in appropriations for DO, or $9.3 million more than the amount enacted for FY2015. With the addition of reimbursable expenses from activities funded through the DO account, the DO operating budget would have totaled $453 million in FY2016. Of the requested funding, $38 million would have gone to executive direction, $59 million to international affairs and economic policy, $76 million to domestic finance and tax policy, $110 million to terrorism and financial intelligence, and $50 million to Treasury management and related programs. In addition, $25 million would have been available until the end of FY2017 for Treasury's Financial Statement Audit and Internal Control program and the modernization of Treasury's information technology systems; $9.5 million for the audit, oversight, and administration of the Gulf Coast Restoration Trust Fund ($7 million of that amount would come from the fund); $3 million for the development and implementation of programs in the Office of Critical Infrastructure Protection and Compliance Policy; and $10 million for a Digital Service team. Relative to the enacted funding for FY2015, the budget request called for $20.6 million more for program expansions (including the Digital Service team), $5.2 million more to maintain FY2015 levels of operation, $3.2 million less in non-recurring expenses (including a reduction of $4.0 million in TFI costs), $0.4 million less from efficiency savings, $0.7 million in reinvestments, and $13.5 million less from adjustments (including $9.5 million less for the administration of the Gulf Coast Restoration Trust Fund). H.R. 2995 The House Appropriations Committee reported a bill ( H.R. 2995 ) on July 9, 2015, that would have provided $200 million in appropriations for DO in FY2016. This amount was not directly comparable with the budget request, as the request included funding for TFI. According to the report on the bill, the recommended appropriation was deemed sufficient to fully fund Treasury's cybersecurity initiatives and the administrative cost of implementing the Resources and Ecosystems Sustainability, Tourism Opportunities, and Revived Economy of the Gulf Coast Act ( P.L. 112-141 ). H.R. 2995 recommended that a separate appropriation account be established for TFI, and that it receive $116 million in FY2016, or $3.5 million more than the amount appropriated for FY2015. Combined with the recommended appropriations for DO, the bill would have provided a total of $316 million for activities labeled DO in the budget request, or $16 million less than the amount included in that request. The report also addressed several issues related to DO operations in FY2016. One was trafficking in wildlife and ivory poaching, mostly in Africa. The committee directed Treasury to submit reports six months apart in FY2016 to the House and Senate Appropriations Committees on the steps it was taking to implement the National Strategy on Wildlife Trafficking. Another issue was an overdue report from Treasury on "economic warfare and financial terrorism." The committee pointed out that FY2015 marked the fifth year in a row when Treasury failed to submit such a document. The committee directed Treasury to submit the report in FY2016. With regard to funding for TFI, the committee directed Treasury to identify online the companies that are not in compliance with the Iran Sanctions Act ( P.L. 104-172 ) and any foreign entities that are doing business with the Iran Revolutionary Guard Corps. Treasury also must submit two reports to both appropriations committees within 100 days of the enactment of the bill. One should address the Office of Foreign Assets Control's (OFAC's) policies and procedures for issuing general licenses; the other should provide certain details on OFAC's procedures for assisting innocent persons who cannot access their bank accounts or apply for credit because they have the same name as someone on the list of "designated and blocked" persons. Another concern addressed by the committee was the operations of the Financial Stability Oversight Council (FSOC) and the Office of Financial Research (OFR). Both were created by the Dodd-Frank Wall Street Reform and Consumer Protection Act ( P.L. 111-203 ). Under current law, each office sets its own budget and then funds it by collecting fees from certain private institutions. As a result, Congress exercises no direct control over their operations through the appropriations process. To give Congress more influence, the committee included provisions in H.R. 2995 that would have required OFR and FSOC to submit quarterly reports on their "budget obligations" and would have subjected OFR to the annual appropriations process. Moreover, the committee urged the FSOC not to pursue what it called "failed or untested domestic policies through international agreements," but to consult with the Securities and Exchange Commission and take into consideration the distinctions among asset management organizations when deciding whether to designate a nonbank financial institution as a "systemically important financial institution," or SIFI. S. 1910 S. 1910 , as reported by the Senate Appropriations Committee on July 30, would have given DO $326 million in appropriations in FY2016, or $116 million more than the amount enacted for FY2015 but $6 million less than the budget request. The committee recommended that $112.5 million of that amount be reserved to fund the operations of TFI, or $2.5 million more than the budget request. A separate appropriations account for the Office would not have been created. In its report on the bill, the committee addressed several issues. One was the financial literacy of American adults. According to recent data from Treasury's Office of Financial Education, one in seven adults is incapable of successfully completing financial tasks beyond those requiring the most "rudimentary" financial literacy skills. The committee recommended that OFE examine the extent to which individuals with rudimentary financial skills benefit from federal financial literacy programs and to develop "measurable" objectives for the improvement of those skills for the Financial Literacy and Education Commission. The committee also directed TFI to "fully" implement all economic sanctions and divestment measures against the Islamic State of Iraq and the Levant, Russia, Belarus, North Korea, Iran, Sudan, Syria, Venezuela, Zimbabwe, and designated rebel forces operating in and around the Democratic Republic of the Congo. Treasury should notify the committee if its resources for enforcing those measures prove to be inadequate. Issue for Congress Proposed DO funding in FY2016 raised again the question of how TFI's budget should be managed. The Obama Administration and the Senate Appropriations Committee preferred that TFI appropriations remain an element of appropriations for DO. The House Appropriations Committee took the opposite view by carving out a separate appropriation account for TFI. At issue was the extent of congressional control over how much money is available for TFI's operations and how those funds are used. Consolidated Appropriations Act, 2016 (P.L. 114-113) The act gave DO $222.5 million in appropriations for FY2016. This amount did not include funding for TFI. Of that amount, $22.2 million would be available until September 20, 2017, for the following purposes: (1) the Treasury-wide Financial Statement Audit, (2) the modernization of DO's information technology, (3) the audit and management of the Gulf Coast Restoration Trust Fund, and (4) the development and implementation of new programs in the Office of Critical Infrastructure Protection and Compliance Policy. According to the congressional explanatory statement for the act, Treasury's departmental offices may offer limited technical assistance to Puerto Rico. Treasury also must submit to the two appropriations committees a report in FY2016 on current and planned cloud computing usage by bureaus and offices. Under the act, TFI separately received $117 million in appropriations for FY2016. Of that amount, no more than $27.1 million may be used for administrative costs, and $5 million will be available until the end of FY2017. In addition, the act stated that Congress expected TFI to "fully" implement sanctions and divestment measures against a number of designated countries (e.g., Sudan, Iran, Russia, and North Korea), and to notify Congress when TFI lacked the resources to do so. Departmentwide Systems and Capital Investments Budget Request The FY2016 Treasury budget request called for $10.7 million in appropriations for DSCIP, or about $8 million more than the amount enacted in FY2015. There were no appropriations for the account in FY2012 and FY2013. The requested amount was to be used for two purposes. One was to construct a shared information technology infrastructure housed in existing Treasury buildings that would allow the analysis of large volumes of financial and managerial data related to various critical functions, such as TFI's operations. The second purpose was to repair the paver stones for the Treasury South Plaza to make it safer for pedestrians. H.R. 2995 H.R. 2995 , as reported by the House Appropriations Committee, recommended no funding for DSCIP in FY2016. S. 1910 The bill, as reported by the Senate Appropriations Committee, recommended that DSCIP receive $5 million in appropriations in FY2016, or $2.3 million more than the amount enacted for FY2015 but $5.7 million less than the budget request. The report on S. 1910 provided no details on how the funds should be used. But it did include a provision directing Treasury to submit an annual "Capital Investment Plan" to the House and Senate Appropriations Committees within 30 days after the release of the annual budget request. Consolidated Appropriations Act, 2016 The act provided $5 million in appropriations for DSCIP in FY2016. Office of Inspector General Budget Request The Treasury Department requested $35.4 million in appropriated funds for OIG in FY2016, or $65,000 more than the amount enacted for FY2015. With the addition of an estimated $13.0 million in payments for services rendered by OIG, its operating budget for FY2016 could total $48.4 million. Of the requested funding, $28.3 million would be used for audits, and the remaining $7.1 million for investigations. Furthermore, $2.8 million of the requested amount would be available through the end of FY2017 for audits and investigations performed under Section 1608 of the Resources and Ecosystems Sustainability, Tourist Opportunities and Revived Economies of the Gulf Coast States Act of 2012 ( P.L. 112-141 , the RESTORE Act ). The audits and investigations would satisfy the requirements of the Inspector General Act, as well as those of a number of statutes. Foremost among those laws are the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act, P.L. 111-203 ), the Federal Information Security Management Act ( P.L. 107-347 ), the Federal Deposit Insurance Act of 1950 (P.L. 81-797), the Improper Payments Elimination and Recovery Act ( P.L. 111-204 ), the Small Business Jobs Act of 2010 ( P.L. 111-240 ), the Digital Accountability and Transparency Act of 2014 ( P.L. 113-101 ), and the RESTORE Act. The Office of Audits expected to complete 77 audits in FY2016, which would be two more than the number it expected to complete in FY2015. H.R. 2995 The bill reported by the House Appropriations Committee recommended that OIG receive $35.4 million in appropriations in FY2016, or $65,000 more than the amount enacted for FY2015 and the same as the budget request. In its report on the bill, the committee stated that the recommended funding should cover all Treasury activities related to the RESTORE Act. S. 1910 The bill reported by the Senate Appropriations Committee also recommended $35.4 million in appropriations for OIG in FY2016. In its report on the bill, the committee "encouraged" the Office to investigate the security of Treasury's facilities and its information networks and systems. Another priority for the committee was an audit of the CDFIF's administration of the grants it distributed. More specifically, the committee wanted more details on the extent to which applications were approved according to current laws and regulations, whether the fund had adequate internal financial controls, whether it oversaw the grants it awarded, and whether there were methods in place to evaluate the extent to which outcomes matched program goals. In addition, the committee directed OIG to submit a report to the two appropriations committees within 120 days of the bill's enactment on the treatment of BFS employees who were employed at the Fiscal Management Service before it merged with the Bureau of Public Debt. Of particular concern to the committee was the extent to which any such employees had been subjected to intimidation, demotion, or other actions that would encourage them to quit their jobs. Consolidated Appropriations Act, 2016 The act provided $35.4 million in appropriations for OIG in FY2016. Office of the Special Inspector General for the Troubled Asset Relief Program Budget Request Under the budget request, SIGTARP would have received $40.7 million in appropriations for FY2016, or $6.4 million more than the amount enacted for FY2015. Taking into account unobligated balances from the previous year and funds from the Public-Private Investment Program administered by the Treasury Department, SIGTARP's operating budget in FY2016 could total $48.1 million. Relative to FY2015, the budget request called for an additional $0.8 million to maintain FY2015 operating levels and $5.7 million to replace the expected end of "no-year" (or mandatory) funding sometime during FY2016. Congress established this funding when it created SIGTARP under the Emergency Economic Stabilization Act of 2008 (EESA, P.L. 110-343 ) to supplement appropriations. The requested funding would have been used to uncover and investigate crimes related to the Troubled Asset Relief Program, which was also a product of the EESA. In addition, the funds would have supported the prosecution of individuals investigated by SIGTARP and continued the oversight of the financial institutions remaining in TARP and TARP-funded housing programs, which might last until 2023. In FY2016, the budget request would have allocated $31.8 million in appropriations to investigations and $8.9 million to audits; an estimated 78% of its entire budget would have gone to law-enforcement activities. In explaining SIGTARP's budget request, the Treasury Department argued that the Office's budget should not necessarily depend on Treasury's involvement in TARP. This was because Congress created SIGTARP with the intention of keeping it in operation as long as TARP funds or commitments are outstanding. Thus, in Treasury's view, SIGTARP's funding did not hinge on Treasury's participation in the program but rather should reflect the Office's staffing requirements to handle its increasing amount of investigative work. H.R. 2995 The bill, as reported by the House Appropriations Committee, recommended that SIGTARP receive $40.7 million in appropriations in FY2016, or $6.4 million more than the amount enacted for FY2015 and the same amount as the budget request. In its report on the bill, the committee acknowledged that the initial operating expenses of SIGTARP were funded through no-year appropriations, but that the amount of such funds had decreased over time and could be used up in FY2016. The committee also noted that to maintain SIGTARP's oversight of the remaining TARP funds, discretionary appropriations were essential. Still, as TARP winds down in coming years, the committee said that it expected requested appropriations for the account to also decline. S. 1910 The bill, as reported by the Senate Appropriations Committee, would have provided $36.7 million in appropriations for SIGTARP in FY2016, or $2.4 million more than the amount enacted for FY2015 but $4 million less than the budget request. In its report on the bill, the committee noted that the Office could draw upon balances carried over from previous years to fund some of its investigations and audits and other needs in FY2016, obviating the need for a larger increase in discretionary appropriations. Consolidated Appropriations Act, 2016 The act provided $40.7 million in appropriations for SIGTARP in FY2016. According to the explanatory statement for the act, the office should focus its FY2016 audits and investigations on TARP housing programs and TARP financial institutions in an effort to prevent waste, fraud, and abuse in the use of TARP funds. Treasury Inspector General for Tax Administration Under the Treasury Department's budget request for FY2016, TIGTA would have gotten $167.3 million in appropriations or $9.1 million more than the amount enacted for FY2015. Of this amount, $1.8 million would have been used for training. The requested increase in funding was based on $2.6 million to maintain FY2015 operating levels, $0.1 million in cost savings from efficiency improvements, and $6.6 million in program increases to allow TIGTA to develop "innovative tools and approaches" to help it detect and prevent fraudulent tax refunds stemming from identity theft and enhance its capability to protect the security of federal tax data from cyber-criminals. TIGTA's operating budget for FY2016 would have exceeded the requested appropriations by an estimated $1.5 million (for a total budget of $168.8 million) because of reimbursements it receives for services rendered. This budget finances TIGTA's audits, investigations, and evaluations of IRS operations. In FY2016, according to the budget proposal, the Office of Audit would have received $65.1 million in appropriations and $600,000 in reimbursements, while the Office of Investigations would have received $102.2 million in appropriations and $900,000 in reimbursements. The Treasury Department pointed to the return on investment generated from TIGTA's investigations and audits as a key justification for increasing the office's budget. In FY2014, TIGTA generated a return on investment of $106 for each dollar spent on its operations. This return reflected both cost savings from IRS's operations and additional revenue from the collection of taxes. Among the top stated priorities for TIGTA in FY2016 were identifying opportunities to achieve cost savings and other efficiencies in IRS's programs; mitigating security risks to IRS employees and facilities; improving the effectiveness of IRS's efforts to combat taxpayer identity theft and reduce improper claims and payments; monitoring IRS's oversight of tax-exempt entities; detecting waste, fraud, and abuse in IRS operations and criminal misconduct by IRS employees; and overseeing IRS's implementation of the Affordable Care Act (ACA, P.L. 111-148 ) and the Foreign Account Tax Compliance Act (FATCA, P.L. 111-147 ). H.R. 2995 The bill, as reported by the House Appropriations Committee, would have given TIGTA $167.3 million in appropriated funds for FY2016, or $9.1 million more than the amount enacted for FY2015 and the same as the budget request. In its report on the bill, the committee expressed its appreciation for the "many issues" that TIGTA had brought to the committee's attention in the past year. The committee directed TIGTA to submit a report on IRS's readiness to manage and withstand cyberattacks to the two appropriations committees within six months of the enactment of H.R. 2995 . The report should evaluate the consequences of recent attempted and successful cyberattacks against the IRS, the steps taken (or being taken) by the IRS to prevent future attacks and to mitigate their effects, the IRS's cybersecurity policies and procedures, and the efforts by the agency to inform employees and contractors about the risks of cyberattacks. S. 1910 A bill reported by the Senate Appropriations Committee would also have provided TIGTA with $167.3 million in appropriations for FY2016. In its report on S. 1910 , the committee acknowledged the added demand that increases in the size and responsibilities of the IRS place on TIGTA's resources. The committee noted that since 2011, TIGTA has designated the security of taxpayer information as the top concern facing the IRS. To get a better understanding of current threats from cyber-criminals and what the IRS was doing to thwart or prevent them, the committee directed TIGTA to submit a report on cybersecurity within six months of the enactment of the bill similar in focus to the report mandated by the House Appropriations Committee. In addition, the committee urged TIGTA to continue to monitor and report on IRS's actions on three different issues. One was the IRS's ability to detect and prevent taxpayer identity theft and related refund fraud, and the steps the IRS is taking to assist victims of such fraud. A second issue was the criteria used by the IRS to evaluate claims for tax-exempt status by social welfare organizations under Section 501(c) (4) of the federal tax code. Finally, the committee encouraged TIGTA to continue to monitor IRS's performance in implementing the ACA, especially the agency's ability to protect the confidentiality of taxpayer information shared with federal and state insurance exchanges, and to prevent ACA refund fraud. Consolidated Appropriations Act, 2016 The act gave TIGTA $167.3 million in appropriations for FY2016. Community Development Financial Institutions Fund18 The Treasury Department requested an appropriation of $233.5 million for CDFIF in FY2016, or $3.0 million more than the amount enacted for FY2015. With the addition of expected reimbursements, user fees, and unobligated balances and recoveries from previous years, the budget request would have given CDFIF an operating budget of $245.2 million in FY2016, or $1.6 million less than the total for FY2015. Of the requested funding, $157.6 million was designated for the CDFI Program, $16.0 million for the Native American CDFI Assistance Program (NACA), $35.0 million for the Healthy Food Financing Initiative (HFFI), and $24.9 million for administrative expenses. Relative to the amounts enacted for FY2015, the budget request allocated $0.4 million to maintain FY2015 operating levels and $21.2 million for program increases. These increases would have been distributed as follows: $5.2 million for the CDFI Program, $1 million for NACA, $13 million for HFFI, and $2 million for the Capital Magnet Fund (CMF). The budget request also included some funding decreases relative to FY2015: $0.1 million less for travel expenses; no funding for the Bank Enterprise Award Program (BEA), resulting in a savings of $18 million; and $0.5 million less for data collection (a non-recurring cost). Since the creation of the CDFIF in 1994, it has awarded over $2.0 billion in grants and loans to CDFIs, community development organizations, insured depository institutions, NACA, and BEA. During the same period, the fund also awarded $80 in grants under the CMF and $9 million in grants through the Financial Education and Counseling Program. Although no direct appropriations are used for this purpose, the CDFIF has administered the New Markets Tax Credit (NMTC), which was available from 2000 to 2013. Taxpayers who made qualified equity investments were able to claim a credit equal to 39% of their investment, distributed equally over a period of seven years. Congress authorized a total of $40 billion in NMTCs to be awarded through 2013. The credit was awarded to investors through a competitive selection process. There were annual limits on the amount of qualified investment eligible for the credit: from 2010 to 2013, the annual limit was $3.5 billion. The budget request would have permanently extended the credit and allowed up to $5 billion in qualifying investments each year. The Small Business Jobs Act of 2010 established the CDFI Bond Guarantee Fund (BGF). Bonds issued under the program support CDFI lending in poor, underserved communities by providing a source of long-term capital. Bonds issued by CDFIs or their designees are guaranteed by the Treasury Department, and the proceeds are lent to eligible CDFIs for community development purposes. The maturity of the bonds cannot exceed 30 years. In FY2013 and FY2014, the Treasury Department issued eight guarantees for bonds with a total face value of $525 million. In FY2015, it had the authority to issue up to $750 million in guarantees. The budget request would have extended the CDFI Bond Guarantee Program through FY2017 and increased the limit for newly issued loan guarantees to $1 billion in FY2016. H.R. 2995 As reported by the House Appropriations Committee, the bill would have provided $233.5 million in appropriations for the CDFIF in FY2016, or $3.0 million more than the amount enacted for FY2015 and the same as the budget request. Of the recommended funding, $176.4 million would have gone to technical and financial assistance grants for CDFIs, $16.0 million for NACA, $18.0 million for BEA, and $23.1 million for administrative expenses. There was no separate funding for HFFI or CMF. In its report on the bill, the committee urged the CDFIF to use its Capacity Building Initiative to establish CDFIs in America Samoa, the Northern Mariana Islands, and other "U.S. insular areas." S. 1910 The bill, as reported by the Senate Finance Committee, would have provided $221.0 million in appropriations for CDFIF in FY2016, or $9.5 million less than the amount enacted for FY2015 and $12.5 million less than the budget request. Of the recommended funding, $161.9 million was designated for technical and financial assistance grants to CDFIs, $15.0 million for NACA, $21.0 million for BEA, and $23.1 million for administrative expenses. Funding for the HFFI would come from the appropriations for financial and technical assistance grants for CDFIs. S. 1910 would also allow the CDFIF to guarantee up to $750 million in bonds under the BGF in FY2016. In its report on S. 1910 , the committee expressed concern about the fund's "nominal ability to verify investment impacts" and a "lack of transparency into many of the CDFI Fund's programs." The committee also asked for more details on how and to what extent "program funding generates meaningful community impacts." It directed CDFIF to establish clear reporting requirements for CDFIs and other awardees, and to collect and analyze "performance data." In addition, the committee urged the CDFIF to improve the quality and completeness of the data it tracks. Among the recommended steps the fund might take to achieve this goal were validating the accuracy of data reported by CDFIs and awardees, developing common definitions of key performance indicators, accounting for investment activity "in a timely manner" after an award has been issued, and developing a risk rating system for certified CDFIs. Another issue addressed in the report was the flow of CDFI investments and loans to underserved and low-income non-metropolitan areas. The committee directed the fund to take into consideration the "unique conditions, challenges, and scale" of such areas when designing programs to promote economic revitalization and community development. Issue for Congress The three proposals for funding the CDFIF in FY2016 raised the question of the future status of two current programs: the Healthy Food Financing Initiative and the Bank Enterprise Award Program. On the one hand, the Obama Administration asked Congress to increase funding for the former from $22 million in FY2015 to $35 million in FY2016, but to provide no funds for the latter. No explanation for the proposed elimination of BEA funding was given in the budget documents. On the other hand, neither S. 1910 nor H.R. 2995 recommended separate funding for the HFFI in FY2016, but both would have funded the BEA. Under each bill, any funding for the HFFI presumably would have had to come out of the amount appropriated for financial and technical assistance grants for CDFIs. It may be the case that, though both Congress and the Administration supported the aims of both programs, they disagreed on the proper way to fund them and how much to allocate to each of them. Consolidated Appropriations Act, 2016 The act gave CDFIF $233.5 million in appropriations for FY2016. Of that amount, $153.4 was designated for technical and financial assistance grants for CDFIs; $15.5 million for technical assistance and other purposes for native American, Alaskan, and Hawaiian communities; $22.0 million for the HFFI; $19.0 million for the BEA; and $23.6 million for administrative expenses. In addition, the act limited the total amount of loans that could be guaranteed under the BGF to $750.0 million in FY2016. According to the explanatory statement for the act, Congress directed the fund to improve the quality and scope of the data it collects about its programs in order to make their results more transparent and easier to analyze. Congress also ordered the Treasury Department to consider the "unique conditions, challenges, and scale" of rural non-metropolitan areas when designing and administering programs intended to revitalize their economies and promote community development. Financial Crimes Enforcement Network Under the Treasury Department's budget request, FinCEN would have received $113.0 million in appropriations in FY2016, or $1.0 million more than the amount enacted for FY2015. With the addition of an estimated $53.5 million in reimbursements, recoveries, and unobligated balances from previous years, FinCEN's operating budget in FY2016 would have totaled an estimated $166.5 million. Relative to FY2015, the budget request included an added $1.9 million to maintain FY2015 levels of operation and reductions of $0.7 million for efficiency savings and $0.2 million for a loss of two full-time administrative positions. FinCEN's priorities in FY2016 are adopting "strong" safeguards against money laundering and terrorist financing; implementing and enforcing those safeguards and using targeted financial measures against specific threats; using research, analysis, and advanced "analytics" to detect and explain threats to the U.S. financial system; implementing and managing programs to coordinate and share financial intelligence between FinCEN and its foreign and domestic partners in government and private industry; and developing and maintaining technologies for collecting and assessing financial intelligence from the private sector and sharing it with foreign and domestic agencies. H.R. 2995 The bill, as reported by the House Appropriations Committee, recommended that FinCEN receive $113.0 million in appropriations for FY2016, or $1 million more than the amount enacted for FY2015 and the same as the budget request. In its report on H.R. 2995 , the committee urged FinCEN to use its expertise in analyzing financial flows and transactions to assist investigations by domestic law enforcement agencies into human trafficking. S. 1910 Under the bill, as reported by the Senate Appropriations Committee, FinCEN would have received $113.0 million in appropriations in FY2016, or $1 million more than the amount enacted for FY2015 and the same as the budget request. In its report on the bill, the committee encouraged FinCEN to alert financial institutions subject to the reporting requirements of the Bank Secrecy Act about the growing risk of cybercriminals attempting to launder the proceeds from the theft of online data through the U.S. financial system. To lower the risk, the committee recommended that FinCEN provide these institutions with a list of indicators of cybercrime that they could refer to when filing suspicious activity reports (SARs) on the laundering of money tied to cybercrimes. The committee also expressed appreciation for the contributions FinCEN had made in recent years to interagency efforts to combat human trafficking and slavery. It commended the advisory FinCEN sent to financial institutions in September 2014 alerting them to signs of money laundering related to human trafficking activities in filing SARs. Consolidated Appropriations Act, 2016 The act gave FinCEN $113.0 million in appropriations for FY2016. Alcohol and Tobacco Tax and Trade Bureau The Treasury Department requested $101.4 million in appropriations for ATTB in FY2016, or $1.4 million more than the amount enacted for FY2015. Taking into account anticipated reimbursements and a transfer of enforcement funds from the IRS through a program integrity cap adjustment, the operating budget for ATTB would have totaled $112.7 million in FY2016, or $5.7 million more than the operating budget for FY2015. Relative to the amount enacted for FY2015, the budget request called for an increase of $1.7 million to maintain FY2015 operating levels; a decrease of $1.2 million from a cutback in ATTB's Criminal Enforcement Program, closures of a number of field offices, the increased use of Open Source software, and lower administrative costs; and increases of $1.0 million to modernize the alcohol beverage labeling program to streamline and simplify the label application and approval process, and $5.0 million for the bureau's alcohol and tobacco enforcement and compliance program to bolster its efforts to reduce the federal tax gap. In FY2016, ATTB's priorities are to collect $22 billion in excise tax revenues from the sale of tobacco and alcohol products; finish audits and investigations of ATTB taxpayers, based on risk and on random selection, to ensure they operate lawfully and comply with tax laws; detect and deter criminal diversion of revenues from the domestic production and sale of tobacco and alcohol products; find regulatory solutions to problems related to tax rate differences among tobacco products; reduce the cost of compliance for ATTB taxpayers by improving and promoting electronic options for filing tax payments and applications for permits and labels; conduct studies of current compliance with federal regulations for the production and sale of alcoholic beverages and use the findings to improve enforcement and compliance programs; enhance ATTB product safety programs targeted at domestic and imported alcoholic beverages; promote U.S. exports of tobacco and alcohol products by helping U.S. companies understand and comply with foreign rules and regulations and working with foreign governments to lower barriers to imports of U.S. products; and work effectively with foreign governments to prevent the loss of tax revenue from illicit activities such as smuggling. H.R. 2995 As reported by the House Appropriations Committee, the bill would have provided $105.0 million in appropriations for ATTB in FY2016, or $5 million more than the amount enacted for FY2015 and $3.6 million more than the budget request. Of the recommended funding, $5 million would be designated for efforts to accelerate the processing of formula and label applications for alcohol products. In its report on H.R. 2995 , the committee expressed concern over delays in the approval of these applications, which are required under the Federal Alcohol Administration Act of 1935 (P.L. 74-401, as amended). To address this concern, the committee directed ATTB to submit a report to both appropriations committees within 60 days of the enactment of the bill on how the office would use the additional $5 million to speed up the review of label and formula applications and to issue "clear and consistent" regulations. ATTB is presently reviewing the laws that govern its activities and duties, especially Title 27, Chapter 1, Subchapter A, Parts 4, 5, and 7, which address the labeling and marketing of wine, beer, and distilled beverages. The committee endorsed the review, provided it was done expeditiously and led to "significant" improvements based on current markets and technologies for alcoholic beverages. S. 1910 The bill, as reported by the Senate Finance Committee, recommended that ATTB receive $101.4 million in appropriations for FY2016, or $1.4 million more than the amount enacted for FY2015 and the same as the budget request. In its report on S. 1910 , the committee urged ATTB to strengthen the enforcement of the laws and regulations governing the production and sale of tobacco and alcohol products. Of particular concern to the committee were recent increases in excise tax evasion for these products. In addition, the committee recommended that ATTB streamline its process for approving label applications through "strategic investments" in the resources and technologies needed to speed up the review of these applications. Consolidated Appropriations Act, 2016 The act provided ATTB with $106.4 million in appropriations in FY2016. Of that amount, $5.0 million was set aside to cover costs related to accelerating the processing of applications for labels and formulas. Bureau of the Fiscal Service Under the President's budget request, BFS would have received $363.8 million in appropriations in FY2016, or $15.7 million more than the amount enacted for FY2015. Of this amount, $4.2 million was designated for initiatives to upgrade the bureau's information systems; the money would have been available through the end of FY2018. With the addition of $227.9 million in anticipated reimbursements, the BFS's operating budget would have totaled $591.7 million in FY2016. Relative to the FY2015 budget, the budget request called for an another $5.9 million to maintain FY2015 operating levels; decreases of $8.5 million for efficiency savings and $1.5 million for program cuts; and an additional $19.8 million (available until September 30, 2018) to support Treasury's responsibilities for implementing the Digital Accountability and Transparency Act (DATA Act, P.L. 113-101 ) and associated financial data standards. The FY2016 budget request could also be broken down by major programs, of which there are nine: (1) collections, (2) debt collection, (3) Do Not Pay Business Center, (4) government agency investment services, (5) government-wide accounting and reporting, (6) payments, (7) retail securities service, (8) summary debt accounting, and (9) wholesale securities services. Collections would have received $26.6 million in appropriations; debt collection, no appropriations; Do Not Pay Business Center, $5.1 million; government agency investment services, $13.1 million; government-wide accounting and reporting, $68.5 million; payments, $133.2 million; retail securities services, $94.1 million; summary debt accounting, $4.2 million; and wholesale securities services, $18.9 million. Several legislative proposals were included in the budget request. They would have authorized BFS to undertake the following actions: offset federal income tax refunds to collect delinquent state tax obligations, regardless of the state in which the debtor resides; amend its regulations to allow states to send notices for state income tax obligations by first-class mail, rather than certified mail; levy up to 100% of a payment to a Medicare provider to collect unpaid taxes; issue garnishment orders for commercial accounts to financial institutions without a court order; recover U.S. assets and keep a portion of the amounts collected to pay for the costs of recovery; and use automated dialing systems and pre-recorded voice messages when contacting wireless phones to collect debts. In FY2016, BFS plans to pursue the following objectives: continue to implement the DATA Act; improve the federal government's fiscal operations by helping agencies migrate to a shared-service model for their financial systems; promote greater use of the U.S. Debit Card and Card Management Services and greater reliance on electronic submissions for non-tax debt collections and payments; expand the use of the Do-Not-Pay Business Center by federal agencies to reduce improper payments; continue to prepare for a "clean" audit of the Treasury Financial Report by FY2018 through providing technical support for federal agencies adopting the Central Accounting and Reporting System; make it easier for federal agencies to submit claims electronically through improvements to the Post Payment System, the Stored Value Card program, and the Invoice Processing Platform; encourage investors to make greater use of the my RA Program and increase their awareness of the new Treasury Retail Investment Management system; and continue to deploy the latest strategies for increasing the collection of delinquent non-tax debt. H.R. 2995 As reported by the House Appropriations Committee, H.R. 2995 would have provided $360.0 million in appropriations for the BFS in FY2016, or $11.8 million more than the amount enacted for FY2015 but $3.8 million less than the budget request. Of the recommended funding, $4.2 million would have been available until September 30, 2018, to modernize the bureau's information systems. In its report on H.R. 2995 , the committee noted that the measure included funding for the USAspending.gov initiative, which should help BFS achieve its transparency goals. The committee also directed the bureau to issue separate reports on payments made in FY2014 and in FY2015 from the Judgment Fund under 31 U.S.C 1304 within 60 days of the enactment of the bill. Each report should account for all payments made from the fund going back to 2008. S. 1910 As reported by the Senate Appropriations Committee, the bill would have provided $356.0 million in appropriations for BFS in FY2016, or $7.8 million more than the amount enacted for FY2015 but $7.8 million less than the budget request. In its report on S. 1910 , the committee stated that the bill contained funds for improving government-wide financial management through the USAspending.gov initiative. The committee also directed BFS to submit a report to both appropriations committees within 180 days of the enactment of the bill on the status of the Do Not Pay Business Center. The report should address the following topics: whether and how the center used payment and beneficiary enrollment data for state programs to identify improper federal payments, the extent to which there was duplication in payments among federal programs, other information that might be effective in preventing improper payments, interagency tools and practices that could be useful in preventing waste and fraud in federal payments, the methodology for determining to what extent investigations by the center have reduced improper payments, and a schedule for achieving the goals of the center. Furthermore, the committee expressed support for the steps taken by BFS to implement the provisions in the DATA Act intended to standardize and disclose the reporting of federal agency expenditures. It directed the bureau to keep the committee informed of new developments. Consolidated Appropriations Act, 2016 The act gave BFS $363.8 million in appropriations for FY2016. Of that amount, $19.8 million may be used until September 30, 2018, for implementing the DATA Act. In addition, the act permitted BFS to withdraw up to $165,000 from the Oil Spill Liability Trust Fund to cover its costs for managing the fund. Treasury Forfeiture Fund (TFF) The Treasury Department's budget request included a proposal to cancel permanently $875.0 million in unobligated balances from the TFF in FY2016. This would come on top of a permanent $963.6 million reduction in those balances enacted for FY2015. The fund serves as the receipt account for the deposit of non-tax assets seized by participating federal bureaus: the IRS's Criminal Investigation unit, the U.S. Secret Service, the Bureau of Customs and Border Patrol, and the Bureau of Immigration and Customs Enforcement. The Treasury Executive Office for Asset Forfeiture (TEOAF) manages the fund. Money in the fund is used to pay for the operating expenses of TEOAF and to support the enforcement activities of the bureaus involved in the National Money Laundering Strategy, the Southwest Border Strategy, and government efforts to combat terrorist financing. TEOAF estimated that $413.0 million would likely be deposited in the fund from asset forfeitures in FY2016. After accounting for earned interest, the restoration of reductions from sequestration, temporary rescissions and recoveries from previous years, and the unobligated balance from the previous year, the amount of money in the fund could total an $1.6 billion in FY2016, or $36.3 million less than the estimated amount in FY2015. According to TEOAF, expenses and obligations for FY2016 may amount to $480.0 million. Combining that amount with the proposed permanent rescission of $875.0 million would mean that the unobligated balance in the fund at the end of FY2016 would be $204.8 million, or $52.6 million more than the estimated total at the end of FY2015. H.R. 2995 As reported by the House Appropriations Committee, the bill would have shrunk the unobligated balance in the fund by $721.0 million in FY2016, or $48.0 million less than the rescission enacted for FY2015 and $154.0 million less than the rescission requested by Treasury. In its report on H.R. 2995 , the committee stated that the resources in the fund should not be used to "augment agency funding" or to "circumvent the appropriations process." In addition, the committee directed Treasury to submit to both appropriations committees each month in FY2016 a table showing the interest earned, forfeiture revenue collected, unobligated balances, recoveries and expenses to date. The table should also include an estimate of expenses for the remainder of the fiscal year. S. 1910 In the bill, the Senate Finance Committee recommended a rescission of $700.0 million from the fund in FY2016, or $69.0 million less than the rescission enacted for FY2015 and $175.0 million less than the budget request. Consolidated Appropriations Act, 2016 The act mandated a rescission of $700 million from the unobligated balances in the TFF in FY2016. Internal Revenue Service The Obama Administration asked for $12.931 billion in appropriations for the IRS in FY2016, or $1.986 billion more than the amount enacted for FY2015. Of this amount, $2.409 billion would have gone to taxpayer services, $5.400 billion to enforcement (including a $352.1 million program integrity cap adjustment under Section 251(b)(2) of the Balanced Budget and Emergency Deficit Control Act of 1985 ( P.L. 99-177 , BBEDCA)), $4.743 billion to operations support (including a $315.2 million program integrity cap adjustment), and $379.2 million to the Business Systems Modernization (BSM) program. With the addition of funds from reimbursements, user fees, recoveries and unobligated balances from previous years, transfers in and out, resources from other accounts, and offsetting collections, the operating budget for the IRS in FY2016 could have totaled an estimated $13.922 billion, or $1.946 billion more than the estimated FY2015 budget. Relative to IRS's FY2015 enacted appropriations, the budget request called for an additional $200.7 million to maintain FY2015 operating levels, a decrease of $18.4 million from efficiency savings, an increase of $16.0 million for expanding the agency's telecommunications network to handle increased customer demand, and $1.787 billion for program increases in taxpayer services, enforcement, and infrastructure development. Over 37% of the amount for program increases (or $667.3 million) would have come from integrity program cap increases. The budget request would have amended the BBEDCA to lift the discretionary budget caps for the IRS. Under the act, Congress created a mechanism for boosting spending allocations among programs that generate a positive return on investment. Increases in those allocations are known as program integrity cap adjustments. Under the FY2016 budget request, the adjustments would have given the IRS an additional $352.1 million for tax enforcement and an added $315.2 million for operations support. As noted earlier, $5 million of the cap adjustment for enforcement would be transferred to TTB to pay for new enforcement initiatives in FY2016. According to the IRS's budget request for FY2016 was intended to address the following priorities: Taxpayer Service Improving the level of taxpayer assistance through the IRS's toll-free telephone service Meeting increased demand from taxpayers for help in complying with ACA requirements Delivering enhanced online service options to taxpayers Providing greater assistance to low-income taxpayers and those in need of tax relief because of financial hardship Enforcement Improving tax compliance by implementing FATCA, ACA, and the Information Return Document Matching program for merchant payment cards, third-party reimbursements, and basis reporting for stock transactions Reducing the revenue loss from tax return fraud, including fraud from identity theft Reversing recent declines in examination and collection efforts Increasing the number of criminal investigations Rebuilding public trust in IRS's enforcement of compliance in the tax-exempt sector Infrastructure Maintaining critical IT infrastructure Upgrading IRS facilities to address health and safety concerns Upholding the integrity of "revenue financial systems" Business Systems Modernization Developing new IT capabilities such as increasing self-service options at IRS.gov, including the Get Transcript tool which gives taxpayers direct online access to their tax accounts IRS Direct Pay, which offers a free, secure online option for scheduling and making tax payments IRS2Go, which allows taxpayers to find out the status of their refund through the IRS website Developing a shared platform for case management Reducing the federal tax gap is an ongoing priority for the IRS. The gap is defined as the difference between the amount of federal income, excise, estate, and employment taxes owed in a year and the amount of those taxes paid in full on time. According to the latest estimate by the IRS, the gross gap totaled $450 billion in 2006; after allowing for late payments and the revenue collected through IRS enforcement activities, the net gap for 2006 was an estimated $385 billion. The gap has three components: underreporting of income, failure to file, and underpayment of the taxes owed. Underreporting accounted for 84% of the 2006 gross gap, underpayment for 10%, and non-filing for 6%. One justification for the budget request that Treasury emphasized in its budget documents was the likely revenue gains from FY2016 enforcement initiatives. Enforcement initiatives raise revenue by deterring taxpayers from failing to meet their tax obligations and by collecting overdue taxes. In FY2014, the most recent year for which figures are available, IRS enforcement actions resulted in $57 billion in tax collections, the fifth straight year when more than $50 billion was collected in this manner. Treasury has long pointed out that activities such as examination and collection yield substantial returns on investment, and that Congress should take those returns into consideration when deciding how much money to appropriate for the IRS in a fiscal year. According to an IRS estimate, its proposed FY2016 revenue-producing initiatives not funded through a program integrity cap adjustment would have yielded a return on investment of $4.1 for each dollar spent on those initiatives by FY2018, when they would be fully phased-in. What is more, the return on investment would rise to $6.4 by FY2018 for each dollar spent on initiatives funded through the cap adjustment. H.R. 2995 As reported by the House Appropriations Committee, the bill would have provided $10.107 billion in appropriations for the IRS in FY2016, or $838.4 million less than the amount enacted for FY2015 and $2.824 billion below the budget request. If enacted, the bill would have given the IRS less in appropriations than it received in FY2004. It would also have imposed the following limits on the IRS's use of appropriated funds in FY2016: No funds could be used to grant employee bonuses and awards that fail to consider the conduct and tax compliance record of the recipients. No funds could be used to hire former employees without considering their past conduct while at the IRS and their compliance with tax laws. No funds could be used to give additional scrutiny to groups applying for tax-exempt status because of their religious beliefs. No funds could be used to target individuals for extra scrutiny for "exercising their First Amendment rights." No funds could be used for conferences that do not conform to TIGTA's recommendations for such events. No funds could be used to produce videos that had not been reviewed for their cost, topics, tone, or purpose and had been certified to be "appropriate." No funds could be used to implement new regulations regarding the criteria used to determine whether organizations qualify for tax-exempt status under Section 501(c)(4) of the Internal Revenue Code. No funds could be transferred to the IRS from the Department of Health and Human Services to implement the ACA. No funds could be used to implement the individual mandate under the ACA. No funds could be used in ways that "violate the confidentiality of tax returns." No funds could be used to design pre-populated individual tax returns. Taxpayer Ser vices H.R. 2995 would have provided $2.232 billion for taxpayer services in FY2016, or $75.0 million more than the amount enacted for FY2015 but $177.2 million less than the budget request. In its report on the bill, the committee noted that the increase from FY2015 was intended to improve IRS's level of service to taxpayers. The committee also stated that the Taxpayer Advocate Service should be "sufficiently" funded from the funds appropriated for taxpayer services. The report also addressed the committee's concerns about recent increases in instances of tax fraud related to identity theft. In the committee's view, this problem has become "especially pernicious" in U.S. territories and possessions. To monitor the results of IRS's efforts to combat identity theft and refund fraud, the committee directed the agency to submit a report to the two appropriations committees by June 17, 2016. The report should cover the period from 2009 to 2015 and provide the following details: (1) the number of taxpayers who had their tax return rejected because their Social Security or taxpayer identification numbers were stolen by someone to commit tax fraud; (2) the average time required to resolve the problem and send a refund to taxpayers who were due one; (3) the number of cases involving stolen taxpayer identification numbers of residents of U.S. territories and possessions; and (4) the effectiveness of steps taken by the IRS to expedite the resolution of identity theft cases, to prevent others from becoming victims, and to educate the public on the risk of identity theft. Another concern addressed in the report was the persistence of fraudulent and erroneous claims for the Earned Income Tax Credit (EITC). To lower the incidence of such claims, the committee recommended that the IRS convene a summit meeting in 2016 of tax-preparation firms, payroll and tax refund processors, and state tax commissioners to agree on new, more effective strategies for verifying that someone is eligible to claim the credit without deterring eligible individuals from filing such a claim. The committee also expressed its opposition to pre-filled or so-called simple tax returns. In its view, such a filing system would "change the relationship between taxpayers and their government," strain IRS resources, impose new burdens on employers (especially small companies), and create a conflict of interest by forcing the IRS to act simultaneously as a tax collector and enforcer of tax compliance on the one hand, and as a financial advisor and tax preparer on the other hand. As a result, the committee added language to the report that would have prohibited the agency from working on a pilot project involving a simple tax return without first getting both the approval of the two appropriations committees and appropriations for that purpose. Enforcement H.R. 2995 , as reported by the House Committee on Appropriations, would have provided the IRS with $4.325 billion in appropriations for tax law enforcement in FY2016, or $535.0 million less than the amount enacted for FY2015 and $1.075 billion less than the budget request. Of the recommended funding, $57.5 million would be reserved to support IRS's involvement with the Interagency Crime and Drug Enforcement program. None of the enforcement funds could be used to implement the ACA. In its report on the bill, the committee addressed several issues. One was the regulation of paid tax preparers. In June 2014, in response to a federal court ruling that the IRS lacked the authority to regulate professional tax preparers, the agency initiated a voluntary regulatory program with many of the same requirements as the mandatory program that was rejected by the courts. To assess the cost-effectiveness of the voluntary program, the committee directed the IRS to submit a report, after it had been reviewed by the Government Accountability Office (GAO), to both appropriations committees within 120 days of the enactment of the bill. The report should evaluate the accuracy of returns prepared by participants in the voluntary program and the amount of improper IRS payments resulting from those returns. The report should also compare the costs of voluntary and mandatory regulatory programs and evaluate the likely impact on accuracy of a mandatory program. Another issue was the timing of information returns. To decrease the number of improper refunds, the Treasury Department had proposed setting the filing deadline for information returns earlier in the filing season. To assess the feasibility of such a proposal, the committee ordered the IRS to submit a report, after it had been reviewed by the GAO, to both appropriations committees not later than 120 days after the enactment of H.R. 2995 on the cost to the federal government and the private sector of setting an earlier filing deadline for information returns. The report should examine the time it would take the government and private entities to implement such a change and its impact on the accuracy of information returns in general. In addition, the committee urged the IRS to work with the Department of Justice and the Federal Trade Commission to devise a common approach to reducing and preventing tax fraud from identity theft. Such an approach should take into account the needs and concerns of vulnerable groups of taxpayers, such as senior citizens. In the committee's view, the IRS should try to notify taxpayers in a timely manner when they are "potential victims of identity theft." Compliance with the requirements for the EITC also drew comments from the committee. It attributed improper payments of the credit, in part, to the complexity of the credit itself. To address this issue, the committee directed the Treasury Office of Tax Policy and the IRS Office of Research, Analysis, and Statistics to undertake a "data-driven" study, in collaboration with paid tax preparers, of ways to improve EITC compliance. Another issue addressed by the committee was the ongoing controversy over IRS's management of the process of reviewing applications for tax-exempt status by social welfare entities under Section 501(c)(4) of the federal tax code. H.R. 2995 would have barred the IRS from implementing in FY2016 any new regulations on the criteria used to determine an entity's eligibility for that status. Operations Support In H.R. 2995 , the House Committee on Appropriations recommended that the IRS receive $3.300 billion for operations support, or $338.4 million less than the amount enacted for FY2016 and $1.443 billion below the budget request. None of the recommended funding could have been used to implement the ACA. In its report on the bill, the committee encouraged the IRS to continue provide printed tax forms and instructions to "vulnerable populations." Among such groups were residents of rural areas where Internet usage rates are below the national average. The committee also directed the IRS to prepare a report on the number of official hours employees spend on union activities and on the amount of related travel expenses and submit it to both appropriations committees within 90 days of the enactment of H.R. 2995 . At the behest of the committee, the GAO was to assess the cost and production schedule for all major IRS IT projects during FY2016, especially the projects that the IRS covered in quarterly reports to the committees, and submit an annual report to both committees. Another concern discussed in the report was IRS's pilot program for identity protection, which was intended to cut the incidence of refund fraud resulting from identity theft. The committee ordered the IRS to submit a report to both committees within 120 days of the enactment of the bill on the effectiveness of the program. The report should examine the following topics: (1) the cost of expanding the program to cover all taxpayers, (2) the reduction in tax fraud that might result from such an expansion, and (3) the cost of assisting taxpayers who were victims of identity theft. Business Systems Modernization As reported by the House Committee on Appropriations, the bill would give the IRS $250 million for the BSM program, or $40 million less than the amount enacted for FY2015 and $129.2 million below the budget request. In its report on H.R. 2995 , the committee pointed out that the major expenses for developing and implementing the program had already been incurred. Therefore, future funding requests, in the committee's view, should decline as the agency realized savings from retiring aging IT systems. As it did with funding for operations support, the committee directed the GAO to submit an annual report to both committees on the cost and deployment schedule for all major IRS IT projects in FY2016. S. 1910 The bill, as reported by the Senate Finance Committee, would have provided $10.475 billion in appropriations for the IRS in FY2016, or $470.0 million less than the amount enacted for FY2015 and $2.456 billion less than the budget request. In explaining why it sought another cut in funding for the IRS, the committee argued that the IRS "continues to ignore the impact of its own behavior on the attitudes of taxpayers." As result, taxpayers have "lost faith in the institution, and it is incumbent upon the agency to regain" their trust. The committee cited three examples to support its case: (1) the IRS's "disparate treatment" of politically conservative and politically liberal entities seeking tax-exempt status under Section 501(c)(4); (2) the IRS's practice of hiring former employees with past performance problems; and (3) its "willingness to cut services to taxpayers in an effort to garner support for increased resources." The committee expressed concern about the IRS's ability to allocate resources among its primary responsibilities during a period of "fiscal austerity and budgetary constraints." It noted that the IRS collected hundreds of millions of dollars in fees annually for the services it provided to taxpayers, and that the IRS had almost complete control over how those fees were used. According to an estimate by the IRS, the agency could receive an estimated $450.4 million in such fees to supplement its appropriated funds in FY2016. In the committee's view, the IRS's process for allocating resources lacked "transparency." As a result, the committee directed the agency to submit a spending plan for the user fees it received within 60 days of the enactment of S. 1910 ; the plan should provide details on how the IRS would allocate those fees among its four appropriations accounts to support specific programs, initiatives, and investments. In addition, the committee recommended that no appropriated funds be used for awarding bonuses to employees or hiring former employees without first considering their job performance and tax compliance. Taxpayer Services As reported by the committee, S. 1910 would provide $2.246 billion in appropriations for taxpayer services in FY2016, or $90 million more than the amount enacted for FY2015 but $163 million less than the budget request. Of the recommended funding, at least $5.6 million would go to the Tax Counseling for the Elderly program; $12.0 million to Low-Income Tax Clinic grants; $12.0 million to the Volunteer Income Tax Assistance matching grant program (to be made available over two fiscal years); and $206.0 million to the Taxpayer Advocate Service, of which $5.0 million would be set aside for assisting victims of identity theft and refund fraud. In its report on the bill, the committee pointed out that the IRS had control over how it allocates the user fees it receives among its major functions and was allowed to transfer up to 5% of the funding enacted for FY2016 among those functions, with the consent of the House and Senate Appropriations Committees. In FY2015, the IRS allocated 75% less of its user fees to taxpayer services than it did in FY2014. The committee urged the IRS to devote a greater proportion of its user fees to taxpayer services in FY2016. Of the recommended appropriation for these services, $90 million was designated for "measureable" improvements in taxpayer services and faster resolution of identity theft cases. The committee criticized the IRS for recent declines in the level of telephone service (LOS). According to a 2015 TIGTA report, the number of Automated Collection Service contact representatives decreased by 24% from FY2011 to FY2014, and this decline contributed to a 25% decrease in the number of taxpayer phone calls answered in that period. The average wait time for a caller increased nearly 97% from the 2011 filing season to the 2014 filing season, when it reached 15.9 minutes. In the committee's view, the IRS had the authority to offset any reductions in taxpayer service appropriations with user fees. The committee urged the agency to assign a high priority to improving its LOS in FY2016. The committee also expressed concern about the possible closure of taxpayer assistance centers (TACs) in FY2016. When the report on S. 1910 was issued, the IRS was in the midst of a six-year effort to evaluate taxpayer preferences in dealing with the IRS. The main goals of the effort were to improve taxpayer services and to provide taxpayers with more secure self-service options through the IRS's website. At the behest of the committee, before the IRS closed another TAC, it had to submit a report to the committee describing the characteristics of the taxpayers that had used the centers in the past decade, including their computer and language proficiencies, and explaining how the IRS planned to meet the needs of those taxpayers. The report should discuss the criteria used by the IRS to select TACs for closure and the likely impact of planned closures on the tax compliance of the affected taxpayers. The committee also directed the IRS to take the following steps before closing a center: (1) notify the public about the geographic area served by the center; (2) hold at least one public hearing on the possible effects of the closure on taxpayer compliance; and ( 3) report to the committee on the concerns expressed by the taxpayers served by the center. Another issue addressed by the committee in its report on S. 1910 was the availability of adequate service for taxpayers residing in rural areas and in Alaska and Hawaii. In the case of rural areas, it directed the IRS to report to the committee within 120 days of the enactment of the bill on the measures it was taking to "alleviate" the problems faced by rural taxpayers in getting the needed guidance to file their returns. In the case of Alaska and Hawaii, the committee directed the IRS to ensure that each Taxpayer Advocate Service Center in the two states was staffed with a Collection Technical Advisor and an Examination Technical Advisor, in addition to other staff. Enforcement S. 1910 recommended that the IRS receive $4.500 billion in appropriations for enforcement activities in FY2016, or $360 million less than the amount enacted for FY2015 and $900 million less than the budget request. One issue the committee addressed in its report on the bill was identity theft and related refund fraud. It expressed concern about the IRS's performance in reducing the level of such fraud and the time it took to resolve cases involving taxpayers who were victims of identity theft and refund fraud. In a bid to improve that performance, the committee directed the agency to report to the two appropriations committees within 90 days of the enactment of the bill on its plans for implementing a more effective approach to authenticating the identity of a taxpayer, and for cutting in half the average time a taxpayer must wait to resolve a case involving refund fraud. The committee also discussed the question of how to reform the process for reviewing applications for tax-exempt status under Section 501(c) (4) to ensure it was untainted by partisan bias. It recommended that the IRS wait until existing investigations into past allegations about political bias in the screening of applications were resolved before issuing new regulations. Several other varieties of tax fraud drew the attention of the committee as well. One was the recent growth in the number of fraudulent tax returns filed under a prisoner's Social Security number. The committee urged the IRS to continue working with the Federal Bureau of Prisons and state Departments of Correction on more effective ways to prevent such fraud. Fraudulent claims for the EITC were another concern. Improper EITC payments rose from $10.5 billion in FY2003 to about $18.0 billion in FY2014. According to the GAO, two factors accounted for these payments: (1) the difficulty some taxpayers experienced in determining by themselves if they are eligible for the credit and (2) the limited ability of the IRS to verify eligibility before refunds were issued. The committee recommended that the IRS expand its education programs for taxpayers and professional tax preparers to improve compliance with the credit. On the issue of processing applications for the federal employment tax status of workers under the SS-8 program, the committee urged the IRS to maintain adequate staffing to meet the program's growing workload. The classification of a worker as an independent contractor or employee has significant tax implications for employers, workers, and the IRS. At issue is whether an individual or an employer is responsible for paying Social Security, Medicare, and federal unemployment taxes, and for withholding federal income taxes. In 1994, the IRS established what was then called the Determination of Worker Status Program to permit an employer or a worker to request an IRS determination of a worker's status as an employee or independent contractor; the program is now known as the SS-8 program. According to a 2013 TIGTA report, the inventory of cases and processing times increased from FY2009 to FY2012. In January 2012, the IRS began to use a new method for prescreening requests for worker status determinations designed to speed up the process. The committee directed the IRS to notify the House and Senate Appropriations Committees, the Ways and Means Committee, and the Senate Finance Committee before reducing or reassigning staff for the program. Operations Support S. 1910 would have provided $3.468 billion in appropriations for operations support in FY2016, or $170 million less than the amount enacted for FY2015 and $1.275 billion less than the budget request. Most of the IRS's planned 20 major IT investments in FY2016 will be funded through the recommended appropriations. To maintain oversight of the results and costs of these investments, the committee directed the IRS to provide both appropriations committees and the GAO with quarterly reports on "major project activities" no later than 30 days after the end of each calendar quarter in 2016. The reports should discuss cumulative expenditures and the performance schedules for previous fiscal years, the costs and schedules for the previous three months, and the costs and schedules for the next three months, for the following IT projects: IRS.gov, Returns and Remittance Processing, EDAS/IPM, Information Returns and Document matching, E-services, Taxpayer Advocate Service Integrated System, and implementation of the ACA. In addition, each report should explain when the projects began, their expected dates of completion, the percentage of work already completed, the current usefulness of the technology, and any anticipated changes in the schedule for completion. As a supplement to these reports, the committee ordered the Treasury Department to review IRS's IT investments every six months to "ensure the cost, schedule, and scope goals are transparent." It also directed the GAO to submit an annual report to both appropriations committees on the cost and results of all major IRS IT projects in FY2016. Business Systems Modernization In its report on S. 1910 , the committee recommended that the BSM program receive $260.0 million in appropriations in FY2016, or $30 million less than the amount enacted for FY2015 and $119.2 million less than the budget request. The committee expressed concern about the continuing risk of cost overruns and delays in getting the desired results from the BSM projects. To manage that risk, the committee directed the IRS to continue to submit quarterly reports in FY2016 on the cost and performance schedules for two projects: CADE2 and MeF. Both the Treasury Department and the GAO would also have to submit annual reports on the cost and results of the two projects. Consolidated Appropriations Act, 2016 Taxpayer Services The act gave the IRS $2.156 billion in appropriations for taxpayer service in FY2016. Of that amount, at least $12 million was to be used for low-income taxpayer clinic grants, $6.5 million for the Tax Counseling for the Elderly Program, and $206 million for the operating expenses of the Taxpayer Advocate Service ($5 million of which was to be used for identity theft casework). In addition, the act specified that at least $15 million was set aside for the Volunteer Income Tax Assistance matching grant program, through the end of FY2017. Enforcement The act provided $4.860 billion for enforcement activities in FY2016. Operations Support The act gave the IRS $3.638 billion for operation support in FY2016. In addition, the IRS Official Time Program Unit must submit a report to the two appropriations committees within 90 days of the enactment of the act on the number of IRS employees who are members of the collective bargaining unit and the amount of official time they use to perform tasks related to their duties as members of that unit. Business Systems Modernization The act provided $290 million for the BSM program in FY2016. Administrative Provisions The act included 13 administrative provisions that applied exclusively to the IRS. Most of them had been added to previous appropriations acts affecting the Treasury Department. One provision had not been included in earlier acts: Section 113 provided an additional $290 million in appropriations to be used solely for the purpose of making "measureable" improvements in the LOS, the prevention of identity theft and related refund fraud, and the protection of taxpayer information from cyberattack. None of the money can be used until the IRS Commissioner submits a spending plan to the two appropriations committees. Nor can any of the money be used to implement the tax provisions in the ACA. Issues for Congress The proposals from the Obama Administration and the House and Senate Appropriations Committees for funding the IRS in FY2016 raised several issues that may reappear in future appropriations requests. Three of those issues are discussed here: Did the IRS need a larger budget relative to FY2015 to accomplish its strategic goals and effectively carry out its legal responsibilities? Was there a sound rationale for the requested increase in FY2016 funding for enforcement and operations support related to the proposed adjustments to the program integrity caps for the IRS established by the BBEDCA? Should Congress consider the return on investment from spending on IRS enforcement activities when deciding how much to appropriate for IRS operations? Adequacy of the IRS Budget The Obama Administration contended that the IRS budget in FY2015 was insufficient in light of the agency's strategic goals, legal responsibilities, and mounting work load. To rectify that deficiency, it asked Congress to increase IRS appropriations by $1.986 billion in FY2016, relative to FY2015. Between FY2010 and FY2015, IRS appropriations fell $1.2 billion (or 9.9%) and staffing by about 13,000 FTEs (or 14.1%). These declines contributed to reductions in both the assistance the IRS provided to taxpayers so they could meet their tax obligations and the actions taken by the IRS to enforce tax laws, including measures to curb tax evasion and refund fraud born of identity theft. During the 2015 filing season, over 60% of calls to the IRS's toll-free telephone taxpayer assistance lines went unanswered; the average wait time for those who got through was 23 minutes; and IRS assistors were allowed to answer basic tax questions only. Audit rates for all individual and business tax returns in FY2014 dropped to their lowest level since FY2005. And IRS's staff involved in enforcement decreased by 7,600 persons (or 18%) from FY2010 to FY2014. At the same time, the IRS's work load grew considerably. From FY2010 to FY2015, the number of individual tax returns filed with the IRS rose seven million (or 5.0%). The IRS had to take on two new major responsibilities: implementing the ACA and FATCA. And cases involving identity theft increased 700% from FY2010 to FY2013. In 2015, the IRS Commissioner, the National Taxpayer Advocate, TIGTA, and GAO issued statements calling for an increase in IRS funding. A primary concern was that continued declines in the resources available to the IRS would further diminish the effectiveness of taxpayer services, delay or cancel the implementation of critical new business systems, increase levels of tax evasion and identity theft, make the IRS more vulnerable to cyberattacks aimed at stealing taxpayer information, and undermine taxpayer confidence in the fairness and efficacy of the federal income tax system. But critics of the IRS, including some leaders in the House and Senate, argued that the IRS needed to demonstrate that it was using available resources as effectively as possible and that it was taking advantage of opportunities for greater program efficiencies and cost savings, before increases in its budget could be considered. They maintained that with careful planning and strategic uses of the hundreds of millions of dollars in user fees the IRS collected each year, it should be able to meet its mandated responsibilities and make significant progress in achieving its strategic objectives. In deciding how much money to appropriate for the IRS in the future, Congress may want to consider the implications of budget proposals for the ability of the IRS to efficiently and effectively meet its statutory responsibilities and to achieve its strategic goals, including a reduction in the federal tax gap and an improvement in the integrity of a tax system that relies on voluntary compliance to raise needed revenue. Increased Funding for Enforcement T hrough Program Integrity Cap Adjustments The Budget Control Act of 2011 (BCA, P.L. 112-25 ) amended the BBEDCA by reinstating limits on discretionary budget authority that had lapsed at the end of FY2002. The current limits apply from FY2012 to FY2021. Section 251(b) (2) of the BBEDCA authorizes certain adjustments to the spending caps after the enactment of appropriations. Under the BCA, the limits on discretionary spending can be adjusted for six reasons: 1. changes in budget concepts and definitions, 2. appropriations designated for requirements for emergencies, 3. appropriations designated for Overseas Contingency Operations/Global War on Terrorism, 4. appropriations for continuing disability reviews and redeterminations, 5. appropriations for controlling health care fraud and abuse, and 6. appropriations for disaster relief. The adjustments for health care fraud and abuse and for disability reviews and eligibility redeterminations allow for additional appropriations to carry out program integrity initiatives, which are activities intended to bring about a net reduction in federal spending, in part through reductions in improper benefit payments. In each case, the adjustment must exceed a specified minimum amount of appropriations for those activities and cannot exceed a specified maximum amount. Those amounts vary from year to year between FY2012 and FY2021. This budget mechanism is intended to ensure that the additional funding does not supplant other federal spending on these activities or is not diverted to other purposes. The Obama Administration asked Congress to provide more funding for IRS enforcement activities and operations support in FY2016 through a program integrity cap adjustment for collecting taxes (and related penalties and interest charges) owed but not paid and reducing improper refund payments. The request would have amended the BCA to allow an adjustment to the discretionary spending limits for the IRS from FY2016 to FY2025. In FY2016, the adjustment would have totaled $667 million in budget authority and outlays; over the entire period, the cap adjustments would have added $18.716 billion in BA and $18.570 billion in outlays. According to an IRS estimate, the cap adjustments would have led to the collection of $432 million in added tax revenue in FY2016 and $59.735 billion in added revenue from FY2016 to FY2025. This estimate assumed that one additional dollar in enforcement spending eventually would result in $6 in additional revenue, mostly from the collection of delinquent taxes. Every budget request for the IRS since FY2006 has included a program integrity cap adjustment for IRS enforcement funding. Congress enacted such a proposal for FY2006, FY2009, and FY2010. Enacted cuts in IRS appropriations since then did not include any of the requested program integrity cap adjustments from FY2011 to FY2015. In an effort to make further reductions in the federal tax gap and foster increased tax compliance, Congress may want to assess the advantages and disadvantages of funding IRS's enforcement activities partly through such an adjustment, as part of its consideration of future budget requests. Revenue Effects of Changes in IRS Appropriations Under current federal budget scorekeeping rules, any budgetary savings (such as increased revenue) from additional appropriations for government administrative programs is not counted as an offset to that spending. This rule goes back to the scorekeeping guidelines included in the conference report for the Omnibus Budget Reconciliation Act of 1990 ( P.L. 101-508 ) and reaffirmed in the conference report for the Balanced Budget Act of 1997 ( P.L. 105-33 ). The guidelines are intended to ensure the consistent treatment of the budgetary effects of government programs over time. None of the guidelines can be changed without the unanimous consent of all budget scorekeepers: the House and Senate Budget Committees, the Congressional Budget Office (CBO), and the Office of Management and Budget. For the enforcement activities of the IRS, this convention means that even though the activities raise additional revenue, the additional receipts cannot be used under congressional pay-go rules to finance tax cuts or spending increases. For example, a proposed decrease in IRS funding of 50% from the amount enacted in FY2015 would be scored as a reduction in the baseline federal budget deficit of approximately $5.4 billion in FY2016; by contrast, a proposed 50% increase in FY2016 funding would be treated as an increase in the federal budget deficit of the same amount. In both cases, even if the proposed changes would affect IRS's enforcement activities only, the increase or decrease in receipts would not affect the projected federal budget deficit. This limitation also applies to the budgetary impact of other government compliance activities, such as measures to prevent improper Medicare payments or improper claims for federal student loans. In the view of some, a key justification for the limitation is that it deters federal agencies with enforcement budgets from shifting resources to collection functions to justify requests for larger budgets for their programs. By contrast, estimates of the revenue effects of legislative proposals to alter tax laws sometimes reflect both the indirect and dynamic revenue effects. H.Res. 5 (Adopting Rules for the 114 th Congress) requires the CBO and Joint Committee on Taxation (JCT) to incorporate the macroeconomic effects of major legislation in their official estimates of the cost effect used to enforce the budget resolution and other House rules. Major legislation is defined as legislation with a "gross budgetary effect" equal to or greater than 0.25% of the projected GDP for the fiscal year to which the budget resolution applies. Some argue that the current practice of disregarding the revenue effects of changes in IRS funding constitutes a bias that inclines Congress to appropriate less than it otherwise would, especially for collection activities. A change in IRS funding may affect taxpayer compliance in ways that generate an indirect revenue effect. But this effect is not scored. Yet the JCT does score the indirect revenue effects of proposed tax code changes. Congress may wish to consider the net contribution of IRS's administration of the federal tax code to the federal budget when deciding on the size of future IRS budgets.

At its most basic level of organization, the Treasury Department is a collection of departmental offices and operating bureaus. The bureaus as a whole account for 95% of Treasury's budget and workforce. Most bureaus and offices are funded through annual appropriations. Treasury appropriations were distributed among 10 accounts in FY2015: (1) Departmental Offices (DO), (2) Departmentwide Systems and Capital Investments Program (DSCIP), (3) Office of Inspector General (OIG), (4) Treasury Inspector General for Tax Administration (TIGTA), (5) Special Inspector General for the Troubled Asset Relief Program (SIGTARP), (6) Financial Crimes Enforcement Network (FinCEN), (7) Bureau of the Fiscal Service (BFS), (8) Alcohol and Tobacco Tax and Trade Bureau (ATTB), (9) Community Development Financial Institutions Fund (CDFIF), and (10) the Internal Revenue Service (IRS). The President's budget request for FY2016 included $13.456 billion in appropriations for the Treasury Department, including a rescission of $875 million for the Treasury Forfeiture Fund (TFF). Of the requested amount, $12.931 billion would go to the IRS; $364 million to the BFS; $332 million to DO; $233.5 million to CDFIF; $167 million to TIGTA; $113 million to FinCEN; $101 million to ATTB; $41 million to SIGTARP; $35 million to OIG; and $11 million to DSCIP. In early July 2015, the House Appropriations Committee reported a bill (H.R. 2995) that provided appropriations for the Treasury Department and several other agencies in FY2016. Under the measure, Treasury would have received $10.758 billion in appropriations, including a rescission of $721 million from the TFF; this amount was $764 million less than the amount enacted for FY2015 and $2.698 billion less than the budget request. Later the same month, the Senate Appropriations Committee also reported a bill (S. 1910) to fund Treasury and the same other agencies in FY2016. Under the measure, Treasury would have received $11.139 billion in appropriations, including a rescission of $700 million from the TFF. This amount was $383 million less than the amount enacted for FY2015 and $2.317 billion less than the budget request. The House and Senate agreed in mid-December 2015 on an omnibus appropriations measure (Consolidated Appropriations Act, 2016, P.L. 114-113) for FY2016 that included funding for the Treasury Department. Under the act, Treasury received $11.942 billion in appropriations, or $420 million more than the amount enacted for FY2015 but $1.514 billion less than the budget request. The three FY2016 budget proposals for Treasury raised several issues for Congress. One concerned the status of funding for the Office of Terrorism and Financial Intelligence (TFI): H.R. 2995 as reported would have created a separate appropriations account for the TFF, whereas both the Administration's budget request and S. 1910 as reported proposed combining funding for the Office with overall DO funding. Another issue was the future status of two CDFIF programs: the Healthy Food Initiative and the Bank Enterprise Award Program. The budget request included funding for the former but no funding for the latter, but S. 1910 and H.R. 2995 would have funded the latter without funding the former. Proposed funding for the IRS in FY2016 raised three additional issues: (1) the potential impact of the three proposals on taxpayer service and tax law enforcement, (2) the advantages and disadvantages of using discretionary funding cap adjustments under the Balanced Budget Act of 2011 to increase funding for IRS enforcement activities, and (3) the implications of the current budget scoring convention of disregarding the net revenue effect of agency administrative programs for the size of the IRS budget.

Background Process for Approving a Nuclear Waste Repository Site The Nuclear Waste Policy Act of 1982 (NWPA) (1) enacted a system for the federal government to establish a deep underground "geologic repository" forpermanent storage of radioactive waste from civilian nuclear power plants. Pursuant to the NWPA and subsequentamendments, consideration of a location forthis repository focused on a site at Yucca Mountain, Nevada. The Department of Energy issued a preliminaryrecommendation of suitability for the YuccaMountain site on September 21, 2001, and on February 15, 2002, President Bush recommended the site toCongress. (2) These actions culminated a series of recentdevelopments that have led to current congressional action on the subject. (3) The NWPA provides that when the President recommends a repository site, the state in which it is located maywithin 60 days submit to Congress a notice ofdisapproval. (4) The State of Nevada exercised this disapproval authority onApril 8. Once this action occurs, the Act provides that the designation cannot becomeeffective unless a "resolution of repository siting approval," in effect overriding the state disapproval, is enacted intolaw within a specified period of time. (5) Asdetailed below, it appears that in the present instance this period will probably terminate just after Congressreconvenes from its August recess. The Act establishes an expedited procedure for congressional consideration of this joint resolution. This report describes salient features of this expeditedprocedure and discusses some questions that may become significant in the course of its implementation. It alsonotes actions so far taken in Congress, pursuantto this statutory procedure, in relation to the Yucca Mountain site. General Purposes of Statutory Expedited Procedures In purpose and general form, the expedited procedure of the NWPA resembles the several dozen other expedited procedures contained in existing law relating tovarious policy areas. (6) Each of these expedited procedures is a set of statutoryprovisions governing congressional consideration of a specified kind of measure. Most regulate consideration of joint resolutions either (1) to disapprove some action that the statute authorizes thePresident, or an agency of the executive branch,to take only if Congress does not disapprove, or (2) to approve some action that a statute authorizes to be taken onlyif Congress approves a specific request to doso. The purpose of an expedited procedure is to facilitate the ability of Congress to dispose of the matter specified in a timely and definitive way. To this end, itestablishes means for Congress to take up, and complete action on, the resolution of approval or disapproval withina limited period of time. For this reason,expedited procedures are also known as "fast track" procedures. They often include provisions for automaticintroduction of the resolution, fixed time periods forcommittee and floor action, automatic or privileged discharge of committees if they do not report, automatic orprivileged floor consideration, prohibitions onamendment, and automatic or expedited final action to send a measure to the President. The expedited procedureof the NWPA incorporates most of theseelements. Elements of the Expedited Procedure The expedited procedure for resolutions of repository siting approval, which appears at 42 U.S.C. 10135,generally conforms to the model just sketched. The Actsets forth procedures for the House and Senate separately, but the following discussion treats both together at eachstage of the legislative process. This treatmentpermits emphasis on possible relations between actions in each chamber. The only exception is the floorconsideration stage, where the procedures prescribed bystatute for House and Senate are adapted to the divergent general rules of the two chambers. Overall Schedule for Action The Act permits Congress to override a state notice of disapproval only if it passes a joint resolution of repository siting approval "during the first period of 90days of continuous session" after receiving the notice. (7) The notice is deemedreceived by Congress on the day the state transmits it to the Speaker of the Houseand President pro tempore of the Senate, and the 90-day period begins on that day. (8) Days of Continuous Session. "Days of continuous session" include all calendar days except those on whicheither house is adjourned for more than three days. (9) Under this definition,the 90-day period will be the same for both chambers, even if the days on which eachis in recess differ. The Constitution mandates that neither house adjourn for more than 3 days without the consentof the other. (10) Pursuant to this mandate, eachhouse recesses its session for more than 3 days only under authority of an adjournment resolution, which is aconcurrent resolution adopted by both houses. As aresult, the days not counted in the 90-day period will be only and exactly those included in any session recess ofeither house that is authorized by an adjournmentresolution. It is evident from this definition that actual days of continuous session can be counted with certainty only after the fact. Prospectively, the count can be only anestimate. Based on the recess periods that have occurred so far in 2002, and the announced congressional schedulefor the remainder of the year, however, itcurrently appears that 90 days of continuous session after April 8 will expire on or about Wednesday, September4. The Senate is scheduled to return from itsAugust recess the preceding Tuesday, and the House on the Wednesday. Continuing Action in a New Session. If Congress adjourns its session sine die before the 90-day periodexpires, continuity of session is "broken," meaning that a new period of continuous session begins with theconvening of the next session. (11) As a result, if a statenotice of disapproval were to be received less than 90 days of continuous session before a sine die adjournment, Congress would have until the 90th day ofcontinuous session in the following session to complete action under the statute. Because Congress is not scheduledto conclude its current session within 90 daysof session from the April 8 notice, these provisions are unlikely to come into play in the present instance. These provisions could come into play if Congress were to receive a disapproval notice late in a session of a Congress. If the notice were received late in a firstsession, and if Congress did not complete action on an approval resolution during that session, the same resolutionwould remain available for further actionduring the full renewed 90-day period in the second session. By contrast, if the notice were received late in a secondsession, the following session would be thefirst session of the next Congress. For this reason, if Congress did not complete action on an approval resolutionduring the earlier session, the legislation wouldhave to be introduced anew in the new Congress, and proceed through the full legislative process denovo during the first 90 days of continuous session of thatnew Congress. Enactment. To become effective, the jointresolution of approval must become law after Congress passes it. Inother words, the site is approved only if either (1) the President signs the approval resolution (or allows it to becomelaw without his signature), or (2) Congressoverrides his veto. These actions, however, do not have to occur within the 90-day period, but can be completedafter its expiration. (12) Form of Approval Resolution The NWPA narrowly specifies the form a resolution of repository siting approval must take. The measure must be a joint resolution, and the statute prescribes allthe wording except for (1) the identification of the site, (2) the name of the disapproving state, and (3) the date ofdisapproval. (13) These requirements doubtlesssuffice to ensure that any companion House and Senate measures relating to the same site would be substantiallysimilar, though not necessarily entirely identical. Any resolution that did not meet these statutory requirements would not be eligible for the expedited considerationprescribed by the Act. In the present instance,only one resolution was introduced in each house ( H.J.Res. 87 and S.J.Res. 34 ), and the two areidentical in wording. The terms of the NWPA also specify that a state disapproval of a site designation can be overridden only by enactment of a resolution of repository sitingapproval, having the form prescribed by the Act and considered under the expedited procedure. (14) (In principle, of course, Congress could also enact legislationsuperseding the NWPA and directing construction of the repository, under its regular legislative procedures.) Introduction and Referral Introduction. The statutory procedures for introduction of resolutions of repository siting approval differbetween the House and Senate. For the Senate, the Act mandates that the chair of the committee of jurisdiction, orhis designee, introduce an approval resolutionby the next day of session after Congress receives the disapproval notice. (15) The corresponding House provision contains no requirement that an approvalresolution be introduced (although other provisions assume that one will be). (16) As a result, it is possible for an approval resolution not to be introduced in theHouse at all, or to be introduced only at a later date. The current process realizes this last possibility. In the Senate, the Chair of the Committee on Energy and Natural Resources introduced S.J.Res. 34 by request on April 9, consistent with the statutory directive. In the House, the Chair of the Subcommittee onEnergy and Air Quality of the Committee on Energyand Commerce introduced H.J.Res. 87 on April 11. For each chamber, the language of the Act presupposes that several approval resolutions might be introduced in relation to a single site disapproval, even thoughall such measures would have to be either identical, or substantially so. No such additional resolutions have beenintroduced in relation to the Yucca Mountainsite. Referral. For each chamber, the Act requires approval resolutions to be referred "upon introduction" to "theappropriate committee or committees." (17) S.J.Res. 34 was referredto the Senate Committee on Energy and Natural Resources, and H.J.Res. 87 to the Committee on Energy and Commerce. Like most, if not all, expedited procedure statutes,the Act leaves the question ofsubcommittee referral to the practices of the respective committees. H.J.Res. 87 was referred to theSubcommittee on Energy and Air Quality; S.J.Res. 34 received no subcommittee referral. Committee Action Requirement for Report or Discharge. Although the language governing committee consideration ofresolutions of repository siting approval differs between the House and Senate, the effects are similar. The committee (or committees) of referral have 60 days ofcontinuous session (defined in the same way as for the 90-day period) to report an approval resolution. If acommittee did not report by the end of the 60-dayperiod, it would automatically be discharged and the resolution placed on the appropriate calendar of its house. (18) The statutory 60-day period, by the end of which the committee must report or be discharged, begins, in each chamber, with the introduction of the first approvalresolution. In the House, this point would have been reached on or about June 18, but the Committee on Energyand Commerce reported H.J.Res. 87 on April 25. In the Senate, the automatic discharge date would have been reached on or about June 16, but theCommittee on Energy and Natural Resourcesreported S.J.Res. 34 on June 10. Although the House committee reported the measure favorably, the statute does not require a favorable report. Under contemporary practice, a measure (in theSenate) or privileged measure (in the House) reported adversely or without recommendation is still placed on thecalendar as eligible for consideration. (19) Aresolution of repository siting approval is a privileged measure in the House, in that it is to be considered under anexpedited procedure. Action May Be Limited to One Resolution. For each chamber, the expedited procedure includes a mechanismto ensure that even if more than one repository siting resolution is introduced, only one will reach the calendar. Inasmuch as only one resolution relative to theYucca Mountain site appeared in each house, these procedures have not come into play during the present process. For the House, the statute specifies that the committee may be discharged only from the first approval resolution introduced, and the committee can avoid thisoccurrence by reporting either that resolution "or an identical resolution." (20) If several identical resolutions are submitted, and the committee reports any one ofthem, it is not discharged from any of the others. (21) If several resolutionsare introduced approving the same site, and the committee reports none of them, it isapparently discharged from only the first one introduced, even if the others are not "identical." On the other hand,if the committee reports a resolution that is notidentical to the first one introduced, it apparently will also be discharged from that first one, so that in this case bothmeasures would reach the calendar. For the Senate, the statute specifies that the resolution from which the committee is to be discharged is the one that was automatically introduced when notice ofthe state disapproval was received. However, the Act also provides for discharge to occur "in the absence of" theautomatically introduced resolution. (22) Thisprovision might come into play only in a renewed 90-day period in a new Congress, when the automaticallyintroduced resolution would have died with the sinedie adjournment of the old Congress. In that situation, if a committee does not report an approval resolutionby the 60th day of continuous session in the newCongress, it will be discharged from all approval resolutions introduced in that house in the new Congress. In a new Congress, discharge (and other components of the expedited procedure) presumably could occur in each chamber only if a new approval resolution hasbeen introduced. Floor Action Under the Expedited Procedure and Its Alternatives The expedited procedure of the NWPA establishes terms for floor consideration of resolutions of repository siting approval in each chamber. Like other statutesestablishing expedited procedures, however, the Act also reserves the right of each house to alter or amend thoseprocedures through the application of its generalpower under the constitution over its own rules. As a result, it always remains possible that either house couldconsider any particular siting approval resolutionunder other terms than those provided by the statute. The ways in which each house may make such alterations, and some possible implications and alternatives of its doing so, are discussed in a later section of thisreport. The House, in particular, has not infrequently taken up measures eligible for expedited consideration notunder the statutory procedures, but insteadpursuant to a special rule or a motion to suspend the rules. In the present instance, however, the House took up andpassed H.J.Res. 87 pursuant tothe statutory procedure on May 8. House Floor Action Discretion of Speaker. Many expedited procedure statutes protect the ability of Members to call up themeasures whose consideration they govern once they reach the calendar. The expedited procedure of the NWPA,by contrast, leaves control over when andwhether the House will consider an approval resolution in the hands of the majority party leadership. This situationis more in harmony with House schedulingpractices generally. Once the resolution has been on the calendar for 5 legislative days, the Speaker may recognize a Member to call it up. (23) Because the Act accords the Speakerdiscretion over whether to recognize for this purpose, he would be able to keep a siting approval resolution fromthe floor by declining to do so. Conversely, theAct provides that when an approval resolution is called up, the House proceeds immediately to consider it. Thisprovision tends to ensure that, as long as theSpeaker does choose to recognize a Member to call the resolution up, consideration will occur. Terms of Debate. When the House takes up an approval resolution, the Speaker recognizes the Member callingit up and an opponent for 2 hours of debate, equally divided and controlled. (24) The Act requires the Member calling up the resolution to be a supporter of it, andthe opposing manager to be an opponent. Under the general practice of the House, the managers of a measure wouldtypically be the chair and ranking minoritymember of the reporting committee (or their designees). These Members would normally be the ones recognizedto manage an approval resolution, as long asthey qualified as supporting and opposing it, respectively. It would be consistent with the customary practice of the House for the Speaker to ask each prospective manager, at the outset of consideration, if he or shesupported or opposed the resolution. If either could not answer appropriately, the Speaker would most likelyrecognize another senior member of the reportingcommittee who did take the appropriate position. For example, if the resolution was not reported, but reached thecalendar by discharge, the committee chairmight well oppose it. The chair then would not be entitled to recognition to call the measure up, but would mostlikely be accorded the time in opposition if hesought it. In the present instance, the Chair of the Committee on Energy and Commerce managed H.J.Res. 87 , and the ranking minority member of one of itssubcommittees managed the measure for opponents. Prohibition on Amendment and Motions. The Act directs that at the end of the 2 hours' debate in the House,the previous question be automatically ordered, and the House proceed to vote on adopting the resolution. It alsoprohibits the intervention of any motion betweenthe conclusion of debate and the vote on adoption. Finally, it explicitly prohibits amendment of an approvalresolution. (25) These procedures are clearly designed to insure that the House vote on adoption will be on the resolution in its original form, without amendment. In theirabsence, an amendment might be offered (1) during the two hours' debate, but only if one of the managers yielded forthe purpose; (2) if the House voted not to order theprevious question; or (3) through amendatory instructions in a motion to recommit. (26) A motion to recommit is normally in order at the conclusion ofconsideration, but under the expedited procedure of the NWPA, as just mentioned, an intervening motion at thatpoint is prohibited. Finally, the Act also prohibits a motion to reconsider the vote on an approval resolution. Like the provisions to bring about the report or discharge of only oneapproval resolution, this prohibition helps to ensure that the expedited procedure will normally give the House one,and only one, opportunity to act on aresolution to approve any given repository site. (27) Senate Floor Action Control of Motion to Proceed. In the Senate, the expedited procedure provides that once an approval resolutionis on the calendar, any Senator may move to proceed to its consideration. (28) If the Senate disagrees to this motion, the Act provides that it may be repeated (and ifmore than one approval resolution reaches the calendar, the motion also might be offered with respect to each). By early July, it was expected that supporters of S.J.Res. 34 might offer a motion to proceed to its consideration before the middle of the month, inthe absence of earlier action by the majority leader. Some discussion has occurred over whether it would beinappropriate for any Senator other than the majorityleader or his designee to offer a motion to proceed to consider the resolution pursuant to the statute. In practice, theSenate normally concedes to its majorityleader the prerogative of making motions to proceed to consider pursuant to the Standing Rules. Although theStanding Rules in principle permit any Senator tooffer this motion, the Senate accords the majority leader the function of managing the floor agenda, and considerscontrol of the motion to proceed a key tool inthe discharge of that function. Some accordingly argue that the same prerogative should be extended to a motionto proceed to consider offered pursuant to thestatute. Others contend that the statutory provision is evidently intended to insure that the measure can reach thefloor whether or not the leadership determines tocall it up. (29) Regulation of Motion to Proceed. Normally, a motion to proceed to consider in the Senate is debatable, but theAct provides that on a resolution of repository siting approval it is nondebatable. The Act provides as well that thismotion may neither be amended, norsuperseded by a motion to consider something else, and its consideration may not be postponed. (30) These provisions help ensure that an attempt to take up anapproval resolution could not be blocked by filibustering (that is, protracted debate or other actions with dilatoryor obstructive intent). Also, if the Senate votes to consider the resolution, it is to "remain the unfinished business until disposed of." (31) This provision is designed to help ensure thatonce the Senate takes up an approval resolution, it will be able to reach a final vote. All of these provisions arecommon features of expedited proceduresgoverning Senate floor consideration. Terms of Debate and Regulation of Motions. Provisions for floor consideration also include many features,common among Senate expedited procedures, designed to prevent the approval resolution from being blocked byfilibuster. In particular, total debate on theresolution is limited to 10 hours. (32) Such a time limitation is requisite forprecluding filibusters, for Senate rules establish neither a general time limit on debatenor any procedure, other than cloture, to impose such a limit. The time is to be equally divided between supportersand opponents; normally, the Senateaccomplishes this end by placing the equally divided time under the control of managers. The managers wouldtypically be the chair and ranking minoritymember of the committee of jurisdiction, if they take opposed positions on the resolution. At the conclusion ofdebate, the vote on the resolution must occur. Aquorum call, but no other action, may intervene. (33) As with the House, theexpedited procedure also prohibits a motion to reconsider the vote. (34) The Act specifies that the 10-hour limit includes any debate on debatable motions offered during consideration of the resolution. It also specifies that any appealof a ruling of the chair in connection with consideration shall not be debatable. (35) The Act permits as well a nondebatable motion to reduce the time available fordebate, and this motion, like the motion to proceed to consider, may neither be superseded by a motion to considersomething else nor amended, nor may itsconsideration be postponed. (36) Potential for Amendment. Although the statutory procedure prohibits amendment of the motion to proceed toconsider an approval resolution, and of the motion to reduce the time for debating one, it contains no provisionprecluding amendment of the approval resolutionitself. The Act does forbid a motion to recommit the resolution, which might have included amendatoryinstructions, (37) but does not explicitly prohibit theoffering of an amendment by other means, either from the floor or by recommendation of the reporting committee. It is unclear whether this omission wasdeliberate, though it may be noteworthy that Congress found it appropriate to include an explicit prohibition againstamendment for the House, but not for theSenate. On the other hand, it can be argued that the legislative history of the NWPA, as well as the overall purposes of expedited procedures generally, imply that theapproval resolution was intended not to be subject to amendment in either house. The close specification made bythe Act for the language of a resolution ofrepository siting approval might be cited in support of the same conclusion. If the Senate took such a view, manyof the questions raised in this section would notarise. (38) If the Senate took the view that a siting approval resolution could be amended, the potential consequences of adopting an amendment to the resolution are alsounclear. It might be argued that if the resolution were amended, it would cease to meet the description required by42 U.S.C. sec. 10135(a) for a resolution ofrepository siting approval. It might thereby become ineligible for further consideration under the expeditedprocedure. For example, if the Senate adopted anamendment to an approval resolution, it might be possible for a Senator to raise a point of order that the amendedmeasure was no longer subject to the limits ondebate that the Act establishes as part of the expedited procedures for considering an approval resolution. If thechair sustained such a point of order, furtherconsideration would presumably have to occur under the general rules of the Senate, potentially making theresolution subject to dilatory action. Final Action Resolution Received from Other House. The expedited procedure for each house contains a provision,identical except for reversing the names of the chambers, to ensure that both will take final action on the samemeasure, and a single approval resolution will becleared for Presidential action. These provisions together direct that when either house passes an approvalresolution, the other house is not to refer it tocommittee, but is to hold it at the desk. This action maintains the resolution passed by the other house in aconvenient status for the receiving house to act on it. Floor consideration in the receiving house is to occur on its own approval resolution with respect to the same site,but the final vote is to occur on the one receivedfrom the other house. (39) In the present instance, after the Senate finishesconsidering S.J.Res. 34 , it will presumably vote on the House-passed H.J.Res. 87 , which it has already received (unless, perhaps, S.J.Res. 34 has by then been amended). A mechanism like this is part of many expedited procedure statutes that provide for the resolutions consideredby each house to be substantively similar in effect. Under these conditions it is appropriate to substitute one for the other as a convenient means to expedite final action. Each House Must First Consider Own Measure. Unlike some other expedited procedures, that of the NWPAprovides for floor consideration in each house to occur only on a resolution of that house. It affords no means bywhich either house might, instead, initially takeup and consider an approval resolution received from the other. Yet it does not require that any separate approvalresolution be introduced in the House (or ineither chamber during a renewed 90-day period in a new Congress). The consequence is that no approval resolutioncan be enacted under the expedited procedureunless some Member of the House (or, in a renewed 90-day period in a new Congress, Members of both houses)chooses to introduce one. Requirement for Identity. The provision for final action contains two different phrases whose language seemscreate a conflict. The first phrase states that the provision applies to any situation in which both houses passapproval resolutions "with respect to the same site." The second phrase, however, permits the automatic substitution of one resolution for the other only "where the textis identical." The second phrase, unlike thefirst, appears to afford an automatic mechanism for final congressional action only if the approval resolutions ofboth houses are identical in text. The languageincludes no provision for automatic final action if the two resolutions are merely substantively similar in effect. A strict interpretation of this language might be used to raise a point of order, in whichever house acts second, at the time of a final vote, if the text of its approvalresolution differed in any way from the one received from the other house. Such a point of order could assert thatthe Act did not permit the approval resolutionoriginating in that house to be automatically laid aside after debate, and final action to be taken on the one received,because the Act authorizes this proceedingonly if the two are "identical." If the chair sustained this interpretation, the house in question would presumablyhave to take its final vote instead on its ownresolution. The Act, however, establishes no further procedure by which either house could then clear forpresidential action an approval resolution received fromthe other. Instead, this final clearing action might have to occur under the general rules of each house, so that itmight become possible for opponents to subjectthis action to dilatory or obstructive tactics. In the present situation, the texts of the only two resolutions of repository siting approval that have been introduced are identical. As long as that identity persists, the difference in language between the two phrases in the expedited procedure would presumably generate nodifficulties. A difference in text between the Houseand Senate measures might still arise, however, if the Senate amended its measure in the course of its proceedings,or possibly if an additional measure withslightly different wording were to be introduced, reported in lieu of S.J.Res. 34 , called up for consideration,and adopted in that form. If the Senate were ultimately to adopt a repository siting resolution measure with a text different from that of H.J.Res. 87 as passed by the House, aSenator might conceivably be able to raise a point of order against invoking the statutory procedure for clearing themeasure for presidential action. If this point oforder were sustained, action to clear the measure would have to take place under the general rules of the Senate,which could entail debatable motions consideredwithout statutory time limitations. These proceedings could delay final action. Congressional Power to Alter Statutory Procedures The preceding discussion identifies a number of difficulties that might arise in the course of consideration ofa resolution of repository siting approval under theexpedited procedure of the NWPA. In particular, the Senate might amend its approval resolution in such a way thatits text no longer met the statutoryrequirements for a resolution of repository siting approval. The amended measure might accordingly be heldineligible for further consideration under theexpedited procedure. Also, because of such amendment or for other reasons, the texts of the approval resolutionsoriginating in the House and the Senate mightdiffer. This situation might make the automatic procedure to clear an approval resolution for the Presidentunavailable in either chamber. The Congressional Rulemaking Power The constitutional power of each house to make its own rules could afford means for dealing with such complications. It is well established that this powerextends to procedural provisions contained in statute as well as to the procedural rules each chamber establishes foritself. Further, the expedited procedure of theNWPA, like most, explicitly declares that the procedural provisions applicable to each house are enacted as anexercise of that constitutional power, and aresubject to change by action of that house alone as a further exercise of the same power. (40) It is also well established in each house that this constitutional rulemaking power may be exercised in various ways. Rules may be adopted or altered on apermanent basis. They may also be waived, suspended, or modified in their application to a specific situation. Finally, the power to make rules is implicitlyunderstood to include the power to interpret them, or to decide what they mean in a specific situation. By its own action pursuant to the rulemaking power, accordingly, either house could modify or alter provisions of the expedited procedure, either permanently andgenerally with respect to consideration of any future approval resolution, or for the purpose of considering a specificapproval resolution. Presumably, eitherhouse could provide either (1) that a resolution of siting approval, as defined by the Act, be considered other thanunder the expedited procedure, or that (2) someother form of measure to authorize construction of the repository be considered under procedures equivalent to thestatutory expedited procedure. Ways of Applying the Rulemaking Power Amendment of Rules. Each house establishes and amends its general rules by adopting resolutions. Becauseeach house retains authority over its own respective rules, such resolutions require adoption only in the houseaffected. In principle, either house could use such aresolution to effect a permanent change in a statutory expedited procedure as well. For example, the Senate couldsupplement the statutory procedure of theNWPA by adopting a resolution explicitly prohibiting amendment of a siting approval resolution. In the same way,either house could extend the mechanism forautomatic final action on an approval resolution received from the other chamber to all cases in which bothresolutions address the same site, even if their texts arenot identical. In practice, this approach would likely be more feasible in the House than in the Senate. In the House, a resolution to change the rules would normally be reportedby the Committee on Rules, which typically operates in cooperation with the majority party leadership on suchmatters. Such resolutions are considered underprocedures that permit the House, by vote, to terminate debate after one hour, and to prohibit amendment. In theSenate, such a resolution either would bereported by the Committee on Rules and Administration or, in the absence of objection, could be brought directlyto the floor by the majority leader. However, itwould be considered under the general rules of the Senate, meaning that it could be subjected to extended debate,amendment, and other potentially dilatoryactions. Modification, Suspension or Waiver of Rules. Each house possesses various established procedures permittingit to alter the application of its rules to a specific measure or in a specific situation. The House often does so byadopting a "special rule" for consideration of aspecified measure just before consideration begins. Like a permanent change in rules, a special rule takes the formof a resolution that the Committee on Ruleshas jurisdiction to report, and is considered under procedures that permit the House to vote to terminate debate, andpreclude amendment, after one hour. In thepast, the majority party leadership and Committee on Rules have often preferred that measures eligible for expeditedprocedures be considered instead underspecial rules. This form of consideration preserves to a greater degree the normal control of the leadership over flooraction. A special rule for consideration of a siting approval resolution could provide that after consideration of the House measure, an automatic final vote occur on anySenate measure approving the same site that the House might already have received, or even on one that it mightlater receive. Alternatively, it also would bewithin the scope of normal practice for a special rule to provide that the approval resolution be considered underan entirely different procedure from that specifiedin the Act. A special rule might, for example, provide that the resolution be called up immediately or in thediscretion of the Speaker, provide for or prohibitamendment, shorten or lengthen the time for debate, alter the division and control of that time, or permit or waivethe application of certain points of order, as theleadership and the Committee found appropriate. The House also often supersedes the procedures otherwise applicable to the consideration of a specific measure by considering the measure pursuant to a motionto suspend the rules. A motion to suspend the rules and pass a measure is subject to 40 minutes' debate, precludesfloor amendment, and requires a two-thirds'vote. Finally, the House could consider an approval resolution by unanimous consent, and the unanimous consentrequest might include a specification of termsof consideration. The Senate normally establishes modified or altered procedures for the consideration of a specific measure only by unanimous consent. It is normally consideredthe prerogative of the majority leader to propound requests for unanimous consent for such purposes. The Senateoften uses unanimous consent agreements of thiskind to restrict or even prohibit amendments to a specified measure, and sometimes to provide that final action ona companion measure received from the Houseoccur automatically. In contentious situations, such as may likely accompany consideration of a siting approvalresolution, however, unanimous consent to anagreement regulating consideration in such ways may be difficult to obtain. Senate rules also include a procedure, little known today, for suspending specified rules in relation to action on a given measure. Although such a motion couldpresumably be used in relation to statutory provisions operating as rules, it appears ill adapted for this purpose. Senate rules impose no time limit on considerationof a motion to suspend the rules, so that it could be subjected to filibuster, delaying or blocking the attempt toestablish any modified procedure for acting on theapproval resolution. As in the House, suspension of the rules in the Senate requires a two-thirds' vote. (41) Interpreting Rules Through Application. In recent times, the Senate has more often exercised its power todetermine the intent and effect of its rules by voting on procedural questions either submitted to it by the chair, orarising through appeals of rulings of the chair. If a floor amendment were offered to an approval resolution, for example, the Senate might decide, on appeal, thatthe statute implicitly forbade such amendments. If an amendment to the resolution were adopted, the Senate might in the same way decide that the amended statutestill qualified for further consideration underthe expedited procedure. This course of action would presumably not be subject to filibuster, because the statute requires that all appeals on questions raised during consideration of anapproval resolution be settled without debate. Action of the Senate in this form, however, would not merelydetermine the application of the rule in the particularsituation in which the question was raised. Because the Senate possesses ultimate authority to determine its ownrules, its decision on a question such as thiswould establish precedent. It would conclusively establish the general meaning of the statutory provision, subjectto revision only by subsequent action of theSenate itself. In principle, the House might engage in similar proceedings, but in practice that chamber has a strong tradition of deferring to the rulings of its Speaker onprocedural questions. A point of order might be raised, for example, that the statutory procedure for automatic finalaction on an approval resolution was intendedto apply whenever a received Senate companion would approve the same repository site as the House measure, evenif the text is not identical. If the Speakersustained the point of order, the House would in all probability accept such a ruling, or at least sustain it if it wereappealed. Subsequently, the House would nodoubt accept this ruling as precedent controlling the meaning of the provision for any future uses of the expeditedprocedure. Additional Statutory Requirements for Site Approval The previous section addresses whether, if an approval resolution were to be amended into a form other thanthat prescribed by the NWPA, it would continue tobe eligible for consideration under the expedited procedure of the Act. Certain provisions of the Act, however,suggest that if the measure were enacted in such aform, it might raise additional questions as well. Pursuant to this language, it might be argued that unless a measurehad the form prescribed for an approvalresolution, it might not suffice to authorize construction of the repository. Related passages could be used to arguethat even if the measure had the prescribedform, it might not achieve its purpose if Congress did not pass it during the prescribed 90-day period. Requirements of Form and Timing Expedited procedure statutes commonly permit Congress to approve (or disapprove) a specified action by using the expedited procedure to enact the measure forwhich the statute provides. They do not purport to require Congress to use, for this purpose, the means of approval(or disapproval) they provide. The language ofthe NWPA appears to reflect an intent to go farther, and prohibit construction of a civilian nuclear waste repository unless Congress enacts the resolution ofapproval in the prescribed form within the specified 90-day period. Specifically, subsection (b) of 42 U.S.C. section 10135 states that once a state "notice of disapproval has been submitted, the designation of such site shall not beeffective except as provided under subsection (c) ...." Subsection (c) provides that under these conditions,the "site shall be disapproved unless , during the ... [prescribed 90-day] period ... the Congress passes a resolution of repository siting approval in accordance withthis subsection approving this site ...." (Italicsadded throughout). The text that a resolution of repository siting approval must possess is prescribed, as alreadynoted, by subsection (a). By no statutory language, of course, could Congress vitiate its own capacity subsequently to pass any legislation within its constitutional power. It could hardly bequestioned that if, independent of the provisions of the NWPA, legislation were enacted specifically providing thata repository be constructed at a given site, theenactment would legally suffice for the purpose. Any conceivable uncertainty could be removed if the enablingstatute explicitly superseded or repealed pertinentprovisions of the NWPA. An argument might be raised, however, that outside the context of the statutory procedure, a measure containing the language prescribed for an approvalresolution would not suffice for this purpose. A resolution of repository siting approval is to state only that "therehereby is approved the site" specified. The Actrequires this approval in order for the site designation to become "effective." It gives meaning to this term bydirecting that when the site designation is effective,the Secretary of Energy is to apply to the Nuclear Regulatory Commission for authorization to construct the site. (42) On this basis, it might be argued that only incontext of the Act does "approval" have specific meaning in relation to establishment of the repository. By this argument, if a resolution was couched in the terms required by the Act, but also had been amended to include other language, or was not passed within therequired 90-day period, it might not constitute statutory authorization to proceed with establishment of therepository. Instead, it might be contended, the processof establishing the repository cannot go forward unless Congress passes either (1) the approval resolution in the formand within the time required by the NWPA,or (2) legislation independent of the requirements of the Act and explicitly directing that the repository beconstructed (or, for example, that the Secretary apply forthe construction authorization). A contrary interpretation of the language of the statute might hold that congressional "approval" of a site designation entails authorization to proceed with therepository, even independently of the statutory mechanism of the NWPA. To preclude such contentions altogether,however, any approval resolution passed eitherin amended form, or outside the statutory time frame (or both), might have to be amended also to contain languageexplicitly authorizing construction (orapplication for authorization to construct), and perhaps explicitly superseding the statutory process of the NWPAas well. Relation of Statutory Requirements to Expedited Procedure These questions of the potential force and effect of an approval resolution under the NWPA are separate from those that might be raised about the eligibility of theresolution for consideration under the expedited procedure of the Act. The NWPA attempts to require that anapproval resolution must be passed in a specifiedform, and within specified time constraints, in order to permit establishment of the repository to go forward. It doesnot require that the approval resolution beenacted in accordance with the expedited procedure itself. The provisions of section 10135 quoted earlier requireaction in accordance with subsections (b) and(c), but not with subsections (d) and (e), which set forth the expedited procedure. It accordingly appears that, for example, the Senate might amend its approval resolution, then continue considering the measure without regard to the constraintsof the expedited procedure on debate and other procedural actions, and ultimately pass in lieu thereof an unamendedcompanion previously received from theHouse. This process would result in an approval resolution becoming law in the form prescribed by statute, but notin accordance with the expedited procedure. The language of the Act would not seem to cast any doubt on the force and effect of a resolution of siting approvalenacted under those conditions. Similarly, aslong as Congress passed an approval resolution having the prescribed form within the required 90 days ofcontinuous session, the measure would apparentlysuffice to approve the site designation even if Congress did not consider it in accordance with the expeditedprocedure. It is, in any case, most doubtful that a statute could effectively require action pursuant to a specified expedited procedure as a condition of the effectiveness of anapproval resolution. If either house departed from the prescribed procedures in its consideration of the resolution,its action presumably would amount to animplicit exercise of the chamber's power to alter the expedited procedure in its application to the specific instance. Such alterations in statutory procedures areimplicitly understood as authorized by the rulemaking clause of the Constitution, even where not explicitlyauthorized by the rulemaking language of the statuteitself. Conversely, however, it does not appear that Congress could in any way use the rulemaking power to establish the effectiveness of an approval resolution that didnot meet the statutory requirements of form and timing. The Act gives the status of congressional rules only to theprovisions of subsections (d) and (e) thatgovern congressional action on an approval resolution from introduction through final action. The provisions ofsubsections (a) through (c), which specify therequired wording and timing of an approval resolution and establish its effects, are not declared to have this status. Nor is it clear that they could be appropriatelyconstrued as having this status, for their effects go beyond procedural implications internal to Congress. Accordingly, if an approval resolution did not meet thestatutory requirements of form and timing, then Congress might prefer to include in the resolution an explicitstatement of its intended force and effect, in order toensure that it would have that force and effect. Finally, if Congress determined to authorize construction of a nuclear waste repository by means of legislation that did not meet the requirements of form andtiming provided by the NWPA, that legislation would presumably be ineligible, under the statute, for considerationunder the expedited procedure. The Act makesthat procedure available only for measures meeting the statutory requirements of form for a resolution of repositorysiting approval. Presumably, as a result,approval legislation of any alternate kind would not be subject to the restrictions imposed by the statute oncommittee action, calling up, debate, amendment, andother procedural actions. It would instead have to be considered under the general procedures of each house. Itcould, accordingly, be considered underprocedures equivalent to the expedited procedure, but only if each house, using its general practices of makingprocedural decisions, so determined.

The Nuclear Waste Policy Act of 1982 (NWPA), as amended, establishes a process for the federal government to designate a site for a permanent repository forcivilian nuclear waste. In February 2002, this process culminated in a presidential recommendation for a repositoryat Yucca Mountain, Nevada. On April 8, theState of Nevada exercised its authority under NWPA to disapprove the site. As a result of this state disapproval,the site may be approved only if a joint resolutionof repository siting approval becomes law after being passed by Congress during the first period of 90 days ofcontinuous session after the disapproval. Thisperiod appears likely to terminate just after the August recess. The Act establishes an expedited procedure for congressional consideration of this approval resolution. Pursuant to this expedited procedure, approval resolutionswere introduced in both houses and referred to the respective committees of jurisdiction, which had until the60th day of continuous session after the statedisapproval to report or be discharged. The House committee reported on May 1, and the Senate committee on June10. In the House, once an approval resolution has been on the calendar for 5 legislative days, a supporter may call it up if the Speaker recognizes him or her for thepurpose. After 2 hours of debate, the House then votes on the resolution without amendment or other interveningmotion. The House passed its resolution onMay 8. In the Senate, once such a resolution is on the calendar, any Senator may make a nondebatable motion toproceed to consider it. Normally, such a motionwould be offered by the majority leader. If rejected, the motion may be repeated. If adopted, the Senate debatesthe resolution for 10 hours (which may bereduced by nondebatable motion), after which a final vote occurs. The statutory procedure forestalls filibustersagainst the resolution by prohibiting mostintervening motions or other actions, but does not on its face preclude amendment of the resolution. An attemptto consider the measure in the Senate wasexpected in early July. After one house passes an approval resolution, the other takes up and debates its own measure, but takes a final vote on the measure received from the first house. This procedure facilitates clearing the resolution for presidential action. The Act provides for this action to occuronly if the two measures are identical, as thepresent House and Senate measures are. If the Senate resolution were to be amended, however, the terms of the Actwould apparently make this clearanceprocedure unavailable. An amended measure also would cease to have the form prescribed by the NWPA for anapproval resolution, and accordingly might fail toqualify for further action under the expedited procedure. Either house might overcome such difficulties by using its constitutional power over its own rules to alter the procedure by which it considered an approvalresolution. If an approval resolution were enacted in a different form from that prescribed by the NWPA, however,it might arguably fail to meet the requirementsof the Act for permitting construction of the repository.

Introduction The sheer number of children coming to the United States who are not accompanied by parents or legal guardians has raised considerable concern. Overwhelmingly, the children are coming from El Salvador, Guatemala, and Honduras. This report focuses on the demographics of unaccompanied alien children while they are in removal proceedings. It discusses the characteristics of these children by nationality, age, and sex and explores these trends over the past few years. It further builds on a set of Congressional Research Service (CRS) reports examining the issues surrounding unaccompanied alien children. Office of Refugee Resettlement Data on Unaccompanied Alien Children After Customs and Border Protection (CBP) agents in the Department of Homeland Security (DHS) have apprehended and processed an unaccompanied alien child, DHS transfers the child into the custody of the Department of Health and Human Services' (HHS's) Office of Refugee Resettlement (ORR). ORR is responsible for placing unaccompanied alien children in appropriate care. The law requires that ORR ensure that the interests of the child are considered in decisions and actions relating to the care and custody of an unaccompanied child. ORR also oversees the infrastructure and personnel of residential facilities for unaccompanied alien children, among other responsibilities. ORR arranges to house the unaccompanied child either in one of its shelters or in a foster care arrangement, or it reunites the unaccompanied child with a family member. In this report, the demographic and placement trends of unaccompanied children are based upon summary data extracted from case file data that ORR maintains on unaccompanied alien children. Due to the confidential nature of ORR data generally, CRS used only selected variables for this analysis. The summary data span the period between FY2011 and FY2014. The FY2014 data are partial (available through April 30, 2014), which made it difficult to reach conclusions about patterns or trends when comparing to the other three fiscal years. Demographics of Unaccompanied Children Country of Origin Much attention has been focused on the top countries of origin for the unaccompanied children. Over the past four years, ORR had unaccompanied children in its custody from 87 different countries, ranging from 41 to 50 different countries each fiscal year. Nevertheless, El Salvador, Guatemala, and Honduras have consistently accounted for the overwhelming majority of all unaccompanied children in ORR custody ( Table 1 ). While the most notable increase in unaccompanied children over the past three fiscal years and the first seven months of FY2014 was from Honduras (980%)—as it steadily increased in overall rank from fourth in FY2011 to first through the first seven months of FY2014—even the smallest increase in unaccompanied children in ORR custody of the three countries (El Salvador) was notable: 463% from FY2011 through the first seven months of FY2014 ( Figure 1 ). Not all apprehended unaccompanied children are transferred to ORR, as some are voluntarily returned to their home countries. Although Mexican children generally make up a sizeable number of the unaccompanied alien children apprehended by CBP officers, only a portion of them end up in ORR custody. For example, CBP apprehended 11,577 Mexican unaccompanied children in the first eight months of FY2014, and only 494 Mexican unaccompanied children were placed in ORR custody during the first seven months of FY2014. Age Age is a key factor to qualify as an unaccompanied alien child under the law. The Homeland Security Act of 2002 defines an unaccompanied alien child as an individual who has no lawful immigration status in the United States, has not yet reached the age of 18, and has no parent or legal guardian in the United States or no parent or legal guardian in the United States who is available to provide care and physical custody. Those 18 and older in ORR custody could have entered the United States shortly before turning 18, could be awaiting transfer back to DHS custody, or could have special needs that have kept them in ORR custody past the age of 18. The median age of unaccompanied children in ORR custody was 17 years old in FY2011 and FY2012, as Table 2 presents. The median age fell to 16 years old in FY2013 and has remained there in the first seven months of FY2014. The youngest three age groups (0-9, 10-12, and 13-15 years old) experienced the most percentage growth compared to the oldest three age groups (16-17, 18, and 19+ years old), which have experienced a percentage decrease during the period examined ( Figure 2 ). While there continued to be a greater overall number of older children in ORR custody, there was also a noteworthy increase in younger children in ORR custody, particularly in the 10-12 age group ( Figure 2 ) over the period studied. From October 1, 2010, through April 30, 2014, ORR had a total of 8,879 unaccompanied children under the age of 13 in its custody. Nationality and Age Distribution From FY2011 through the first seven months of FY2014, there was an increase in the number of children in each of the three youngest age brackets (0-9, 10-12, and 13-15) for Honduras, Guatemala, and El Salvador. Most notably, in the first seven months of FY2014, the youngest three age brackets for Honduras made up over half of all Honduran unaccompanied children (6,242). Like Honduras and El Salvador, Guatemala had an increase in the three youngest age brackets, however, it also had the greatest number of unaccompanied children in the oldest three age brackets (16-17, 18, and 19+) ( Figure 3 ). Sex Traditionally there have been more male than female unaccompanied children in ORR custody. In 2002, immigration officials testified that the overwhelming majority of unaccompanied alien children were male. The number of unaccompanied females increased from 1,075 in FY2011 to 5,385 in FY2013. The number of unaccompanied girls reached 2,959 in the first seven months of FY2014. Similarly, the percentage of females among unaccompanied children has grown. The share of females was stable at about 22% in FY2011 and FY2012 and increased to about 27% in FY2013 and 33% in the first seven months of FY2014 ( Figure 4 ). As previously shown in Figure 1 , the overwhelming majority of unaccompanied children in ORR custody from FY2011 through the first seven months of FY2014 originated from Honduras, Guatemala, and El Salvador. The sex distribution from the top countries of origin among children in ORR custody was examined to provide a better understanding of the female population. Examining the male-to-female ratio for each specific top source country reveals that a greater proportion of females in ORR custody originated from El Salvador than from Honduras, while a lower proportion of females originated from Guatemala ( Figure 5 ). Honduras had the most females in ORR custody and was also the country with the greatest number of minors in ORR custody overall. In absolute numbers, most males in ORR custody were ages 16-17 in each of the three fiscal years and in the first seven months of FY2014; however, the number of males age 0-9, 10-12, and 13-15 steadily increased over the past three fiscal years and in the first seven months of FY2014 ( Figure 6 ). Similar patterns occurred for females. In the first seven months of FY2014, the number of females in the 16-17 age bracket increased, whereas the number of males decreased ( Figure 7 ). The median age of unaccompanied children by year, sex, and top country ( Table 3 ) present the age trends a bit more starkly. The median age of females has dropped from 17 years in FY2011—the year that was the median age across all groups of children—to 15 years in the first seven months of FY2014. The median age for females in FY2013 was 13 years. When viewed by country, the median age decreased for all three and fell to 15 years for Honduran children during the first seven months of FY2014.

The number of children coming to the United States who are not accompanied by parents or legal guardians and who lack proper immigration documents has raised complex and competing sets of humanitarian concerns and immigration control issues. This report focuses on the demographics of unaccompanied alien children while they are in removal proceedings. Overwhelmingly, the children are coming from El Salvador, Guatemala, and Honduras. The median age of unaccompanied children has decreased from 17 years in FY2011 to 16 years during the first seven months of FY2014. A greater share of males than females are represented among this population. However, females have steadily increased in total numbers and as a percentage of the flow since FY2011. The median age of females has dropped from 17 years in FY2011—the year that was the median age across all groups of children—to 15 years in the first seven months of FY2014.

Marine Environmental Protection Budget Congressional appropriations for the Coast Guard are not broken down by specific mission (e.g., marine environmental protection), but are allocated to broader categories, such as "operating expenses." The Coast Guard accounts for mission-specific funding by using a "sophisticated activity-based costing model." Table 1 identifies the estimated levels of spending for the marine environmental protection mission in recent years. Spill Response, Prevention, and Preparedness4 Protecting the marine environment from accidental oil and chemical spills is a key mission of the Coast Guard. Along with representatives of 15 other federal departments and agencies, the Coast Guard and the Environmental Protection Agency (EPA) comprise the National Response Team and 13 Regional Response Teams. EPA serves as the chair, and the Coast Guard is the vice-chair of these teams. The National Contingency Plan (NCP) provides the organizational structure and procedures for preparing for and responding to discharges of oil and hazardous substances on both water and land. Coast Guard responsibilities can be divided into two categories: (1) spill response and (2) spill prevention/preparedness. As the primary response authority in coastal zone waters, the Coast Guard has the ultimate authority to ensure that a spill is effectively removed and that actions are taken to prevent further discharge from the source. During such response operations, a Coast Guard On-Scene Coordinator would coordinate the efforts of federal, state, and private parties. Preventing and preparing for spills is also a Coast Guard responsibility, and the Coast Guard's jurisdiction covers vessels; onshore, transportation-related facilities; and deepwater ports. The Coast Guard's prevention/preparedness duties are based on international agreements and federal standards and regulations. The Oil Pollution Act of 1990 (OPA) and the international treaty MARPOL 73/78 require the owners and operators of vessels that carry oil and designated hazardous substances to submit to the Coast Guard "Vessel Response Plans" and/or "Shipboard Oil Pollution Emergency Plans." These vessel-specific plans address such matters as spill mitigation procedures, training requirements for the crew, and spill mitigation equipment required to be carried onboard. The Coast Guard must approve the plans for a ship to operate legally in U.S. waters. Under these authorities vessel operators also must submit to regular inspections, and the Coast Guard's inspection program is a key component of their oil spill prevention effort. The Coast Guard represents the United States at the International Maritime Organization (IMO), which, through treaties, sets international environmental and safety standards for vessels. Important treaties cover the following topics: accidental and operational oil and chemical pollution; the right of a coastal state to take measures on the high seas to prevent, mitigate, or eliminate danger to its coastline from pollution by oil; a global, cooperative framework for combating major incidents or threats of marine pollution from oil and hazardous and noxious substances; and pollution from the dumping of wastes and other materials. Inspection of Foreign Ships (Port State Control Program) The Coast Guard conducts "certificate of compliance" examinations—both on a random and targeted basis—on foreign vessels that make port calls in the United States. The inspection program emphasizes compliance with environmental and safety standards and, particularly since September 2001, is concerned with port security as well. The inspecting officers verify that the vessels and their crews are in substantial compliance with international conventions and applicable U.S. laws. The pollution prevention examination covers the various waste streams onboard and related record keeping, which vary for different types of ships, and may include the following: Oil pollution prevention systems include the oily water separator and the sludge containment system. The oily water separator is a high-maintenance device, and ships sometimes alter their piping to bypass the system. Further, pumping oily sludge ashore is expensive and ships have been known to take illegal steps to avoid it. The black water system includes marine sanitation devices and other systems to treat, store, and discharge sewage. Hazardous waste includes paints, thinners, and cleaning solutions that contain hazardous substances. The types and volumes of hazardous waste vary depending on the technology and processes used aboard. Non-hazardous waste is shipboard garbage, including food waste, plastics, and other synthetic materials, as well as recyclables like glass, and aluminum and steel cans. The gray water system includes discharges from the galley, sinks, showers, and baths. In recent years, cruise ships, most of which are registered in foreign countries, have gained attention. These very large vessels carry up to 5,000 passengers who generate a large amount of sewage and gray water. (For additional information, see CRS Report RL32450, Cruise Ship Pollution: Background, Laws and Regulations, and Key Issues , by [author name scrubbed].) Inspection of Domestic Ships The domestic inspection system is similar to the port state control program in assuring compliance with applicable laws and treaties. Rules vary according to size and type of vessel (e.g., tanker, passenger, cargo, and mobile offshore drilling units), and the number of passengers carried. In 1996, the Coast Guard initiated its Alternate Compliance Program (ACP), under which "classification societies" can perform inspections that satisfy certain periodic Coast Guard test and inspection requirements. National Pollution Funds Center The Coast Guard created the National Pollution Funds Center (NPFC) in 1991 to carry out many of the requirements of Title I of the OPA. The NPFC manages the Oil Spill Liability Trust Fund (OSLTF). The OSLTF is primarily used to finance prompt responses to oil spills and to reimburse parties for applicable costs associated with oil spills (e.g., cleanup costs, natural resource damages, economic losses). Initially, the primary source of revenue for the fund was a 5-cents-per-barrel fee on imported and domestic oil. Collection of this fee ceased on December 31, 1994, because of a "sunset" provision in the law. However, in April 2006, the tax resumed as required by the Energy Policy Act of 2005 ( P.L. 109-58 ). Moreover, in 2008, the Emergency Economic Stabilization Act of 2008 ( P.L. 110-343 ) increased the tax rate to 8 cents per barrel through 2016; in 2017, the rate is scheduled to increase to 9 cents per barrel. The tax terminates at the end of 2017. To ensure that responsible parties can be held accountable for cleanup costs and damages in the event of an oil spill (thereby preserving the oil spill fund), OPA requires that vessels show evidence of financial responsibility, such as insurance. The NPFC carries out this mandate by issuing Certificates of Financial Responsibility (COFRs) to shipping vessel owners when owners demonstrate the ability to pay for oil spill cleanup and damages. In general, vessels over 300 gross tons are required to have a valid COFR to operate in U.S. waters. The NPFC also takes action to recover cleanup costs from responsible parties. It documents ongoing costs and damages from the spill area, and bills the responsible party. About 40% of spills in U.S. waters are "mystery" spills, and the costs go unrecovered. Marine Debris Marine debris (e.g., discarded fishing lines or nets) can endanger birds and marine animals, and cause damage to coral reefs. Even less lethal trash from recreational fishing and boating (such as beverage cans and bottles, food wrappers, and foam plastic pieces) degrades beaches, coral reefs, and the oceans. The Coast Guard's approach to debris is preventive, promoting compliance by boarding and inspecting vessels, and working with local port agencies to ensure there are facilities to receive garbage from vessels. The Coast Guard also coordinates with the Environmental Protection Agency (EPA), the National Marine Fisheries Service, the National Park Service, and the Ocean Conservancy in monitoring and measuring amounts of marine debris. This activity is authorized in the Act to Prevent Pollution from Ships, 33 U.S.C. 1905 and 1915, as well as MARPOL Annex V. Marine and Environmental Science The Coast Guard has a history of scientific study of the oceans dating back to 1881, when it began Arctic cruises along the Alaska coast. Today the Coast Guard's role is that of a facilitator, supporting the scientific efforts of other groups. Moreover, many of the oceanographic and other scientific activities conducted by federal agencies, including the Coast Guard, were consolidated in 1970 with the creation of the National Oceanic and Atmospheric Administration (NOAA). The Coast Guard operates three icebreakers in the Arctic and Antarctic, and provides supplies to remote stations. The Coast Guard also participates in the International Ice Patrol, which monitors iceberg danger in the northwest Atlantic, particularly in the area of the Grand Banks of Newfoundland. The iceberg season is usually from February to July, but the Ice Patrol is logistically flexible and can commence operations when iceberg conditions dictate. Environmental Compliance Coast Guard operations must comply with applicable environmental laws. Ongoing initiatives include meeting the more stringent emission requirements of the Clean Air Act Amendments of 1990, and developing strategies to minimize the generation of hazardous waste. There also are continuing efforts to design pollution prevention into shore facility improvement projects, and to conduct environmental audits at facilities to find and correct potential environmental violations.

The U.S. Coast Guard's environmental activities focus on prevention programs, accompanied by enforcement and educational activities. A key component of the Coast Guard's environmental activities involves maritime oil spill prevention. As required by several environmental statutes, including the Clean Water Act and the Oil Pollution Act, the Coast Guard's pollution preparedness and response activities aim to reduce the impact of oil and hazardous substances spills. Related to this duty, the Coast Guard inspects U.S. and foreign-flagged ships to ensure compliance with U.S. laws and international agreements. In addition, the Coast Guard's National Pollution Funds Center (NPFC) manages the Oil Spill Liability Trust Fund (OSLTF), which is primarily used to finance prompt responses to oil spills and to reimburse parties for applicable costs associated with oil spills (e.g., cleanup costs, natural resource damages, economic losses). The Coast Guard's approach to marine debris (e.g., discarded fishing lines or nets) is preventive, promoting compliance by boarding and inspecting vessels, and working with local port agencies to ensure there are facilities to receive garbage from vessels. With other agencies, the Coast Guard monitors and measures marine debris. The Coast Guard has a history of scientific study dating back to the 1880s, but its current role is that of a facilitator, supporting the scientific efforts of other groups. The Coast Guard operates three icebreakers in the Arctic and Antarctic, and provides supplies to remote stations. Coast Guard operations must comply with applicable environmental laws. Requirements include air emission standards and waste management.

Introduction Interagency coordinative arrangements and activities—called for in public laws, executive orders, and administrative directives—appear to be growing in number, prominence, and proposals throughout virtually all individual policy areas and across-the-board. Underlying this growth are several developments: the increase in governmental responsibilities, cross-cutting programs, and their complexity; the inadequate preparation for and response to severe crises (in particular, the 9/11 terrorist attacks and the 2005 Gulf Coast hurricanes); and heightened pressure to reduce or consolidate federal programs and expenditures. This report examines formal interagency collaborative arrangements and activities, which are intended to enhance joint efforts and cooperation among independent federal agencies with shared responsibilities and overlapping jurisdictions. The study examines the following: various types and understandings of collaborative activities and arrangements, as well as related concepts of interagency coordination, integration, mergers and reorganizations, networking, and partnerships; background of relevant efforts; rationales for interagency collaboration and the problems these are designed to address; concerns and questions about the rationales; difficulties in assessing interagency collaboration success or failure; and factors affecting the adoption, evolution, and impact of collaborative activities and arrangements. This Congressional Research Service (CRS) study builds on and supplements an extensive collection of materials, covering various aspects of interagency collaboration, current and past, which are cited in the bibliography at the end of the report. That compilation identifies analyses of different subject and policy areas as well as different types of arrangements used among agencies. The relevant studies—both current and historical—come from congressional committees, CRS, executive branch entities, Government Accountability Office (GAO), governmental commissions, professional associations, and scholars. Various Types and Understandings of Collaboration Interagency collaboration—as a way to enhance cooperation among agencies with shared responsibilities and overlapping jurisdictions—has been used in at least two different ways: to mean a distinct type of activity and arrangement, or broadly to cover one or more other related types (coordination, networking, integration, mergers, and partnerships). Broad Interpretation of Collaboration Representative of this latter view, the Government Accountability Office has adopted an encompassing characterization of collaboration for certain of its reviews: For the purposes of this report we use the term "collaboration" broadly to include interagency activities that others have variously defined as "cooperation," "coordination," "integration," or "networking." We have done so because there are no commonly accepted definitions of these terms and we are unable to make definitive distinctions between these different types of interagency activities. GAO later added to this by defining "'collaboration' … as any joint activity by two or more organizations that is intended to produce more public value than could be produced when the organizations act alone." This broad interpretation—which approaches the generic "cooperation"—led to the discovery of hundreds of examples of collaborative activities, even within a specialized area. Other studies have estimated similar totals. Different Types of Interagency Collaboration At least six different types of collaborative arrangements and activities can be identified. Even though lacking agreed-upon, hard-and-fast, detailed definitions of these, generalized operational understandings or working definitions can be developed for the principal interagency activities and arrangements, separate from collaboration as a broadly encompassing concept. Designed to ensure or enhance cooperation among agencies with overlapping jurisdictions and shared responsibilities, these are 1. collaboration , an arrangement which relies, to a substantial degree, on voluntary or discretionary participation among the members, who are relatively equal or at least have parity in such an activity and arrangement; 2. coordination , an arrangement in which a lead agency or officer directs an operation, project, or program among one or more other agencies; 3. merger , an arrangement which merges or transfers all or parts of different agencies or their authorities, jurisdictions, personnel, and resources on a permanent basis to another organization, either a new or existing department, agency, bureau, office, or other entity; 4. integration , an arrangement which brings together relevant parts of agencies on either a long-term or a temporary ad hoc basis, to carry out a particular operation, project, program, or policy; these endeavors, unlike mergers, involve non-permanent transfers of personnel, resources, or authority among relevant agencies; 5. networks , an arrangement which involves the federal government and all or several other levels of government: federal, state, local, tribal, or, in some cases, foreign countries; and 6. partnership s , an arrangement which features public-private partnerships, with the public sector entities extending from the federal government to state, local, or tribal governments, as well as, in some cases, foreign governments; and with the private sector involving different types of entities: non-governmental organizations (NGOs), not-for-profit organizations, for-profit companies and firms, government-sponsored enterprises, and government-chartered corporations. These different types may overlap with one another, may exist in the same organizational structure, or may even be required in the same authorization (but without express definitions, distinctions, elaboration, or specification). Such endeavors can result in hybrids, in which several types of activities and arrangements exist in the same organizational structure. Many of the examples cited herein combine different activities and arrangements (rather than a single type), which are difficult, if not impossible in some instances, to separate. Besides the multiple activities which can be involved in a single collaborative enterprise, other factors influence its interpretation and use, both of which vary. This condition arises, in part, because there are no commonly accepted definitions of the concepts as used in the public sector and there is no precise definition of any in law or executive order that applies across-the-board. Complicating the absence of agreed-upon precise definitions, different interpretations—and terminology—for each concept may be based on traditions of their use among and within agencies, or over time. The understanding and use of these various concepts, for example, might differ meaningfully between the military and civilian sectors of government, given their different responsibilities, heritages, authority structures, organizational frameworks, and autonomy among the components. Moreover, the importance and frequency of use of a type of arrangement, as well as its purpose, are likely to differ among (and even within) individual agencies. This, in turn, could lead to different interpretations and resulting names. Public-private partnerships, for instance, might be more prolific and prominent in some domestic health care programs or international aid projects—or certainly different—than in military field operations. Time is also a likely factor in the understandings taken on by these six concepts, because terms and their use and meaning change over different periods. The interpretations and implications of collaboration as it was used 60 or more years ago, for instance, might well differ from today's use. In addition, certain concepts, such as partnerships and networks, might have changed from an earlier period when fewer such arrangements existed or when their use in federal policy implementation differed. Furthermore, the criteria adopted to identify various cooperative arrangements can vary or be extremely broad. In other words, the terminology has been used on occasion inconsistently, imprecisely, interchangeably, or without differentiation among the activities. Distinguishing Between Collaboration and Coordination Despite a reliance on an encompassing view of collaboration, a distinction has been made between it and coordination, a concept suggesting that a lead agency or official has formal authority over the process, product, and participants. According to one analysis, It is useful to distinguish coordination from collaboration of multiple organizations. Interagency coordination might be defined as a specific form of collaboration that applies to particular cases and operations. By contrast to collaboration when multiple agencies may perceive mutual benefit in working together, coordination often is more of a top-down exercise. It takes place when a leader with authority over multiple organizations directs them to collaborate to achieve a specified joint purpose. This distinction can be developed further, although it need not be absolute or applicable in all collaborative and coordinative arrangements. Ideally, in this view, collaboration (but not coordination) recognizes a degree of voluntarism among the participants; even though required to become members of a collaborative arrangement, their actual participation could vary, based on their own determinations and not on directives from a lead authority. This situation reflects parity, if not equality, among them, producing a horizontal cooperative arrangement among peers. Under this interpretation, there could still be a degree of consolidated authority inside a collaborative enterprise; but it would not be as comprehensive, detailed, substantial, or formalized as it would among coordinative counterparts. A downside of a true collaboration enterprise—because there is no lead officer or agency in charge—is that some members might not participate adequately or at all, even to the point of jeopardizing the interagency enterprise. By comparison to collaboration, an interagency coordinative arrangement, in principle, situates a lead official or agency with formal authority to instruct, direct, or order other members. This setting produces a hierarchical structure. An agency or official is in charge and is responsible for the process, product, and other participants, who are not the equal of the lead in this enterprise. Following this distinction, several examples demonstrate differences between collaboration and coordination. These examples also illustrate a wide range and level of either or both such arrangements. Such distinctions are manifested in high-level council responsibilities, department-to-department operational agreements, and agency head directives to other entities, as well as regularized and frequent interactions among a variety of participants. Examples of Collaboration A 2010 memorandum of agreement (MOA) between the Department of Defense (DOD) and the Department of Homeland Security (DHS) regarding cybersecurity reflects some of collaboration's main characteristics: The purpose of this Agreement is to set forth terms by which DHS and DoD will provide personnel, equipment, and facilities in order to increase interdepartmental collaboration in strategic planning for the Nation's cybersecurity, mutual support for cybersecurity capabilities development, and synchronization of current operational mission activities. Implementing this Agreement will focus national cybersecurity efforts, increasing the overall capacity and capabilities of both DHS's homeland security and DoD's national security missions…. DoD and DHS agree to collaborate to improve the synchronization and mutual support of their respective efforts in support of U.S. cybersecurity. Departmental relationships identified in this Agreement are intended to improve the efficiency and effectiveness of requirements formulation, and requests for products, services, technical assistance, coordination, and performance assessment for cybersecurity missions executed across a variety of DoD and DHS elements. The MOA recognizes a common agreement of two departments, spelling out each one's specific responsibilities, obligations, and benefits (for the participants themselves as well as the program). Neither department, however, is given direct authority over the other in meeting these specified requirements or in accomplishing its goals; instead, the MOA relies upon each one to meet its commitments. Another collaborative arrangement involves the Homeland Security Council. Created by the Homeland Security Act of 2002, the council is composed of the President, Vice President, Secretary of Homeland Security, Attorney General, Secretary of Defense, and such other individuals as may be designated by the President. Its functions—largely advisory, based on exchanges among the members—are to advise the President on homeland security matters. (1) assess the objectives, commitments, and risks of the United States in the interest of homeland security and to make resulting recommendations to the President; (2) oversee and review homeland security policies of the Federal Government and to make recommendations to the President; and (3) perform such other functions as the President may direct. An example of a collaborative arrangement also appears in legislation establishing an interagency committee to enhance certain vocational rehabilitation services research and training. The committee, as a whole, was called on to promote interagency collaboration and joint research activities relating to assistive technology research and research that incorporates the principles of universal design at the Federal level, and reduce unnecessary duplication of effort regarding these types of research within the Federal Government. A further illustration occurs in a statutory provision for grants to states for programs dealing with child abuse and neglect prevention and treatment programs. It authorizes grants "supporting and enhancing interagency collaboration between the child protection system and the juvenile justice system for improved delivery of services and treatment." A final example of collaboration (along with networking and partnerships) involves an information-technology enterprise under the Defense Information Systems Agency (DISA), named "Forge.mil" after its website. It involves a "private project collaboration [which] provides teams that require greater access control with their own secure, private, web-based collaborative software development environment offered as an on-demand fee for service capability." It is designed "to enable rapid development and deployment of new products and services on the Global Information Grid." In so doing, Forge.mil—which also reaches out to private sector contractors, who hold appropriate security clearances—provides a platform where "DoD employees can collaborate on open source and DoD community source software." In support of "net-centric operations and warfare, Forge.mil will enable cross-program sharing of software, system components, and services [and] promote early and continuous collaboration among all stakeholders (e.g., developers, material providers, testers, operators, and users) throughout the development life-cycle." Examples of Coordination By comparison to this notion of collaboration, interagency coordination has been used to recognize a directed operation or activity, in which a lead agency or official has authority over other participants. An example of this is the Secret Service's lead status in National Special Security Events (NSSEs), high-profile, large-scale events requiring an especially high level of security. The Presidential Threat Protection Act of 2000, building on an earlier presidential directive, reads, When directed by the President, the United States Secret Service is authorized to participate, under the direction of the Secretary of the Treasury [now Homeland Security], in the planning, coordination, and implementation of security operations at special events of national significance, as determined by the President. The same enactment also grants the Attorney General specific cross-agency powers for apprehending fugitives, including the establishment of permanent interagency task forces under the direction of the U.S. Marshals Service. The law prescribes that the Attorney General shall, upon consultation with appropriate Department of Justice and Department of the Treasury law enforcement components, establish permanent Fugitive Apprehension Task Forces consisting of Federal, State, and local law enforcement authorities in designated regions of the United States, to be directed and coordinated by the United States Marshals Service, for the purpose of locating and apprehending fugitives. Another illustration is manifested in a revamped program for the Chesapeake Bay's protection and restoration, with enhanced overarching authority residing in the Environmental Protection Agency (EPA). President Obama's executive order setting up the relevant interagency arrangement reads, A Federal Leadership Committee (Committee) for the Chesapeake Bay is established to oversee the development and coordination of programs and activities, including data management and reporting, of agencies participating in protection and restoration of the Chesapeake Bay. The Committee shall manage the development of strategies and program plans for the watershed and ecosystems of the Chesapeake and oversee their implementation. The Committee shall be chaired by the Administrator of the Environmental Protection Agency (EPA), or the Administrator's designee. A final coordinative example is the most far-reaching: it centers on the Director of National Intelligence (DNI), who has been granted extensive and substantial authority over the U.S. intelligence community, consisting of 16 departments and agencies. Established by the Intelligence Reform and Terrorism Prevention Act of 2004, the DNI—a principal part of "the most comprehensive reform of the U.S. intelligence community since it was created"—is "to serve as head of the of the intelligence community (IC) and principal adviser to the President on intelligence matters related to the national security and to oversee and direct the implementation of the National Intelligence Program." The DNI was established as an independent entity outside the Executive Office of the President and apart from any other agency (unlike the predecessor Director of Central Intelligence, who also headed the Central Intelligence Agency). The Director of National Intelligence has certain budgetary, spending, and personnel powers that give him authority and leverage over the collective intelligence community as well as over individual components. Along with this, the DNI has been granted express statutory authority to direct and coordinate IC operations and activities, powers that are arguably unrivaled by any current or past interagency coordinative arrangement. Among other things, the Director of National Intelligence shall provide guidance for the development of the National Intelligence Program annual budget for each element of the intelligence community; ensure the effective execution of the annual budget for intelligence and intelligence-related activities; be responsible for managing appropriations for the National Implementation Program by directing the allotment or allocation of such appropriations through the heads of the relevant departments and agencies; monitor the implementation and execution of the National Intelligence Program by the heads of the elements of the intelligence community; establish objectives, priorities, and guidance for the intelligence community to ensure the timely and effective collection, processing, analysis, and dissemination of national intelligence; determine requirements and priorities for, and manage and direct the tasking of, collection, analysis, production, and dissemination of national intelligence by elements of the intelligence community; oversee the National Counterterrorism Center (and the DNI may establish other intelligence centers); prescribe, in consultation with relevant agency and department heads, personnel policies and programs applicable to the intelligence community that encourage and facilitate assignments and details to national intelligence centers and between elements of the intelligence community; make service in more than one element of the intelligence community a condition of promotion to such positions within the intelligence community as the Director shall specify; ensure the effective management of intelligence community personnel who are responsible for intelligence community-wide matters; ensure the elimination of waste and unnecessary duplication within the intelligence community; perform such other functions as the President may direct; have principal authority to ensure maximum availability of and access to intelligence information within the intelligence community consistent with national security requirements; protect intelligence sources and methods from unauthorized disclosure; and subject to the direction of the President, establish uniform standards and procedures for the grant of access to sensitive compartmented information of employees (direct and contract) of any federal agency or department and ensure the consistent implementation of those standards and procedures throughout such agencies and departments. Qualifications on the Distinction Between Collaboration and Coordination Distinguishing between collaboration and coordination on paper, however, is complicated in practice. A collaborative effort—where centralized authority is absent and participants are relatively equal—might still find that some participants, following the cliché, "are more equal than others." Along this line, a single agency or officer may take the initiative in setting priorities, formulating plans, guiding activities or operations, and, in effect, determining the agenda for the entire collaborative enterprise. Or some of the participants may defer to or be co-opted by others, particularly if the others are perceived as more well-versed or experienced in an area or more powerful. By comparison, a coordinative effort—despite the formal powers given an officer or agency to lead and direct a project—might not result in adequate compliance among the participants. The lead official (at least in his or her view) might not have sufficient authority and resources to carry out the mandate or expectations setting up the coordinative enterprise. Alternatively, a substantial amount of collaboration might occur within a formal coordinative arrangement. A lead officer, for instance, might consult meaningfully with other participants in determining broad policies and processes, as well as specific assignments and duties. In fact, such determinations might be made by some or all of the participants, not just the lead officer, even when the coordinative enterprise is still at the planning stage. Or the consultation among the members might result in the lead officer, at least in some situations, ratifying decisions made by the collective membership. Along with these qualifications, some examples reveal ambiguity between collaboration or coordination, especially when practiced by entities given the same informal title. Cases in point are the so-called "czars," a frequently used (but misleading) name covering different types of government officials. The common characterization of "czar," which exaggerates their influence, fails in some cases to distinguish between two categories of presidential appointees who engage in coordinative vis-à-vis collaborative roles. One category consists of appointees who are confirmed by the Senate and have statutory authority to coordinate, that is, to conduct and direct interagency activities and operations. The Director of National Intelligence and the Director of the Office of National Drug Abuse Policy are primary examples. A second category consists of appointees who are not Senate-confirmed and who lack specific statutory authority to direct interagency efforts. Officially, they are confined to collaborative roles. Nonetheless, they might still wield power across agency lines—and engage in real coordination among agencies—under certain situations and circumstances. Key among these, for instance, are the support given them by the President and their leadership role in crisis situations or major policy initiatives. A prime illustration of such a position was the Director of the Office of Homeland Security, created by executive order in 2001, in the immediate aftermath of 9/11. Background of Relevant Efforts and Concerns Heritage and Antecedents Interagency collaboration and other types of formal cooperative ventures have a long and varied heritage. Throughout much of the history of the U.S. government, efforts to enhance cooperation among agencies and to strive for a proper division of labor among agencies have been undertaken. Historical and contemporary examples of shared responsibilities and overlapping jurisdictions, leading to interagency collaborations, abound. These differ, however, along several dimensions: major or minor; long-term or short-term; involving many entities or just a few; successful in accomplishing their purpose or unsuccessful; and operating under different rationales and restrictions. An early example was the federal government's response to the Whiskey Rebellion or Insurrection in 1794. In this precedent-setting case, President George Washington, accompanied by Secretary of the Treasury Alexander Hamilton, led a militia force (of nearly 13,000 troops) to rescue several Treasury agents and safeguard others as well as to enforce the excise tax on liquor. Sometime later, in the 1840s, the management of Indian reservations was shared between the Indian Bureau (also referred to as the Office of Indian Affairs) and the Department of War. Secret Service protection of the President—when the assignment for it began in 1894 and was regularized in the aftermath of President William McKinley's assassination in 1901—relied additionally, in certain situations, on the military, Coast Guard, National Guard, and the U.S. Post Office Department as well as state and local law enforcement. These initial arrangements were coordinated by the President's secretary (who performed a wide range of duties for the chief executive at the time, when there was no official chief of staff). In the early 1900s, Secret Service detectives, as they were then called, from the Department of the Treasury were loaned to conduct investigations to other departments; these included the Interior, which was engaged in a massive land fraud investigation at the time, and Justice, before it had established its own (Federal) Bureau of Investigation in 1908 (consisting mostly, incidentally, of former Secret Service personnel). Enforcement of Prohibition and the Volstead Act in the 1920s and early 1930s involved a number of federal agencies (along with multiple state and local authorities), extending from the Revenue Cutter Service, a precursor to the Customs Service, to the Coast Guard and the Prohibition Unit in Treasury. Throughout much of the 20 th century and into the current day, controlling U.S. borders—primarily to halt illegal immigration and smuggling of contraband, especially illicit drugs—has also involved many agencies. These entities—some of which have been abolished, transferred, merged, or reorganized during this lengthy period—include the Coast Guard; Customs Service; Immigration and Naturalization Service; Immigration and Customs Enforcement Bureau; Bureau of Narcotics; Drug Enforcement Administration; Office of National Drug Control Policy; Federal Bureau of Investigation; and various elements of the intelligence community, National Guard, and military services (in selective assignments and duties). Expanded or changed responsibilities in international relations and national defense in the aftermath of World War II, propelled by the early phase of the Cold War, launched perhaps the most massive reorganization in the history of the federal government. The National Security Act of 1947 established the National Security Council with interagency collaborative responsibilities; Director of Central Intelligence with some interagency coordinative authority, who also headed the new Central Intelligence Agency; Department of Defense (initially titled the National Military Establishment), which merged the new Department of the Air Force with the pre-existing Departments of the Army and Navy; and the Joint Chiefs of Staff with a consultative and collaborative role. Contemporary Developments More contemporary examples of interagency collaboration have extended to an increasing number and variety of policy and subject areas. One is security at National Special Security Events. NSSEs, which are relatively few occurring in any one year, are high-profile, large-scale events, such as presidential nominating conventions and international organizational meetings held in the United States. Beginning in the latter 1990s, as already mentioned, these efforts have been led by the Secret Service and involve a number of federal, state, and local governmental units as well as private sector organizations. Enhanced coordination of homeland security functions arose in the aftermath of the terrorist attacks on September 11, 2001, on the World Trade Center and Pentagon, followed the next month by anthrax powder being sent through the mails to government and news media offices. The homeland security arrangement initially relied on a then-new Office of Homeland Security and Homeland Security Council, created by executive order, and later, on the Department of Homeland Security and a Homeland Security Council, established by public law. In addition, significant changes in the intelligence community arose in the aftermath of 9/11 and the subsequent military involvement in Afghanistan and Iraq. Prominent among the changes was the establishment, in 2004, of the new post of Director of National Intelligence, with coordinative powers over 16 intelligence community components (already described). Another contemporary illustration, here dealing with environmental protection and conservation, is the revamped Chesapeake Bay Protection and Restoration program (discussed above). It is designed to create new shared federal leadership of the program, with an augmented coordination mandate and authority for the Environmental Protection Agency over a number of federal, state, and local governmental entities. Federal medical care programs have also relied on interagency mechanisms. For example, dental care for children from low-income families relies on a network of federal and state organizations in combination with public-private partnerships. In sum, these collaborative efforts extend beyond national security or homeland security—albeit, the most visible issue areas—to other varied policies and programs. Among these are protecting the environment; conserving natural resources; preparing for and responding to natural disasters and pandemics; restructuring the domestic financial sector; determining the safety and effectiveness of medications; regulating various consumer goods; implementing medical and social welfare programs; and granting security clearances. Along with these are the many interagency law enforcement endeavors, including apprehending fugitives, as well as detecting, preventing, and investigating credit card fraud, identity theft, trafficking in people, and illicit drug possession, use, sale, distribution, and production. Rationales for Interagency Collaboration These various collaborative arrangements and activities have advanced in the contemporary era for a number of reasons. Four major ones are: the growth and changing nature of governmental responsibilities; political and economic pressures to reduce the size and scope of these responsibilities and to cut federal expenditures; increases in the number, scale, complexity, and diversity of cross-cutting programs, with attendant increases in overlapping jurisdictions and shared responsibilities among agencies; and the urgency and importance—in several notable cases (e.g., the September 11, 2001, terrorist attacks and the 2005 Gulf Coast hurricanes)—of restructuring the government's response to crisis situations. These developments have led to clarion calls for improved collaboration, coordination, or clarification of functions and duties—along with other ways to enhance cooperation—among agencies with shared responsibilities and overlapping jurisdictions. Rationales for interagency collaboration are multiple in number and dimensions. Some of the rationales lend themselves to subcategories, differ in importance and currency, or overlap with and reinforce others. Moreover, the rationales not only embody policy-oriented benefits by a collective—for example, a product or service that is more effective and efficient than it would be otherwise—but also can bring about possible advantages or benefits for individual participants. Agencies engaged in collaborative efforts, for instance, might find mutual or reciprocal benefits for themselves or might gain support for certain vested interests. These possible advantages might accrue directly or indirectly (e.g., to increase their own capabilities, improve their own products and services, or learn about different operational practices). Another by-product might be that collaborating on one project results in a quid pro quo among the participants. Yet another might be building compatible and reinforcing relationships over the long term with other participants. Some selective rationales for interagency collaboration—and the problems to be addressed—follow. End or Reduce Policy Fragmentation Without interagency collaboration, policymaking and its implementation are likely to be fragmented and divided among agencies with overlapping jurisdictions and shared or related responsibilities. Possible results of this condition, which collaboration could minimize, are uncertainty over existing and future roles and responsibilities of individual agencies, lack of a clear and common direction, or an ignorance of other agencies' responsibilities and activities in the same realm. Agencies operating alone, moreover, might be given contradictory tasks, compete with one another, or even work at cross-purposes. Fragmented jurisdiction among multiple congressional committees has also been seen as reinforcing the same condition in the executive, resulting in uncoordinated responsibilities, mandates, and policy implementation. Interagency collaboration could help to reduce such fragmentation (in both branches), by encouraging a realignment of committee jurisdictions, at least for certain programs, projects, or operations. (Competing viewpoints, however, might be raised against more far-reaching consolidations of jurisdictions of congressional committees as well as of executive agencies. ) Improve Effectiveness in Policy Formulation and Implementation Improving effectiveness in policy formulation and implementation could result from collaborative efforts by bringing a variety of experiences, expertise, and capabilities to bear on a problem area along with possible additional resources. Agencies operating jointly on a program, moreover, are more likely to be alert to its overall demands and requirements than if operating individually. Make Agencies Aware of Different Perspectives and Orientations Following this same line of reasoning, agencies in collaborative efforts—versus ones operating alone—could be made aware of different perspectives in dealing with common problems. The different perspectives might focus on a single policy or might encompass a broad program. In either event, an agency might see benefits from different vantage points and viewpoints, in effect, expanding its horizons and adding to the ways it approaches policy formulation and implementation. Mitigate Conflict Among Agencies Interagency conflict—often characterized as "turf battles"—occurs for a variety of reasons. Among others are competition over subject and policy areas, missions and strategies, jurisdictions, funding and resources, and status, as well as personal rivalries among officials. A result of these is a failure of or limitation on interagency cooperation. A formalized interagency collaborative process—requiring agencies to work together on a project or program—might overcome or at least mitigate such conflicts. Increase Agency Productivity Enhancing the productivity of agencies might occur through interagency collaborative efforts, by making each participant aware of other ways of conducting operations and activities. An agency operating in isolation would not necessarily be aware of its own inadequacies in implementing policies, let alone ways to overcome these. Enhance Efficiency, Reduce Redundancy, and Cut Costs Increasing the efficiency of public policy implementation and, as a corollary, lowering costs could occur by reducing or eliminating redundancy and duplication of effort, in which two or more agencies carry out similar or identical tasks. In such cases, each affected agency might be paying for services, supplies, equipment, facilities, and personnel that could otherwise be shared among several. Recognizing this redundancy could also lead to a reduction in each agency's participation in a program—increasing economy and efficiency—without necessarily reducing the program's overall effectiveness. By interacting with other agencies, moreover, each participant might become aware of various other cost-saving techniques and "best practices" in managing their organization and operations. Heighten the Attention to and Priorities for Cross-Cutting Programs When agencies operate in relative isolation, they might not be fully aware of their involvement in the growing number, importance, and complexity of programs that overlap with other agencies' jurisdictions and responsibilities. Recognizing this overlap, collaborative enterprises heighten the attention of the participants to such cross-cutting programs and could promote these as priorities. Change Organizational Cultures Agency-centered organizational cultures view their own operations, responsibilities, and priorities through a single prism. Such a myopic view discourages working with other agencies, adopting other orientations, and adapting to new demands and duties. Changing organizational cultures from ones that are agency-centered to ones that are interagency-oriented could result from and lead to more collaborative endeavors. The lessons of such experiences, even in a single field, might transfer to other policy areas and efforts. Increases in information-sharing, for instance, could result from interagency collaboration, leading to more information being shared, more relevant and directed information being transmitted to the right consumers, and more information being sent quickly in real time, that is, when it is needed. Change Bureaucratic and Administrative Cultures and Methods of Operation The bureaucratic and administrative cultures of an organization help to determine the way it operates internally. This includes setting the criteria and standards for hiring and promoting personnel; providing incentives to engage in certain operations, assignments, and duties; and evaluating the productivity of offices and bureaus as well as personnel. Without collaborative efforts, agencies might hold on to cultures that rely heavily on traditional methods of operation, including ones that do not favor or support interagency efforts. In addition, learning how other agencies operate could provide a different orientation and focus for both employees and management. Transformations into cultures that recognize and support joint efforts might encourage a redesigning of incentives and rewards for interagency efforts; complementary and common training and educational programs; creation of long-term joint enterprises or an increase in temporary, ad hoc exercises and operations; and development of other compatible processes and reciprocity in certain exchanges (of information and personnel, for instance). Streamline and Improve Congressional and Executive Oversight Congressional and executive oversight of programs and projects—the review, monitoring, and supervision of policy implementation—might be hampered by piecemeal approaches resulting from agencies operating alone rather than in concert with others. A constricted view among overseers focuses on only a part or parts of a program, based on individual agency jurisdictions, authorizations, and funding, rather than looking at the whole or a combination of agencies and activities. (See also the related rationale " End or Reduce Policy Fragmentation ," above.) Collaborative arrangements lend themselves to a more comprehensive oversight perspective, because of the cross-agency responsibilities which cover a number of entities involved in an enterprise. As an outgrowth, it is possible that congressional panels and executive entities (such as the Office of Management and Budget, National Security Council staff working groups, or various presidential advisors in relevant areas) could review interagency collaborations as collectives rather than in parts. Such oversight efforts, in league with other developments, have been seen as encouraging and sustaining improvements in policy implementation as well as identifying duplicative programs. Extending this line, the House Rules for the 112 th Congress contain a new provision regarding possible duplicative programs. It requires that standing committees, when developing their oversight plans for that Congress, "include proposals to cut or eliminate programs, including mandatory spending programs, that are inefficient, duplicative, outdated, or more appropriately administered by State or local governments." Independent oversight units—such as GAO, which has a 2010 statutory mandate to identify duplicative programs annually, independent evaluators, and inspectors general, as well as specially created boards and commissions —already possess some authority to review interagency operations. Reflecting this, for example, is a charge in the Inspector General Reform Act of 2008; it directs the Council of the Inspectors General for Integrity and Efficiency (CIGIE) to develop and coordinate interagency and interentity audits, investigations, inspections, and evaluation programs and projects. In addition, relevant provisions in the Government Performance and Results Act (GPRA) can be used for such interagency oversight endeavors. Another concern arising from fragmented congressional oversight is that agency officials are spread thin and are possibly confronted with competing policy demands and priorities. Officials testify before multiple congressional committees and subcommittees, meet with many Members and staff, comply with numerous reporting requirements, and respond to multiple requests for information and data. Collaborative ventures could reduce such duplication of effort, freeing up agency officials for other purposes, and could reduce the cross-pressures on agencies that might result in working at cross-purposes. Finally, such collaborative arrangements could regularize and reinforce working arrangements among relevant agencies and with principal congressional overseers. Concerns and Questions about the Rationales Rationales are positive and promotional. Concerns and questions, however, might arise over whether performance can match the promise. Individual rationales, for instance, might rest on assumptions that are presented as givens rather than on assumptions that are explicitly defended. Along with this, some rationales—such as improving effectiveness, efficiency, and economy—might not be compatible goals in all cases. For instance, start-up costs and possible downtime for personnel transferred to a new interagency arrangement (designed to improve effectiveness) could result in higher initial expenditures for the new arrangement vis-à-vis the existing non-collaborative approach. Another reason for possible higher expenditures of a collaborative venture over a non-collaborative one could involve added funding for the former. Its promoters might expect that a joint venture would use additional funding more productively as a collective than if it were dispersed among independent units operating separately. This could improve effectiveness and productivity but would cost more. Moreover, interagency arrangements designed to improve performance in one area might hinder it in another. An interagency arrangement added for one purpose might take away from some of the participants' other responsibilities, mandates, and priorities. That is because interagency arrangements are not without cost to the participants in terms of funding, resources, personnel, and attention. Transfer of these to an interagency effort would remove them from the participants' other responsibilities and functions, unless off-setting developments occurred: new resources were added, the collaborative workloads were shared equitably, or the interagency arrangement resulted in increased efficiency and economy for the participants. Other concerns might arise over particular types of arrangements or their operation. First of all, private sector organizations involved in public-private partnerships might not be equal to the challenge, because they might lack the capacity, capability, resources, and range of services needed. As another matter, some partnerships, at least in certain arenas, have resulted in the government agency being "captured" by the private industry it is supposed to be regulating; this can occur, in some cases, because the government regulators are dependent on the private companies for data, information, and self-regulation to a degree. Public-private partnerships might also be transformed into "iron triangles," "cozy little triangles," or "subgovernments." These terms refer to alliances of private entities and public agencies, sometimes supported by congressional panels, that develop mutually reinforcing relationships; these, in turn, can dominate a policy area, often without adequate outside checks and controls. Public-private partnerships might also lead to so-called "shadow government." This (negative) characterization is applied to a structure in which a government agency no longer possesses the necessary capacity to carry out certain functions and duties, because its capabilities have been ceded to the private sector through extensive outsourcing. (By comparison, others view private sector involvement as not only a vital ally but also a vitalizing force in implementing public policy.) A separate concern is that the management and oversight of contractors and others in public-private partnerships might prove difficult or beyond the capabilities of the contracting organizations. This could occur because of deficiencies and flaws in how well a federal agency or private company manages and oversees contracts. The executive, importantly, might not possess sufficient expertise, experience, or resources to oversee private sector operations effectively; and, consequently, the government might rely on the private sector to do so. This could result in a low priority for and commitment to adequate management and oversight; a lack of neutrality, objectivity, and impartiality; (the appearance of) a conflict of interest; and waste, fraud, and abuse. Problems might also arise because of certain restrictions on government access to relevant information, data, and personnel of the private contractors. Another limitation on effective oversight of such partnerships arises for two reasons: (1) the multiple levels and sources of contracting—sometimes reaching three or four deep and covering many individual operators—and (2) the bundling of contracts, in which offerings for a number of different purposes are combined in a single letting. Both of these complexities complicate audits, evaluations, and investigations, making it difficult to determine clearly responsibility for a project or program and its effectiveness. Furthermore, (inordinately) high expectations for a collaborative effort might be overly ambitious, thereby undervaluing any improvements, in the view of some observers. In addition, some collaborative efforts might lack the capacity and capability to fulfill even modest expectations. Extending this line of reasoning, one public administrator and policy analyst viewed effective interagency coordination as not just elusive but, to some degree, illusory, as a search for the "Philosopher's Stone." Finally, it is not always certain that an interagency collaborative arrangement is more effective or efficient than what it replaced. At least in some cases, it is difficult to assess and compare the success or failure of such enterprises. Difficulties in Assessing the Success of Interagency Collaboration Several difficulties arise in attempting to assess accurately and reliably the success of interagency collaborative arrangements, their initiation, evolution, and impact. As background, first of all, there appear to be no systematic, comprehensive, long-term, current analyses or comparisons of such arrangements to assess how well these met their purposes and rationales. Nonetheless, two studies—a distant one commissioned by a Senate select committee in 1937 and a recent one required by Congress and assigned to GAO in 2010 —provide information, data, and frameworks of analysis regarding interagency collaborative activities and arrangements (or their absence) across multiple policy and program areas. To provide reliable comprehensive, systematic assessments, analyses could examine one type of interagency arrangement over time or across different settings and policy areas; compare different types in one or more areas; or, perhaps most importantly, compare a new interagency collective arrangement with a dispersed and decentralized structure it replaced. None of these would be easy or inexpensive to accomplish. Reliable assessments of success and its counterpoint (failure), moreover, are hampered for several reasons. A fundamental one is how success is defined and determined in particular cases, including the setting of appropriate and reasonable criteria and standards for measuring it. Because there are different types of collaborative ventures—established for different purposes and with different powers—each might require different criteria and standards. Along with this, the perceived success at the end of a project or throughout an ongoing enterprise is in part determined by the expectations and objectives for the collaboration at its beginning (as noted above). Accompanying this, the success of a collaborative enterprise is not necessarily an absolute. Instead, it might be partial: meeting certain standards but not others; meeting some sooner than others; or meeting some expectations but not others. Different estimations of success could also depend on who is conducting the evaluation—agency officials or a separate body, such as GAO, an independent evaluator, or an office of inspector general—and what qualifications they possesses. Finally, a variety of other conditions and factors (discussed further below) influence the establishment, operation, and performance of an interagency arrangement. For instance, a major interagency conservation effort could be aided or damaged by significant changes in the environment, which might be difficult to control for in any assessment. As another illustration, assessments of public-private partnerships engaged in "welfare-to-workfare" programs would have to take into account various other conditions which could affect their impact. These include, among others, the skills, training, and experience of the unemployed; the state of the overall job market, which influences competition for employment opportunities; the availability of appropriate-level jobs; and the accessibility of support services, such as public transportation and day-care, if needed. Factors Affecting the Adoption, Evolution, and Impact of Collaborative Arrangements Collaborative arrangements differ in structure, organization, authorities, purposes, size, scope, scale, life-span, and expectations. One scholar recognized tensions and competitions—including political and organizational ones—surrounding agencies and other parties in initiating and maintaining interagency collaborative efforts. Such rivalries led to conflict among the involved agencies and related congressional committees. These also led, in some cases, to conflicts between agencies, on the one hand, and various entities in the Executive Office of the President (if these are involved), on the other, and to conflicts between the executive and legislative branches. A number and variety of factors engender or endanger collaborative arrangements—whether these are initiated, maintained, transformed, or abolished—and determine their strengths and weaknesses. These factors—both formal and informal, tangible and intangible—extend across three basic levels: systemic, structural and institutional, and individual. Included are: transformations in governmental responsibilities and broad-scale, wide-ranging public policies; significant changes in the political and governmental environment surrounding a (potential) collaborative effort, including the substance and direction of the policy area, electoral developments, officials in government, and organizational characteristics of the agencies involved; the urgency, scope, scale, and complexity of the problem being addressed; expectations of what is to be accomplished and determining how extensive and demanding these expectations are, for the project and for the participants; extent of a merger, realignment, or reorganization; selection of which agencies or parts thereof are to be incorporated, in what capacity, and to what extent and degree; location of a new structure that merges or integrates different agencies; selection of a lead agency or officer in coordinative arrangements; powers and resources available to a lead officer in a cross-agency arrangement, including those which already exist across-the-board, which apply to a specific project or program, or which are anticipated; autonomy of the individual components; organizational cultures within the agencies; bureaucratic and administrative cultures within the agencies; competition of a collaborative enterprise with other missions, mandates, responsibilities, strategic plans, and policy priorities among and within the participating agencies; jurisdictional rivalries or "turf battles" among the agencies; support for interagency collaboration versus support for agency autonomy, from power-brokers both inside and outside of government; regularity, frequency, intensity, and direction of oversight by Congress and the executive; incentives for and benefits of participation (mutual and reciprocal among agencies, agency-centered, or individual); disincentives and costs of participation; level and type of involvement, with policy and process formulation at one end of the spectrum and field operations at the other end; capacity, capabilities, heritage, experience, and expertise of the agencies involved in a joint venture; leadership skills and practices of the participants; and confidence in the professionalism, competency, and integrity of the participants. Conclusions and Observations In 1937—following the first phase of the New Deal expansion of government responsibilities and the earlier (largely unsuccessful) multi-agency effort to enforce Prohibition and the Volstead Act—the Senate created a Select Committee to Investigate the Executive Agencies of the Government with a View to Coordination. The panel commissioned a study by the Brookings Institution, whose extensive and detailed report concluded that "to prevent duplication and, what is worse, working at cross purposes, it is essential that coordinating mechanisms be established and maintained." This conclusion and other complementary ones resonate in the contemporary era. In 2011, President Barack Obama, expanding on his State of the Union address, emphasized that We live and do business in the information age, but the organization of the Federal Government has not kept pace. Government agencies have grown without overall strategic planning and duplicative programs have sprung up, making it harder for each to reach its goals…. In areas as varied as surface transportation to job training, public health, and education, I have proposed to consolidate scores of programs into more focused, effective, and streamlined initiatives. Legislative initiatives have also called for overarching studies and advanced recommendations, both broad and selective. The House of Representatives added a section to its Rules for the 112 th Congress, to require committees, during the development of their oversight plans, to "include proposals to cut or eliminate programs, including spending programs, that are inefficient, duplicative, outdated, or more appropriately administered by State or local governments." Previously, in 2010, Congress directed the Government Accountability Office to look into a similar phenomenon annually: to identify "areas of potential duplication, overlap, and fragmentation, which, if effectively addressed, could provide financial and other benefits." The first GAO report found 34 areas where agencies, offices, or initiatives have similar or overlapping objectives or provide similar services to the same populations; or where government missions are fragmented across multiple agencies or programs. These areas span a range of government missions…. Within and among these missions, this report touches on hundreds of federal programs, affecting virtually all major federal departments and agencies…. Reducing or eliminating duplication, overlap, or fragmentation could potentially save billions of tax dollars annually and help agencies provide more efficient and effective services. As these legislative and executive reviews reflect, the concerns raised decades ago have been heightened in the contemporary era, because of the further growth in government responsibilities, cross-cutting programs, and complexities in public policies. Added to this are certain crises which demonstrated the inadequacies of existing structures and arrangements, along with increased pressures to reduce federal programs and budgets. One response has been support for new, expanded, or improved interagency collaborative arrangements. Today's objectives underlying this refine and add to the earlier goals of preventing duplication and cross-purposes. Current rationales extend to a number and variety of objectives. These include reducing policy fragmentation, improving effectiveness, increasing economy and efficiency, mitigating conflict and competition among agencies, enhancing agency productivity, developing an awareness of different perspectives and orientations, changing organizational and administrative cultures, and streamlining and improving executive and congressional oversight. Different types of interagency activities and arrangements are available to help bring about joint efforts and cooperation among separate federal agencies with shared responsibilities and overlapping jurisdictions. Six principal types—each given a working understanding and illustrated with examples here—are collaboration, coordination, integration, mergers, networking, and public-private partnerships. Using these concepts with clarity, consistency, and consensus, however, can meet a number of obstacles. First of all, there is no agreed-upon straightforward, precise definition of them in the media, academic studies, statutes, or executive directives, where different types might be called for but without detailed descriptions or directions. And their applications and understandings—along with their use in combination or as hybrids—are subject to a number of influences, including the setting, time, and heritages among diverse governmental organizations. Consequently, the terms have sometimes been employed interchangeably, inconsistently, or ambiguously. Despite the large and increasing adoption and promotion of interagency arrangements, questions arise over their rationales and underlying assumptions. It is not always certain how successful some of the interagency arrangements are, either among or within the different types or over time. Part of the reason for this is the difficulty of conducting valid and reliable assessments of interagency arrangements. This hurdle is made higher in attempts to compare one interagency arrangement to another, to a predecessor non-collaborative experience, or even to the same arrangement over time, because of changing conditions and intervening developments. Accompanying the difficulties in evaluating interagency collaborative arrangements are the numerous factors that influence them. These include their political environment and policy context, as well as the resources, independence, authority, membership, leadership, and operational experience of the agencies involved. Such factors are analytically distinct on paper but are hard to account for separately in practice. Selective Bibliography on Interagency Collaboration71 Overarching Studies on Interagency Arrangements Abramson, Mark A., et al. "Increasing Collaboration." Four Trends Transforming G overnment . IBM Center for the Business of Government. 2003. pp. 14-15. Available at http://www.businessofgovernment.org . Bardach, Eugene. Getting Agencies to Work Together: The Practice and Theory of Managerial Craftsmanship . Brookings Institution: Washington, DC, 1998. Congressional Research Service. CRS Report RL31357, Federal Interagency Coordinative Mechanisms: Varied Types and Numerous Devices , by [author name scrubbed]. Garrison, David (Counselor to the Deputy Secretary, U.S. Department of Health and Human Services). Interagency Collaborations: Are There Best Practices Or Just Good Practice? A Report to the President's Management Council Via the National Partnership for Reinventing Government . January 18, 2001. Government Accountability Office. Managing For Results: Barriers to Interagency Coordination . March 2000. GAO/GGD-00-106. _____. Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue . March 2011.GAO-11-318SP. _____. Results-Oriented Government: Practices That Can Help Enhance and Sustain Collaboration Among Federal Agencies . October 2005. GAO-06-15. Linden, Russ. "Collaborative Intelligence." Public Manager , vol. 39, Spring 2010. pp. 20-26. Podesta, John, et al. A Focus on Competiveness: Restructuring Policy Making for Results. Center for American Progress: Washington, DC, 2010. pp. 1-10. Salamon, Lester M., ed. The Tools of Government: A Guide to the New Governance . Oxford University Press: New York, 2002. Schick, Allen. "The Coordination Option." In Peter Szanton, ed. Federal Reorganization: What Have We Learned? Chatham House Publishers: Chatham, NJ, 1981. pp. 85-113. Seidman, Harold. "Coordination: The Search for the Philosopher's Stone." Politics, P osition and Power: The Dynamics of Federal Organization (Fifth Edition). Oxford University Press: New York, 1998. pp. 142-157. Stanton, Thomas H. Improving Collaboration by Federal Agencies: An Essent ial Priority for the Next Administration. National Academy of Public Administration: Washington, DC, 2007. Stanton, Thomas H. Moving Toward More Capable Gover nment: A Guide to Organizational Design. The PricewaterhouseCoopers Endowment for the Business of Government, 2002. Available at http://www.endowment.pwcglobal.com . Stanton, Thomas H. and Ginsberg, Benjamin, eds. Making Government Manageable: Executive Organization and Management in the Twenty-First Century . Johns Hopkins University Press: Baltimore, MD, 2004. Twitchell, David G., et al. "Overcoming Challenges to Successful Interagency Collaboration " Performance Improvement . March 2007, vol. 46, pp. 8-15. U.S. Senate Select Committee to Investigate the Executive Agencies of the Government with a View to Coordination [Byrd Committee]. Investigation of Executive Agencies of the Government: Preliminary Report [prepared by the Brookings Institution]. S. Rept. 75-1275, 75 th Congress, 1 st sess. Washington, DC: GPO, 1937. Wilson, James Q. Bureaucracy: What Government Agencies Do and Why They Do It. Basic Books: New York, 1989. pp. 268-274. Homeland Security Interagency Structure Congressional Research Service. CRS Report R40602, The Department of Homeland Security Intelligence Enterprise: Operational Overview and Oversight Challenges for Congress , by [author name scrubbed]. _____. CRS Report RL33042, Department of Homeland Security Reorganization: The 2SR Initiative , by [author name scrubbed] and [author name scrubbed]. _____. CRS Report RL31148, Homeland Security: The Presidential Coordination Office , by [author name scrubbed]. _____. CRS Report RS22754, National Special Security Events , by [author name scrubbed]. _____. CRS Report RS22840, Organizing for Homeland Security: The Homeland Security Council Reconsidered , by [author name scrubbed]. _____. CRS Report R41520, Securing America's Borders: The Role of the Intelligence Community , by [author name scrubbed] Ervin, Clark Kent [former Acting Inspector General of the Department of Homeland Security]. Chapters on "The Failure of Intelligence," "Preparing for a Catastrophic Attack," and "Conclusion: Closing the Vulnerability Gap." Open Target: Where America Is Vulnerable to Attack . Palgrave Macmillan: New York, 2006. George, Roger and Rishikof, Harvey, eds. The National Security Enterprise : Navigating the Labyrinth . Georgetown University Press: Washington, DC, 2011. Federal Emergency Management Agency. National Response Framework and Strategic Plan . 2010. Both available at http://www.fema.gov/about/indx.shtm . Kaiser, Frederick M. "Creating the Department of Homeland Security: An Old Approach to a New Problem." In Stanton, Thomas H., ed. Meeting the Challenge of 9/11: B lueprint s for a More Effective Government . M.E. Sharpe: Armonk, NY, 2006. pp. 93-104. Kean, Thomas H. and Hamilton, Lee H. (co-chairs). Bipartisan Policy Center. National Security Preparedness Group. In U.S. Senate Committee on Commerce. The State of Aviation Security , testimony at hearings, 111 th Congress, 2 nd sess. January 20, 2010. Available at http://bipartisanpolicy.org/library/testimony/congressman-lee-hamilton-and-governor-tom-kean . Stanton, Thomas H., Ed. Meeting the Challenge of 9/11: Blueprints for More Effective Government . M.E. Sharpe: Armonk, NY, 2006. U.S. Commission on the Prevention of Weapons of Mass Destruction Proliferation and Terrorism. World at Risk: Report . 2010. Available at http://www.preventionwmd.gov/reort . U.S. National Commission on Terrorist Attacks Upon the United States [9/11 Commission]. Final Report . Washington, DC: GPO, 2004. U. S. Senate Committee on Governmental Affairs. Border Management Re organization and Drug Interdiction (Prepared by the Congressional Research Service). S. Prt. 100-111, 100 th Congress, 2 nd sess. Washington, DC: GPO, 1988. The volume includes an extensive collection of studies and recommendations from Congress, the executive, and private sector that date to 1912, along with three CRS analyses: Kaiser, Frederick M. "Border Management Reorganization," pp. 1-36; Bazan, Elizabeth B. and Fields, Lou. "Illustrative Sources of Federal Law Enforcement Authority Related to Border Management," pp. 37-52; and Hogan, Harry L. "Drug Smuggling," pp. 53-61. National Security Interagency Structure Congressional Research Service. CRS Report RL34565, Building an Interagency Cadre of National Security Professionals: Proposals, Recent Experience, and Issues for Congress , by [author name scrubbed]. _____. CRS Report R41295, Intelligence Reform After Five Years: The Role of the Director of National Intelligence (DNI) , by [author name scrubbed] _____. CRS Report RL30840, The National Security Council: An Organizational Assessment , by [author name scrubbed] _____. 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Personnel Security Clearances: Overall Progress Has Been Made to Reform the Governmentwide Security Clearance Process (statement of Brenda Farrell, Director, Defense Capabilities and Management). GAO-11-232T. December 1, 2010. _____. Personnel Security Clearances: Progress Has Been Made to Improve Timeliness bu t Continued Oversight Is Needed to Sustain Momentum. GAO-11-65. November 19, 2010. U.S. Senate Subcommittee on Oversight of Government Management, the Federal Workforce and the District of Columbia. Security Clearance Reform: Setting a Course for Sustainability . Hearing, 111 th Cong., 2 nd sess. November 16, 2010. Miscellaneous Studies on Interagency Collaboration Congressional Research Service. CRS Report R40856, The Debate Over Selected Presidential Assistants and Advisors: Appointment, Accountability, and Congressional Oversight , by [author name scrubbed] et al. _____. CRS Report RL31446, Reorganizing the Executive Branch in the 20 th Century: Landmark Commissions , by [author name scrubbed]. Dean, Alan L. and Ink, Dwight. "Modernizing Federal Field Operations." Making Government Manageable: Executive Organization and Management in the Twenty-First Century. Thomas H. Stanton and Benjamin Ginsberg, Eds. Johns Hopkins University Press: Baltimore, MD, 2004. pp.192-197. Environmental Protection Agency. Guidance for Federal Land Management in the Chesapeake Bay (May 12, 2010) and Chesapeake Bay Program (regularly updated). Both available at http://www.epa.gov/region03/Chesapeake/indx.htm . Goldsmith, Steven and Donald F. Kettl. Eds., Unlocking the Power of Networks: Keys to High -P erformance Government . Brookings Institution: Washington, DC, 2009. Kamensky, John M. "Regulatory Partnerships: Good or Bad?" The Business of Government . Fall/Winter 2010, pp. 61-64. Meriam, Lewis and Schmeckebier, Laurance F. 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Interagency collaboration among federal agencies with overlapping jurisdictions and shared responsibilities is not a new phenomenon. Attempts to foster cooperation among agencies, reduce their number in particular policy areas, or clarify the division of labor among them date to the early days of the republic. Such arrangements are increasing in the contemporary era in number, prominence, and proposals across virtually all policy areas. The reasons for the current upsurge are the growth in government responsibilities, cross-cutting programs, and their complexity; certain crises which showed severe limitations of existing structures; and heightened pressure to reduce the size of federal programs and expenditures. Recent congressional action reflects these considerations. In 2010, Congress directed the Government Accountability Office (GAO) (P.L. 111-139, 124 Stat. 29) to conduct routine investigations to identify programs, agencies, offices, and initiatives with duplicative goals and activities within Departments and governmentwide and report annually to Congress on the findings, including the cost of such duplication. GAO identified 34 such programs. The GPRA Modernization Act of 2010 (P.L. 111-352) provides that the Office of Management and Budget's government-wide priority goals include "outcome-oriented goals covering a limited number of crosscutting policy areas." Legislative initiatives in the 112th Congress have also advanced across-the-board reviews (e.g., H.R. 155) or recognize shared jurisdictions and responsibilities among agencies. And House Rules for the 112th Congress call on its standing committees to include proposals in their oversight plans to eliminate "programs that are inefficient, duplicative, outdated, or more appropriately administered by State or local governments." President Barack Obama has taken similar stands regarding overlapping programs—in his 2011 State of the Union Address, subsequent memoranda, and recent budget requests—and the executive has continued ongoing arrangements or added new ones. The broad concept of interagency collaboration contains at least six types of various activities and arrangements: collaboration (an exchange among relatively equal entities or peers, separate from collaboration's broad use), coordination, mergers, integration, networks, and partnerships. These categories often overlap with, supplement, or reinforce one another; and several different types may occur in the same organizational structure and endeavor. Complicating matters, the different types are not defined in public laws or executive directives, even though required in some. Because of this and other reasons, the terms have sometimes lacked consistency and precision, have been used interchangeably, or have been applied to more than one category. Nonetheless, working definitions can be developed for the different types. All of these are surrounded by a number of rationales, intended to enhance collaboration, improve coordination, or clarify responsibilities and jurisdictions among agencies. The underlying objectives and expectations range from reducing policy fragmentation and mitigating competition among agencies, to enhancing efficiency and effectiveness, changing organizational and administrative cultures, and streamlining and improving congressional and executive oversight. Despite these appeals, concerns and questions have arisen over some of the rationales and their underlying assumptions as well as determining the success or failure of interagency efforts. This report—which will be updated as conditions dictate—examines the burgeoning field of interagency collaboration and presents a bibliography at the end, highlighting the broad subject as well as specific areas.

Introduction The rulers of the former Soviet Union proclaimed the high quality of their socialized healthcare system. During this period, health information was closely guarded and some official health statistics were viewed by outside experts as highly suspect. Soviet data showed numbers of hospital beds and doctors per capita as among the highest in the world and life spans comparable to those in other developed countries. As became more apparent after the Soviet collapse at the end of 1991, such data were often incomplete or falsified and covered up substantial and growing health problems. The newly independent Eurasian states of the former Soviet Union faced problems sustaining the huge, expensive, and ineffective healthcare systems they inherited. Health conditions seemed to deteriorate during the 1990s, as measured by life expectancy at birth, infant and maternal mortality, drug addiction, rates of infectious disease, and other measures. Efforts to turn around this state of affairs accelerated in the 2000s, but in many respects these states still face some health challenges common to developing countries. These challenges, according to many observers, continue to hinder economic and democratic development in the states. The Eurasian states and international organizations are the sources of data used in this report. In some cases, international organizations have provided estimates when the data supplied by the Eurasian state have not complied with the data definitions of the World Health Organization. Besides healthcare quality and access, factors affecting health touched on but not analyzed in detail in this report include poverty rates, conflict, living and working conditions, and the environment. Overview of U.S. Policy U.S. health assistance to Eurasia began even before the collapse of the Soviet Union with a public-private medical aid program to distribute pharmaceuticals and medical supplies to the Soviet republics. Later, the George H.W. Bush and Clinton Administrations led international efforts to address needs in Eurasia, including health needs to some degree. The 1992 FREEDOM Support Act ( P.L. 102-511 ), the major authorization for aid to Eurasia, included the provision of medicine and medical supplies and equipment and other aid to create quality healthcare and family planning services as among the priorities of U.S. assistance. In the early 1990s, however, U.S. and Western donors lacked a clear picture of health conditions in the Eurasian states—largely because of the mostly sanguine picture painted by Soviet health officials—and some donors tended to assume that a short-term aid infusion would put Eurasian health systems "back on their feet" in a short time. It later became clear that the Eurasian states faced massive health problems that would be hard to ameliorate. As related by the U.S. Agency for International Development (USAID), "the assumption underlying USAID assistance programs to Europe and Eurasia at the beginning of the 1990s was that democratic reform and free-market economic growth would sustain and improve social sector conditions, including health." However, the complexities and pre-existing inadequacies of healthcare in the region belied this assumption, according to USAID. U.S. Security and Health Assistance to Eurasia In recent years, U.S. policymakers have increasingly been concerned with global disease threats and other health problems. This increased attention began with a January 2000 unclassified National Intelligence Estimate (NIE) on the implications for U.S. national security of rising infectious disease outside U.S. borders. According to the NIE, infectious diseases could add to political, military, social, and economic disorder in the Eurasian states and otherwise set back democratic and free market reforms. Such instability might further complicate U.S. arms control cooperation and efforts to contain the proliferation of weapons of mass destruction. In addition, the NIE cautioned that Eurasian militaries and populations could face increased health problems, harming the national security of the Eurasian states and diminishing the effectiveness of the militaries in international peacekeeping. Also, military forces and populations with significant health problems could become agents for the spread of diseases among U.S. forces involved in international exercises and training and to the U.S. homeland population. However, the terrorist attacks on the United States on September 11, 2001, the spread of anthrax in the United States by mail later in the year, and the more recent foreign threats of new or lesser-known diseases such as the West Nile virus, severe acute respiratory syndrome (SARS), the H5N1 ("bird flu") virus, and the H1N1 ("swine flu") virus have heightened policy concerns about biological terrorism and international disease threats to the U.S. homeland and U.S. foreign interests. In September 2002, the National Intelligence Council (NIC) issued a follow-on report to its Global Infectious Disease Threat NIE which highlighted the threat of HIV/AIDS and other infectious diseases in countries of strategic importance to the United States, including Russia. This new report warned that infectious diseases could "exacerbate social and political instability in key countries," and threaten the United States, since it is a major hub of world travel with a large number of citizens residing overseas. The report stated that major means of combating the infectious disease threat, as well as biological terrorism, include the establishment of effective global surveillance and response systems, but that the lack of capacity, funds, and commitment in many Eurasian states stymie such efforts. In response to a request from the Undersecretary of State for an update to the Global Infectious Disease Threat NIE, the National Intelligence Council issued Strategic Implications of Global Health in December 2008. This Intelligence Community Assessment (ICA) expanded the concerns of the earlier NIE to include maternal mortality, malnutrition, chronic diseases, the availability of basic healthcare, and other non-infectious health issues that could affect the economies, governments, and armed forces of countries and regions of strategic interest to the United States. These health issues could impact the U.S. Homeland through diseases and declining economic and security cooperation with Eurasia. The report warned that continuing significant health problems in Russia could eventually set back its efforts to diversify its economy away from reliance on oil and gas exports and harm its military readiness. The report warned that U.S. joint missions with the armed forces of Russia could be compromised if Russian troops were not able to perform adequately because of poor health. Faltering healthcare and rising levels of infectious disease and non-infectious conditions could contribute to economic decline, increased authoritarianism, and regime instability in Eurasian and other developing countries. Former Director of National Intelligence Dennis Blair included the findings of the report in his 2009 and 2010 annual threat assessment testimony to Congress. In November 2009, the National Security Council released a National Strategy for Countering Biological Threats which warned that "in today's interconnected world, an outbreak of highly communicable disease anywhere on the globe increases the risk to everyone...." The Strategy called for reducing such threats to the United States by "improving global access to the life sciences to combat infectious disease.... establishing and reinforcing norms against the misuse of the life sciences; and ... coordinat[ing] activities that collectively will help influence, identify, inhibit, and/or interdict those who seek to misuse the life sciences." In meeting these goals, the Strategy called for "ensuring the global availability of ... capabilities such as disease surveillance and detection to mitigate the risks from natural, accidental, and deliberate outbreaks [and] ensuring that communities can quickly and effectively respond to large outbreaks of infectious disease." By enhancing the ability of communities to respond to disease outbreaks, the Strategy avers, deliberate biological attacks are deterred or minimized if they do occur. The Strategy also calls for improving data reporting on infectious disease outbreaks and on the capacity of the global health community to "manage risks from naturally occurring and deliberately introduced infectious diseases." Hailing a "strong track record" by the United States over the past few years in reducing the risks posed by "legacy biological weapons programs" in Eurasia, the Strategy details that these efforts have included redirecting the research of former weapons scientists, repurposing or decommissioning facilities and equipment, and enhancing safe and secure work with high-risk pathogens and toxins." U.S. Agencies Involved In Healthcare Assistance to Eurasia U.S. policymaking on health issues in Eurasia involves the State Department's Office of the Director of Foreign Assistance, the Bureau of European and Eurasian Affairs, the Bureau for South and Central Asian Affairs, the Office of the Coordinator of U.S. Assistance to Europe and Eurasia, the Office of International Health Affairs, and USAID, and the Department of Health and Human Services (HHS) and other agencies. The State Department's Coordinator of Assistance to Europe and Eurasia plays a major role in integrating policy and implementation goals and plays the leading role in allocating foreign aid appropriated by Congress for Eurasian countries. USAID receives the bulk of such aid and is the lead agency in implementing healthcare aid programs in the Eurasian states. Its Bureau of Global Health (GH) helps USAID country programs to improve access and quality of services for maternal and child health, nutrition, family planning and reproductive health; and to prevent and treat HIV/AIDS, malaria, tuberculosis, and other infectious diseases. Working primarily through interagency agreements with USAID, HHS's Office of Global Health Affairs (OGHA) and HHS's Centers for Disease Control and Prevention (CDC) engage in health assistance across Eurasia. OGHA evaluates programs, provides guidance to field offices, and supports the U.S.-Russia Bilateral Presidential Commission's Health Working Group, which is chaired on the U.S. side by the HHS Secretary. CDC assumed greater prominence post-9/11 in helping to implement, often in cooperation with USAID, efforts to prevent and control infectious diseases in Eurasia, including biological agents. Some critics argue that there is a need to improve the interagency coordination of healthcare policy and implementation, including that regarding Eurasia, in line with the National Strategy for Countering Biological Threats , other presidential directives, and the HHS's National Health Security Strategy. The CDC has emphasized that combating infectious diseases in Eurasia protects U.S. citizens at home and abroad, serves humanitarian and goodwill aims, and buttresses the world economy, democratization, and stability. It views aid for strengthening public health infrastructures and establishing strong infectious disease surveillance systems in the region as key to prevention, early warning, and early response to health threats there that could impact U.S. security. The CDC established a Global AIDS Program (GAP) Office in Russia in late 2006 to expand disease surveillance, develop pilot programs to prevent mother-to-child HIV transmission, improve guidelines for testing exposed infants, and provide support for other HIV programs carried out by the U.S. government and international agencies in Russia. The CDC also has staffers at a Global Disease Detection and Emergency Response Branch (GDD) site in Kazakhstan and at International Emerging Infections Program (IEIP) sites in all the Central Asian states. CDC has a Field Epidemiology Training Program (FETP) advisor in Kazakhstan to provide expertise in training and outbreak investigations. There are USAID staffers in Russia and all the Central Asian countries to carry out HIV/AIDS and tuberculosis programs. Congressional Response Congress became increasingly concerned about the rising global threat of infectious diseases, including HIV/AIDS, TB, and malaria as early as 2005, and has authorized and appropriated funds reflecting that concern continuously since then (see the Appendix for a list of current health-related legislation being considered by the 111 th Congress). The House Congressional Global Health Caucus was founded in 2005 to provide a bipartisan forum for discussions. Much attention in Congress has been focused on the threat infectious diseases pose in Africa, but attention has broadened to include health problems in Eurasia and other regions. Members of the House Banking Committee ( H.Rept. 106-548 ), in reporting the Global AIDS and Tuberculosis Relief Act of 2000 ( P.L. 106-264 ), cited the January 2000 NIE to the effect that increases in HIV/AIDS were threatening Eurasia and Asia as well as Africa. On the appropriations side, Foreign Operations Appropriations for FY2001 ( P.L. 106-429 ) for the first time allocated a small amount ($6 million) from the Child Survival and Disease Programs (CSD) fund to combat infectious diseases in Eurasia, and these amounts have since increased. The HIV/AIDS, Tuberculosis, and Malaria Act of 2003 ( P.L. 108-25 ) established an Office of the Global AIDS Coordinator (OGAC) in the State Department to integrate and expand U.S. government global HIV/AIDS prevention, care, and treatment efforts. As re-authorized by the Global Leadership Against HIV/AIDS, Tuberculosis, and Malaria Reauthorization Act of 2008 ( P.L. 110-293 ), HIV/AIDS efforts were integrated into efforts to address global healthcare challenges. CSD was combined with the Global HIV/AIDS Initiative (GHAI) Account to form the Global Health and Child Survival (GHCS) Account. Assistance through the GHCS Account has been provided to all the Eurasian states except Belarus and Moldova. In 2008, the OGAC signed Partnership Framework agreements with Russia and Ukraine that set forth five-year plans for combating HIV/AIDS. Congress generally has appeared to support health assistance that amounts to a few percent of the overall aid to Eurasia (see Table 1 and Table 2 ). Total U.S. aid budgeted for FY1992-FY2010 for health programs in Eurasia was less than 5% of about $35.3 billion of all aid for Eurasia (excluding the value of privately-donated cargoes). Health aid has been dwarfed by that provided for democratization, economic reform, and arms control. However, after the terrorist attacks on the United States on September 11, 2001, and other events heightened U.S. concerns about U.S. vulnerabilities, including global health issues, a somewhat greater percentage of foreign assistance for Eurasia has consisted of health aid. The Obama Administration has boosted health aid as a percentage of assistance to Eurasia from 14% in FY2009 to 19% in FY2010 and 18% requested for FY2011. Health in the Eurasian States: Context and Current Developments As part of the legacy of the former Soviet Union, the Eurasian states inherited a large centralized and state-owned healthcare apparatus that provided good care for some medical conditions but relied on outdated practices to treat other illnesses. The health of Soviet citizens lagged behind that of U.S. and other Western populations in terms of access to many new medical procedures and medicines and even in terms of prosaic measures such as the number of hospitals with plumbing and heat. The healthcare system emphasized a large number of specialized medical facilities with large staffs and prolonged hospitalizations, rather than primary and preventive care, including regular check-ups. The healthcare system was isolated from changing world standards of treatment of diseases such as TB, it followed secretive practices that prevented the operation of a competent disease surveillance system, and it suffered from a lack of medical supplies and equipment outside of the major medical centers. The emphasis on specialized and hospital care meant that primary care and early diagnosis were starved of funds. After the Eurasian states gained independence, the new international borders separated many medical industries from their customers in other countries and required the re-negotiation of business relations that are still not wholly satisfactory. Despite this shared legacy, the Eurasian states emerged from the Soviet collapse with varying health situations. Some of the Eurasian states had better healthcare facilities and healthier populations than others. Many observers have viewed Central Asia's population as having suffered the most from inadequate healthcare during the Soviet period. The Western Eurasian states had older populations than the Central Asian states at the time of the Soviet collapse, reflecting differences in fertility and mortality. Environmental catastrophe affected health in several regions, including the Chernobyl area (radiation fallout in Ukraine and Belarus), Chelyabinsk area (radiation contamination in Russia and Kazakhstan), Semipalatinsk (radiation from nuclear weapons testing in Kazakhstan) and the Aral Sea area (desertification in Kazakhstan and Uzbekistan). The Eurasian states also differed in their rates of economic decline during the 1990s. The extent to which decreases occurred in related areas varied as well, such as healthcare funding, the diets of the people, and living conditions, all of which affected morbidity and mortality. Conflicts in Eurasia also damaged health, leading to casualties, injuries, orphans, and displaced persons who suffered physically and psychologically. In the post-Soviet era, demographers have been able to scrutinize previously suppressed health data and conduct analyses that suggest that some aspects of the health crisis in Russia and other Eurasian states can be traced back to the 1960s. A major indicator of overall health, life expectancy, peaked in the 1960s and began a downward trend in Russia and other republics of the former Soviet Union by the late 1960s. This downward trend has been linked by research to an increase in alcoholism, violence, tobacco use, and poor diets. Another peak occurred in the mid-1980s, mostly attributed to government restrictions on alcohol consumption. Most observers agree that in the early years after the Soviet Union collapsed, there were major declines in health in virtually all Eurasian states in terms of such measures as infant mortality, alcoholism, and cardiovascular disease. The Central Asian states suffered the greatest declines in Eurasia in life expectancy, increased morbidity, deterioration of conditions in hospitals and other health facilities, and failures to control and prevent infectious diseases. In the late 2000s, health conditions have improved in some respects, but by many measures—including life expectancy, under-5 and maternal mortality, TB rates, HIV/AIDS rates, and alcoholism (in the Western NIS), the Eurasian countries continue to lag behind most developed countries. According to one USAID report that ranked Eastern European and Eurasian states in terms of various health factors, all the Eurasian states except Belarus ranked among the bottom one-half of the 28 countries considered. The most vulnerable countries were Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Turkmenistan. Such poor health conditions, USAID warned, "diminish society's productive capacity, deteriorates the strength of civil society, and tarnishes people's perceptions of the benefits of democracy and free-market economies. Poor health is, therefore, not only a threat in its own right; it is a threat to economic and democratic progress." Health challenges in all the Eurasian states loom larger because of the very low percentages of gross domestic product (GDP) they have devoted to healthcare. Table 3 shows GDP per capita in the Eurasian states and the percent going to health. Health spending levels are low in the Eurasian states in comparison to the 8.5% on average spent in the Organization for Economic Cooperation and Development countries (OECD; composed mostly of European countries and the United States), except for Georgia, where the percentage of spending virtually matches the OECD percentage. Soon after he came to power in Russia in 2000, then-President Putin began dedicating more budgetary resources to address health problems. A National Health Project, one of four National Priority Projects, was launched in 2005 as the centerpiece of his effort to improve healthcare. Pay for doctors and nurses was boosted, new equipment for medical centers was provided, and the number of ambulances was increased. With the injection of added funds from the National Priority Health Program, healthcare spending in Russia in 2006 finally rose above the level of such spending during the Soviet period. In late 2007, President Putin issued a decree to implement a Concept for a Demographic Policy for the Russian Federation up to 2025 that called for an increase in life expectancy to 75 years of age and increases in childbirth and immigration. Through these means, it is hoped that Russia's population will stabilize at 142-143 million by 2015 and will increase to 145 million by 2025. These hopes may be unrealistic, since even Russia's State Statistical Agency forecasts that the population will decline to less than 136 million by 2025. The Concept may be relying on an unlikely surge in non-ethnic Russian immigration, which many ethnic Russians oppose. In late 2008, a Russian government commission released an associated Healthcare Development Concept to 2020 that called for improving the quality of medical care; educating people to adopt healthy lifestyles; reversing the decline of the population; and increasing life expectancy. To achieve these goals, the Concept called for increasing the provision of medicines; reducing out-of-pocket expenses for medical care; boosting the qualifications of healthcare personnel and creating a system of incentives to ensure high-quality work; and providing exercise and sports facilities and taking other measures to facilitate healthy lifestyles. Summing up the 2009 results of the National Health Project, Deputy Prime Minister Alexander Zhukov announced in early 2010 that the size of the population for the first time in fifteen years grew slightly; that life expectancy increased by 1.2 years to over 69 years for both sexes; that mortality rates for most diseases decreased; that the number of deaths caused by alcohol poisoning fell by 32%; that a pilot program had resulted in fewer road deaths; and that healthcare for infants had improved. At a government meeting in mid-April 2010, Prime Minister Putin stated that he had "dramatically increased" healthcare spending from 225.4 billion rubles in 2000 to 1.5 trillion rubles in 2009. He stressed, however, that healthcare problems still existed, as indicated by the low level of public satisfaction with healthcare, regional disparities in the funding and availability of healthcare, inefficient spending on unnecessary hospitals, out-of-pocket expenses for necessary procedures, and inadequate outpatient and preventative care. In his state of the government address to the legislature on April 20, 2010, Putin announced that he was boosting funds for the National Health Project. Faltering healthcare in Central Asia has been reflected in decreasing life spans, high infant and maternal mortality rates, and increases in cardiovascular/circulatory, parasitic, infectious, and respiratory diseases. While the spread of TB and hepatitis in Central Asia is most worrisome, the U.N. office coordinating U.N. interagency and international aid efforts on HIV/AIDS (the Joint United Nations Program on HIV/AIDS, or UNAIDS) has pointed to rising HIV prevalence (the number of people living with HIV) in Kazakhstan and elsewhere in Central Asia as a global concern. Poor sanitation and increasing drug abuse, tobacco and alcohol use, malnutrition, diet deficiencies, and tainted blood supplies contribute to declining health. Healthcare reforms have focused on making the healthcare system more efficient by closing excess hospitals and on obtaining more funding through taxes and payroll deductions. The latter efforts have faltered, resulting in a heavy reliance on user fees for service. Kyrgyzstan has made the most progress in healthcare reform (though its fragile economy places them at risk), and Tajikistan and Turkmenistan the least. The health consequences of poor quality healthcare seriously constrain economic development in the region, according to many observers. Selected Health Indicators Life Expectancy, Childhood Mortality, and Maternal Mortality Table 3 shows life expectancy rates for adult males and females, maternal mortality rates, and mortality rates for children under five years of age throughout the Eurasian region. Life expectancy at birth is perhaps the most commonly used indicator of health status in a country. Life expectancy had continued to decline between 1990 and 2008 in Belarus, Kazakhstan, Russia, and Ukraine. There are large gaps between average life expectancy for males and females in Eurasia and life expectancy in OECD countries. There is a twelve-year deficit between the average male lifespans in Eurasian and OECD countries, and a ten-year deficit between female lifespans in Eurasian and OECD countries. According to most demographers, major factors accounting for these deficits in life expectancy in the Eurasian countries include higher rates of heart-related disorders, cancers, and injuries, while infectious diseases account for a smaller portion in most of the states. Alcoholism underlies many diseases and injuries, and helps explain the large gap in mortality rates between men and women. Accidents or violence and alcohol poisoning accounted for the most alcohol-related deaths, but alcohol contributed to many diseases as well, such as heart disease, liver disease and certain cancers. USAID estimates that mortality rates over the period from 1990-2007 for children under five years of age declined significantly in Moldova and Tajikistan and somewhat less in the rest of Eurasia. Tajikistan and Turkmenistan had the highest rates of under-5 child mortality in Eurasia. According to USAID, the relatively high mortality rates in the Eurasian states among children under five years old (as compared to most European countries) are telling signs of the poor healthcare and the plight of many families suffering from poverty and malnutrition. Rates of maternal mortality—the death of women during pregnancy, childbirth, or in the immediate period after delivery—also are much higher in the Eurasian states than in most other European countries. Maternal mortality rates have declined in recent years in all the Eurasian states except Georgia. Causes of maternal mortality likely would include poor nutrition, lack of maternal care, and high rates of abortion. According to the World Bank, the Eurasian countries are unlikely to meet Millennium Development Goals (targets for development from 2000 until 2015) for child and maternal mortality. High rates of abortion are being reduced in several Eurasian states by education and access to other contraceptive methods. In 2006, the Russian government launched a plan to budget $1.3-1.7 billion annually for ten years to boost the birthrate and reduce abortions, including by providing free care at maternity hospitals, increasing childcare benefits, permitting 18 months of partially paid maternity leave, and building new prenatal centers. In January 2010, Russian Health Minister Tatyana Golikova hailed these initiatives as boosting the number of children born in 2008 to 1.7 million. However, she also reported that the overall abortion rate in Russia remained too high. The Incidence of Infectious Diseases The sharp deterioration of the health infrastructure due to economic conditions has contributed to a dramatic increase in levels of infectious diseases, particularly TB and HIV/AIDS, in all the Eurasian states since they gained independence. Table 4 shows the number of new cases of TB and the numbers living with HIV. Although HIV/AIDS is currently spreading throughout Eurasia largely among injecting drug users, rising rates of sexually transmitted disease (STD) are a worrisome sign that HIV/AIDS may spread into the general population. Childhood vaccination rates in Eurasia declined dangerously in the late 1980s and early 1990s, contributing to a diphtheria epidemic in the early 1990s. By the mid-1990s, this epidemic accounted for 90% of worldwide cases. Ukraine, Russia, and Tajikistan were hardest hit. The George H.W. Bush Administration and USAID collaborated with the World Health Organization (WHO) in delivering vaccines and the United States later advocated international donor assistance for childhood immunizations. By the latter 1990s, diphtheria cases had declined greatly, as had some other childhood diseases. In Russia, the National Schedule of inoculations against diphtheria, tetanus, pertussis, mumps, measles, poliomyelitis, and tuberculosis reached 96%-99% coverage for children less than two years old in 2004. However, rates of coverage for older children remained low, reportedly because not enough vaccines were available. In most other Eurasian countries, childhood vaccination rates had reached 96-99% coverage in the late 1990s. However, coverage in Armenia and Georgia in 2006 (the latest date of information) was still below this range, and coverage in Azerbaijan, Kyrgyzstan, and Tajikistan had barely met this range. Tuberculosis The number of cases of TB in Eurasia is much higher than in the OECD countries ( Table 4 ). The increases in new TB cases in the Eurasian states are not as rapid as in previous years, except for Tajikistan. The highest numbers of new TB cases are in Kazakhstan, Russia, Ukraine, and Uzbekistan. In 2001, Russia refused a World Bank loan to fight TB and HIV/AIDS, reportedly because the World Bank would not permit Russian drug manufacturers that did not meet international standards to participate. However, Russia accepted the aid in 2003 and has worked with USAID and WHO to disseminate Directly Observed Treatment Short-course (DOTS) more widely and integrate the treatment into the general healthcare system. Russia is classified as among the twenty top priority countries for U.S. assistance to treat TB. Continuing poor living conditions and inadequate treatment has fueled the rise of multi-drug resistant TB. The release, through amnesties or the completion of sentences, of tens of thousands of prisoners with TB into the general population has contributed to the spread of drug-resistant TB in Russia. Also, convicts with the final stages of TB (or cancer or AIDS) have been released on humane grounds, possibly spreading the disease. Multi-drug-resistant TB can be extremely costly to treat, further burdening already strained healthcare finances in the Eurasian states. All the Eurasian states except Turkmenistan are considered by WHO to have "high burdens" of multi-drug resistant TB cases. Even more striking, among nine countries worldwide reporting in recent years that over 12% of new TB cases were multi-drug resistant, all but two were Eurasian countries (Azerbaijan, Kazakhstan, Moldova, Russia, Tajikistan, Ukraine, and Uzbekistan). Also, the only countries where over 50% of previously treated TB cases were multi-drug resistant were in Eurasia (the just-mentioned states excluding Ukraine). WHO has hailed Russia's successful efforts since the discovery of such high rates of infection in 2006 to reduce the number of cases, and has reported that by late 2009, Armenia, Azerbaijan, Georgia, Kazakhstan, Moldova, Tajikistan and Ukraine were developing plans to combat multi-drug resistant TB. HIV/AIDS Eurasia is the only area of the world where HIV prevalence (the number of people living with HIV) remains on the rise. The prevalence of HIV would be even higher, except that numbers of new HIV cases have slowed since the 1990s, when the rate of new infections was the highest in the world. Injecting drug use, prostitution, and population mobility are the main contributors to increasing HIV prevalence in most of the Eurasian states. Like the case with TB, HIV prevalence in Eurasia is higher among prisoners and the partners of those just released. According to UNAIDS, there were about 1.46 million adults and children with HIV/AIDS in Eurasia in 2007. Ukraine has the highest HIV infection level in Europe, more than 1.6% of the population aged 17-49. Under one scenario, by 2014 Ukraine could experience a 1.6 percent reduction in GDP associated with the healthcare and other economic costs of HIV/AIDS, and AIDS mortality could reduce employment in the labor force by 10.4 percent. Russia has the largest number of adults and children in Eurasia living with HIV, an estimated 940,000 in 2007 (the latest available data), or about 0.66% of the population (among adults aged 17-49, about 1.1% have HIV), according to UNAIDS. Reflecting on the epidemic in Russia, UNAIDS has stated that "a decade ago, few would have predicted that one million or more people would be living with HIV in the Russian Federation alone." The Russian government has somewhat reversed many years of "malign neglect" regarding HIV/AIDS by increasing its spending from $6 million a year on the disease in the early 2000s to $13 million (400 million rubles) in 2009. Among other Eurasian states, Azerbaijan, Belarus, Kazakhstan, and Ukraine funded over 50% of their spending on HIV/AIDS programs from their domestic budgets, while the rest depended heavily upon the Global Fund to Fight AIDS, Tuberculosis and Malaria, UNAIDS, or other international donors. AIDS mortality in Russia and other Eurasian states is concentrated among those aged between 17-49, reducing the working age population and contributing to demographically-older populations. Despite an emphasis on treatment over prevention, less than one-fourth of the people needing antiretroviral therapy in Eurasia receive anti-retroviral medications, a level far below that of other countries with comparable GDPs, according to UNAIDS. Most new HIV cases in Eurasia still originate from IDUs, and is spread through their partners to the general population. Heterosexual transmission is the most common, although social stigma and punitive laws may keep men who have sex with men from seeking treatment and being reflected in official data on new cases. In Turkmenistan and Uzbekistan, consensual sex between same-sex adults is outlawed. Many observers call for the Eurasian states to spend more money on HIV prevention, including by providing IDUs with opioid substitution treatment (OST), involving methadone or buprenorphine. The Russian medical establishment remains opposed to OST on the grounds that one addiction should not be substituted for another. There have been some efforts at cooperation among the Eurasian states, including the launch of the Program of Urgent Response to HIV/AIDS by the Commonwealth of Independent States (CIS) in 2002, under which a Coordination Council on HIV/AIDS meets periodically to discuss joint efforts. In an effort to strengthen regional responses to the continued increase in HIV prevalence, the CIS prime ministers in November 2008 approved a 2009-2013 program that called for all CIS countries to establish single national AIDS programs with unified monitoring and evaluation systems. The program also urged greater efforts to enhance access to free, voluntary, and confidential HIV counseling and testing and to bolster prevention programs for young people and populations at higher risk. The CIS program is supported by UNAIDS. Seeming to illustrate problematic data reporting, Turkmenistan's deputy minister of health reportedly boasted in October 2009 that the country had opened an HIV prevention clinic, but that "to our great happiness, not a single case of HIV has been reported anywhere in the country." In Uzbekistan, the chairman of the trustees' council of the Sen Yolgiz Emassan (You Are Not Alone) state child foundation, President Karimov's daughter Lola Karimova, has directed HIV prevention efforts for youth. UNICEF has supported some of these efforts. Perhaps indicating some problems with HIV/AIDS prevention programs in Uzbekistan, however, an HIV/AIDS activist was sentenced to seven years in prison in February 2010 after he published an HIV prevention brochure—partly funded by UNICEF—that the government alleged encouraged immoral behavior. Drug Addiction All of the Eurasian states face increased illegal drug use, with the greatest estimated levels of opiate use in Russia, Ukraine, Kazakhstan Kyrgyzstan, and Uzbekistan and the greatest levels of cannabis use in Kazakhstan, Kyrgyzstan, and Uzbekistan (see Table 4 ). In all of the Eurasian states, demand reduction efforts are inadequate, according to the U.S. State Department's International Narcotics Control Strategy Report, because of inadequate budgets, inadequate treatment services, and a lack of focus on drug use prevention by officials. Drug treatment is poor or lacking in most of Eurasia, and where available, often entails involuntary confinement after arrest. Laws are mostly aimed at interdiction and punishment of drug traffickers and users, and drug users avoid seeking treatment out of fear of arrest. Where available, treatment mostly consists of detoxification with little or no follow-up rehabilitation efforts. For instance, OST pilot programs have been introduced in Azerbaijan, Belarus, Georgia, Moldova, Tajikistan, and Uzbekistan, and partially scaled-up programs have been implemented in Kyrgyzstan and Ukraine, but access remains limited. Armenia, Kazakhstan, Russia, and Turkmenistan still do not provide OST. Since 2000, drug use in Russia has increased steadily, dominated by heroin and other opiates. In 2004, Russia enacted a new law—which amended a 1998 Russian narcotics law that mandated the involuntary commitment of drug users—to in principle permit drug treatment options to imprisonment. However, law enforcement has continued to emphasize imprisonment and the healthcare system resists OST. In late 2005, the government launched a program to reduce the total number of drug users by up to 20% by 2010 by cracking down on drug traffickers, but these efforts have appeared to fail. The U.N. Office of Drugs and Crime stated in late 2009 that the rate of heroin and opium use in Russia is the second highest in the world (first is China), about 1.7 million users, and that one out of three overdose deaths worldwide occurs in Russia. In March 2010, Russia's Federal Narcotics Control Service reported that there were 550,000 registered drug addicts, and that 30,000 Russians die each year from overdoses. It termed the addiction and overdose rates a national security problem. Russia increasingly has demanded that the United States and NATO combat drug production in Afghanistan as a primary mission. In Eurasia, drug treatment programs have struggled to meet burgeoning needs. According to the State Department's International Narcotics Control Strategy Report : In Armenia, a Drug Detoxification Center, part of the Narcological Clinic, provides short-term drug treatment. Two new drug treatment facilities opened in 2009, one of which is part of the prison hospital system. These new facilities should help alleviate the lack of long-term treatment and counseling that previously limited the success of treatment efforts. In 2009 the Narcological Clinic began offering methadone substitution treatment. In Belarus, drug addicts are generally treated in psychiatric hospitals or at 21 outpatient narcotics clinics, either as a result of court remand or self enrollment. Addicts are also treated in prisons. On the whole, treatment emphasizes detoxification over stabilization and rehabilitation. Three OST clinics are operated by the Ministry of Health, and serve several hundred addicts. There are at least twelve small-scale NGO-run rehabilitation centers. On the whole, availability and quality of services have improved somewhat. NGO-run centers provide fee rehabilitation services to both registered and anonymous drug addicts, while government-run centers provide similar services for free, but only to registered addicts. Because the official drug addict registry is readily available to Belarusian law enforcement agencies, drug addicts still often avoid seeking treatment. In Georgia, demand for detoxification and substitution therapy far outstrips supply. In addition to current NGO-supported OST centers, which treat approximately 450 patients, the government opened six new treatment centers in 2009. These centers co-finance OST with clients and serve approximately 1,200 patients. A pilot methadone program began in the penitentiary system in 2008. In Kazakhstan, a pilot project to test methadone therapy was launched in two cities in 2009, and 29 heroin addicts, including 11 that were HIV-positive, took part. In Kyrgyzstan, insufficient funding is hampering prevention and treatment programs and training of professional staff. Programs providing treatment for drug users are conducted by state institutions in partnership with civil sector organizations. UNODC also supports a number of drug treatment assistance programs. In Moldova, there is no formally structured, integrated approach to treatment for drug addiction. The after-care and reintegration system is underdeveloped. Detoxification is available in two government medical institutions on an out-patient basis. A few private healthcare institutions are also authorized to offer detoxification treatment. Detoxification services are included under the National Health Insurance Fund for insured people. Uninsured persons must pay for detoxification. If anonymity is desired, insured patients must go to private healthcare institutions and pay out-of-pocket. Some NGOs offer rehabilitation and reintegration programs free-of-charge on an anonymous basis. In Turkmenistan, the Ministry of Health operates seven drug treatment clinics. Addicts can receive treatment at these clinics without revealing their identity and all clinic visits are kept confidential. Drug addiction is a prosecutable crime and persons convicted are subject to jail sentences, although judicial officials usually sentence addicts to treatment. In Ukraine, the government has implemented pilot OST programs using buprenorphine and is shifting to methadone treatment and is expected to cover up to 20,000 addicts in 111 clinics countrywide by 2013. In Uzbekistan, hospitals with drug dependency recovery programs are inadequate to meet the increasing need for detoxification and treatment, although the government is making an effort to open new treatment facilities. Alcoholism and Smoking According to the WHO, smoking prevalence in most of Eurasia increased during the 1990s but began to decline somewhat at the turn of the century as anti-smoking campaigns appeared to make some headway. WHO data listed Austria and Bosnia as having the highest prevalence rates of smoking in the world, at 47% and 38% of adults, respectively in 2002-2005. In Eurasia, Russia and Ukraine had the highest smoking prevalence among adults (36%) surveyed in the same time period. In Russia, almost two thirds of adult males reportedly smoke, with many starting at young ages. While the percentage of males who smoke has stabilized in recent years, the percentage of females who smoke has risen from about 10% in 1994-1998 to 15% in 2002-2005. In Ukraine, the percentage of males who smoke has risen from about 48% in 1994-1998 to 62% In 2002-2005, while the percentage of females who smoke has fluctuated between 14%-20%. Smoking has been linked to high percentages (more than 33%) of male deaths among those aged 35-69 in Russia, Armenia, Belarus, Kazakhstan, and Ukraine, rates that are substantially higher than in the United States. Of all the Eurasian states, only Azerbaijan does not restrict tobacco advertising on television. Alcohol consumption in Russia and many other Eurasian states remains much higher than in most of the world. Moldova and Russia have the largest per capita consumption of marketed and home-brewed spirits in the world, according to the U.N. Food and Agriculture Organization. Ukraine has the highest rate of alcohol consumption among children and youth, according to WHO. Alcohol consumption in Russia declined briefly in the mid-1980s as a result of a sobriety campaign, but rose thereafter. Beginning in 1993, there was a large increase in male alcohol poisoning in Russia, along with increases in male homicide and suicide, traffic accidents, and circulatory and respiratory diseases. In June 2009, the Lancet reported that alcohol poisoning and alcohol-induced heart failure were among the major causes of early death of Russians aged 15-54, and that other causes of death related to alcohol consumption included depression, pancreatic disease, tuberculosis, and pneumonia. The report claimed that excess alcohol and tobacco usage among Russians accounted for most of the divergence between Russian and West European life expectancy. In 2009, Russian President Medvedev became increasingly concerned about the prevalence of alcoholism in the country. At the end of June 2009, he stated that he was "surprised to learn that we now drink more than we did in the 1990s, even though those were very difficult times," and called for Health Minister Tatiana Golikova to work out plans for an anti-alcohol campaign. A few days later, he warned that about 18 liters of alcohol are being consumed per capita per year, and that "this is a monstrous figure. After 9-10 liters [of alcohol per person per year], gene pool problems arise, and degradation begins." In September 2009, the Health Ministry reportedly had drafted a plan for discussion, and in November 2009, the Federal Service for Regulating the Alcohol Market (Rosalkogolregulirovaniye) had drawn up proposals to increase the minimum price of vodka, crack down on the illicit production of alcohol, increase penalties for selling alcoholic beverages to underage youths, and develop sports and other programs advocating healthy lifestyles. In January 2010, Putin approved the anti-alcohol campaign. As per his decree, alcohol consumption per capita is to be reduced by 15% by 2012 and 55% by 2020. In the second stage of the campaign, from 2013-2020, sports and healthy living will be stressed. Reportedly, legislation to carry out the campaign has bogged down in the legislature because of resistance from government officials and commercial interests that rely on revenues from alcohol sales. Water-Borne Diseases, Poliomyelitis, and Viral Hemorrhagic Fever Some Eurasian states have made progress in recent years in repairing water and sewer systems that deteriorated after the collapse of the Soviet Union (or were always sub-standard), but in Kyrgyzstan and Tajikistan and some other Eurasian states, water-born illnesses such as hepatitis, cholera, and typhoid fever apparently still remain serious problems. In April 2010, WHO confirmed an outbreak of poliomyelitis (a water-borne virus) in Tajikistan that had killed twelve children and may have paralyzed nearly 300, the first such cases since 1997. Reportedly, the disease spread from Afghanistan, one of the four countries in the world where polio is still endemic. By the end of April 2010, UNICEF had rushed oral polio vaccines sufficient for 1.1 million children to the country for an immunization campaign being carried out in May-June 2010. Following the polio outbreak, Kazakhstan, Uzbekistan, and Russia announced restrictions on travel or trade with Tajikistan. Some Russian military personnel stationed in Tajikistan rushed to send their children home. Tajik health officials urged the families to submit their children to polio immunization before such travel. Some of the children entering Russia were found to have polio. The numbers of Crimean-Congo hemorrhagic fevers in Russia's Bashkortostan republic increased in 2009 to over 3,200 cases, compared to about 2,200 in 2008, linked to increasing numbers of host rodents, other animals, and ticks, which are the vectors of infection. Russia's Penza region also reported a surge in cases in 2009 to over 2000. Other regions of Russia reported lower incidences of hemorrhagic fever over the previous year, but there were still dozens of infections and several deaths. The deputy health minister in Tajikistan reported in August 2009 that about one to two dozen cases of viral hemorrhagic fever are suspected in Tajikistan each year, with some recent cases being reported in southwestern Tajik towns and one in Dushanbe. Picnics and outings to popular recreational areas were banned in South Kazakhstan Oblast in Kazakhstan in late April 2010 because of the risk of contracting Crimean-Congo hemorrhagic fever. Non-Medical Indicators Increasing numbers of people in Eurasia belong to subgroups that face special health needs, including orphans, refugees, and the internally displaced. Refugees and Displaced Persons Eurasian health conditions have been impacted by the large number of persons who have fled warfare and discrimination since the breakup of the Soviet Union. The U.N. High Commissioner for Refugees (UNHCR) has estimated that during the 1990's there were as many as nine million internally displaced persons or refugees in Eurasia. Major humanitarian emergencies caused by conflict have occurred in Armenia, Azerbaijan, Georgia, Russia, and Tajikistan. During the 1990s, conflict resulted in the exile or displacement of over 1.5 million Armenians, Azerbaijanis, Georgians, and Chechens and other residents of Russia, according to UNHCR. Other population shifts have included ethnic Russians leaving former republics where they are ethnic minorities and returning to Russia (3 million between 1992 and 1996), Crimean Tatars returning to their homeland in Ukraine (250,000 between 1988-1999), and Georgians displaced during the Russia-Georgia conflict (158,000 in August 2008). While many of those displaced have returned, UNHCR estimates that as of January 2009, there still were 987,804 displaced persons in Eurasia. Despite efforts by aid agencies to address the urgent health needs of the displaced, the longer-term health needs of this vulnerable population are harder to address, particularly if the displaced continue to face inhospitable living conditions and limited access to local healthcare facilities. Table 5 shows the current estimates of refugees and displaced in Eurasia. Children in Residential Care According to UNICEF, the numbers of children placed in residential care (infant homes, orphanages, boarding homes and boarding schools) has increased in Eurasia since 1991, from an average of about 574 children per 100,000 population in 1991 to an average of about 879 children per 100,000 in 2006. While numbers of institutionalized children have been growing, declining public funding has contributed to poorer care. Most of the children are in boarding schools and a fewer number are orphans. Kyrgyzstan and Tajikistan are increasingly relying on boarding schools to help children from poor families benefit from schooling. The orphanages in Eurasia, unlike in most of Europe, often include children with birth defects, mental disabilities, and chronic health conditions. USAID and international donors have increasingly provided assistance, including urgent and other healthcare, and have encouraged the establishment of a foster care system to replace orphanages and of community-based services so that parents can continue to care for their challenged children. Over the period 2002-2008, USAID provided advice and training in Russia on early crisis identification, family preservation and reunification, social support for families with HIV, development of a university curriculum on child welfare, and the establishment of regional supervision systems for social workers. In the Western Eurasian states (Belarus, Moldova, Russia, and Ukraine), the number of children in foster care has increased from an average of 59 per 100,000 population in 1991 to 122 per 100,000 in 2006, but progress in implementing foster care systems in other Eurasian states has been halting. The numbers of homeless and street children in Russia and other Eurasian states reportedly also may have decreased in recent years following a boost in such cases after the Soviet collapse. Still, HIV-positive youth face stigmatization that reduces prospects for foster care placement or residential care and may contribute to homelessness. In St. Petersburg, Russia, USAID supported a program from 2004-2008 to provide medical and psychological services for street and neglected children to ensure their rehabilitation and transition from streets to birth families, foster-care, or independent living. U.S. and International Health Aid to Eurasia, FY1992-FY2011 Table 1 and Table 2 show the amount of health aid to the Eurasian states provided or proposed for FY1992-FY2011 (data for FY1992-FY2008 include all funding sources and agency spending, while data for FY2009-FY2011 include "function 150" foreign assistance funding). U.S. assistance budgeted for FY1992-FY2010 for health was less than 5% of total aid to Eurasia of about $35.3 billion (excluding the value of privately donated cargoes), indicating the relatively low priority of such aid. U.S. government health aid to Eurasia has been far less than private donations of medical goods and expertise, which were worth about $4.2 billion during FY1992-FY2010. The biggest change in appropriations for healthcare over the period FY1992-FY2011 appears to be associated with the terrorist attacks on the United States on September 11, 2001, which led to greater recognition of the national security implications of world health problems. Before 9/11, health aid held fairly steady at about 3% or less of Eurasian funding from FY1998 through FY2001, and amounted to an average of about $39 million per fiscal year. For FY2002 and thereafter, funding tripled as a percentage, to about 9%, and amounted to an average of about $66 million per fiscal year. Although levels of funding appear linked to the events of September 11, 2001, programmatic emphases have changed over various U.S. Administrations. The former Clinton Administration asked Congress in 1997 to begin supporting a new "Partnership for Freedom" initiative as part of boosted Eurasian assistance that would emphasize grass-roots economic and social reforms, including health. Additional aid was sought for hospital and health facility partnerships, programs to combat infectious diseases, and efforts to bolster clean water supplies, childhood survival, and maternal health. The request for a large boost in Eurasian aid was not supported by Congress, but many of the programmatic emphases, including health aid, were endorsed by Congress. Building on the "Partnership for Freedom" initiative, USAID increasingly emphasized social needs in Eurasia. USAID came to argue that economic reforms in the Eurasian states had not always contributed to the growth of middle classes, and also helped create "a new class of chronically poor," who lost the meager state benefits they received under communism. While democratization and economic reforms remained U.S. objectives, USAID stressed that without adequate healthcare and other social services, populations in the Eurasian states would lose faith in the reform process. USAID stated that it would increasingly take social issues into account in designing and implementing programs, so that "the broadest possible spectrum of [Eurasian] citizens ... have the opportunity to enjoy the benefits of reform." In 2005, USAID's Bureau for Europe and Eurasia launched a Health Sector Strategy: 2005-2010 and Beyond that called for U.S. health assistance to be used "to improve the health of [Europe and Eurasian] populations in order to support a successful transition to democracy and free-market economies." The strategy "builds upon the region's current epidemiological and economic realities and USAID's experience and successes to date. It preserves a focus on HIV/AIDS, tuberculosis and reproductive health, while explicitly recognizing the enormous deleterious effect that non-communicable disease is having on the region." USAID has long stressed the restructuring of post-Soviet healthcare systems in order to improve measures of health in Eurasia. Programs to "strengthen" healthcare systems deal with public-private partnerships; finance, policy, management, and organization (including devolution and decentralization and provider payment systems); procurement (including rational drug use); primary care, family medicine, and public health; quality improvement; information systems; human resources development; privatization, and NGO development. USAID's Quality Public Health and Primary Health Care in Central Asia ("Zdrav-reform," "Zdrav Plus," and "Zdrav Plus II") began in 1994 (involving four of the five regional states; Tajikistan joined in 2005), and by the end of 2009, $30 million had been allocated to the program to restructure the health care systems of the states to bolster the government's stewardship (policies, laws, and institutions) of healthcare, financing, and delivery, particularly of primary care. USAID has leveraged the program through partnership with the World Bank and the Asian Development Bank, and has reported that the program "has helped Central Asian countries make tremendous advances in structuring their health systems to operate efficiently and to respond to the health care needs of their populations." Among other programs, beginning in 2005, the Global Fund to Fight AIDS, Tuberculosis and Malaria—a governmental public/private partnership organization that receives the largest share of funding from the United States—has permitted countries to apply for funds for health systems strengthening purposes as well as for disease-specific components. Among Eurasian states, only Georgia has applied for such funds, but its proposal was not funded. Private donations of medical goods and expertise include those provided through the Health Partnerships program, implemented by the American International Health Alliance (AIHA; a public-private organization that leverages government and private funding to foster cooperation between U.S. hospitals and healthcare providers and Eurasian medical facilities and experts for aid efforts focusing on educational activities and professional exchanges). Private donations that do not use U.S. subsidized transport are not included in this total. Dozens of primary, urgent, or other healthcare partnerships launched by AIHA are active in all twelve Eurasian states. Operation Provide Hope, an interagency program launched in 1992, and USAID's ocean freight program provide U.S. funded transport services for private donations of medical goods. The value of health-related donated cargoes has declined somewhat over the years, from a high of $372 million in FY1993 to $150 million in FY2008. When the value of the privately donated cargoes that are transported with government support are added, U.S. public and private health-related assistance amounts to about $4.9 billion in total aid to Eurasia in FY1992-FY2008 (see text box). Besides USAID health-related programs, the Department of State coordinates efforts by the Department of Health of Human Services and other agencies to redirect former Soviet biological warfare scientists to peaceful research, with a focus on healthcare (such as drug and vaccine development for the control of tuberculosis, hepatitis, HIV/AIDS and other infectious diseases). In addition, some activities of the Moscow and Kiev Science and Technology Centers, funded by the State Department, deal with biomedical research by Eurasian scientists. With major U.S. backing, a Civilian Research and Development Foundation NGO was set up in 1995, including a Biomedical and Behavioral Sciences Program that carries out collaborative medical research, funded by the U.S. State, Defense, and Commerce Departments, NIH, and others. Programs involving retraining for scientists from Russia, Ukraine, and from Central Asia who previously worked on biological and chemical warfare have increased in keeping with post-9/11 U.S. security emphases. Among other Eurasian health programs, the Peace Corps has carried out preventive health education in Armenia, Kazakhstan, and Moldova, and community health development activities in Turkmenistan and Uzbekistan. Peace Corps programs in Kazakhstan, Moldova, Turkmenistan, and Uzbekistan stress education on preventing HIV/AIDS, and in Kazakhstan, Turkmenistan, and Uzbekistan emphasize maternal and child health. The Defense Department has donated military hospitals under the Excess Defense Articles program and has provided follow-on equipment packages and training to virtually all of the Eurasian states during FY1992-FY2008. The Obama Administration boosted health aid as a percentage of assistance to Eurasia in FY2010 and FY2011 (see Table 2 ). In FY2010, the Administration increased health assistance by about $10 million, mainly to Tajikistan, Ukraine, and Uzbekistan, while continuing to support relatively high health funding in Russia. In boosting health aid to Tajikistan and Uzbekistan, the Administration emphasized that they are on the "front lines" of counter-terrorism efforts in Afghanistan, and in the case of Ukraine, that its integration with the West is a priority. The Administration averred that in Tajikistan, "support to strengthen border security, counter-narcotics efforts, democratic reforms, health, education, and economic growth is key to improving Tajikistan's role as a bulwark against regional threats such as terrorism and drugs," and warned that "Tajikistan's needs in health and education are so severe that they jeopardize progress in other priority objectives." The Administration stressed that "Ukraine has one of the world's fastest rates of increase in pre-epidemic HIV and TB infection. Assistance programs to arrest the spread of HIV/AIDS will also help prevent mother-to-child HIV/AIDS transmission, address the spread of multi-drug resistant TB strains, and stem the potential long-term disruption HIV/AIDS poses to Ukraine's economic growth." The Administration stated that bilateral relations with Uzbekistan appeared to be improving and that the United States would engage the Uzbek people directly through health assistance. For FY2011, USAID has called for health assistance to continue to all the Eurasian states to address needs that still place them within the category of "developing countries" in terms of some communicable and non-communicable diseases. European Union and International Health Assistance Efforts In 2008, the European Union provided $68 million for healthcare, including reproductive health, under the European Neighborhood and Partnership Instrument for Eastern Europe, which covers Armenia, Azerbaijan, Belarus, Georgia, Moldova, and Ukraine. The EU also provided $1.3 million in 2008 for healthcare for Central Asia. EU-Russia talks about drawing up a new Partnership and Cooperation Agreement resulted in 2009 in a decision to hold meetings on public health issues. However, the Russian side cancelled the first two planned meetings. In 2009, the EU allocated $8 million for Chechnya, some of which was used to bolster maternal and child health services. Over the period 2007-2009, the EU provided $5.3 million for rehabilitating disabled persons in Russia. International organizations with health programs in Eurasia include the World Health Organization, the U.N. Fund for Population Activities, UNICEF, the U.N. Development Program, the Global Fund to Fight AIDS, TB, and Malaria, and the World Bank. WHO's budgetary emphasis is on functional programs and regions, so a breakdown of spending in each Eurasian state is not available. Each Eurasian state has a WHO special representative who coordinates in-country programs. Among recent efforts in Eurasia, WHO deployed experts in late April 2010 to perform a field-based risk assessment of a polio outbreak in south-west Tajikistan, the first imported polio outbreak in the WHO European Region since the Region was certified polio-free in 2002. In November 2009, WHO deployed experts in western Ukraine to characterize the clinical and epidemiological features of a suspected outbreak of pandemic flu (H1N1) in the country, and to recommend best-practice scenarios for treatment. In October 2009, WHO launched a project with the European Commission to help Kazakhstan's Ministry of Health to reduce maternal and neonatal mortality rates in Kazakhstan, which were said to be almost 90% higher than those in the European Union. According to the database of the Global Fund to Fight AIDS, TB, and Malaria (a global public-private organization), it has disbursed funding of $805 million to combat these diseases in Eurasia, with over one-third going to Russia ($321 million), about one-fifth to Ukraine ($167 million), and the rest to other Eurasian states, excluding Turkmenistan. Turkmenistan has a pending grant of $7 million for combating TB, but its Health Ministry has been slow in implementing TB programs, although drug-resistant TB rates in the country reportedly are increasing. The United States is the largest donor to the Global Fund, contributing $841 million in 2009 and pledging $1 billion in FY2010. The U.N. Children's Fund (UNICEF) has health and nutrition programs throughout Eurasia. Spending in the Eurasian states over the last five years (these periods were mostly from 2006-2010) was $68 million, and ranged from $12.9 million in Uzbekistan to $3.3 million in Belarus, according to UNICEF. The United States is the largest donor to UNICEF programs. UNICEF programs in Uzbekistan have focused on improving access to basic services for women and children and on training authorities on how to deliver social services. Aid aims to ameliorate high rates of infant, child and maternal mortality, the poor quality of basic education, increasing numbers of children in conflict with the law and in institutions, and inadequate care for disabled children. The U.N. Population Fund (UNFPA) also has programs in all the Eurasian states. Among the UNFPA programs carried out in 2005-2009, those for Armenia ($4.2 million), Kazakhstan ($3.8 million), Tajikistan ($1 million), Turkmenistan ($2.3 million), and Uzbekistan ($7.7 million) devoted a substantial portion of to reproductive health and family planning issues. Active World Bank projects involving some health component in the Eurasian states (except Russia) amount to $485 million. These include projects supporting avian influenza control in Armenia, Kyrgyzstan, Moldova, Tajikistan, and Turkmenistan; health sector reforms in Armenia, Azerbaijan, Moldova, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan; and AIDS control in Central Asia. Issues for Congress How Significant are Health Issues inEurasia to U.S. Interests? There is considerable debate about U.S. health assistance to Eurasia. Many of the arguments focus on the merits of maintaining health assistance, the application of health assistance, and the extent to which the recipient countries demonstrate a commitment to improving health. Those who endorse continued or expanded U.S. health aid to the Eurasian states argue that disease outbreaks in Eurasia, whether the result of nature or bio-terrorism, are among those that might spread to U.S. shores. Particularly since 9/11, they emphasize the significance to homeland security of disease prevention and surveillance beyond U.S. shores. Other observers argue that infectious disease rates are not as high in Eurasia as in other developing countries, and do not threaten U.S. interests as severely. A number of analysts concerned about the possible impact of infectious diseases on security are particularly troubled by the vulnerability of U.S. defense personnel involved in exchanges, exercises, training, or transit in Eurasia. U.S. security interests may be served by bolstering the health of Eurasia's military forces and civilian populations. Declining health in the military and security forces can harm their ability to combat terrorism and drug trafficking, to ensure the safety and security of weapons of mass destruction, and otherwise to defend the territorial integrity of the states. If the military forces are less capable of carrying out these missions, then U.S. border, customs, and security aid (recently boosted by the Administration and Congress), may be less effective than anticipated, according to this argument. U.S. health aid has been considered by several Eurasian military establishments as a major benefit of military-to-military cooperation, according to U.S. defense officials. Critics counter that the U.S. military is always concerned about protecting personnel from disease, and that Eurasian military personnel are no more dangerous than the personnel of other countries with large health problems. Many observers stress that U.S. interests in economic and political reforms in Eurasia may be undermined by health problems in the countries. Adverse health trends in Russia may be a drag on economic reforms, foster civil unrest, encourage a countervailing political authoritarianism, and perhaps lead to a more internationally belligerent, nuclear-armed Russia, they argue. Even small increases in health aid may pay big dividends in discouraging such developments in Russia, some observers argue. However, as Table 3 indicates, governments of the Eurasian states are spending a very small percentage of their budgets on health. Without greater commitments by the states to healthcare, U.S. and international assistance may not have a lasting impact on healthcare. In addition, the states must address the societal roots of health problems such as alcohol and drug abuse, and homicides and suicides. How Much Can the United States do to Improve Health Conditions in Eurasia and What Types of Health Aid are Appropriate? The United States faces competing priorities for its aid dollars and limits on its ability to fund healthcare reforms in Eurasia. Observers who urge greater emphasis on U.S. health aid to Eurasia argue that small increases in such aid may pay big dividends in lowering disease rates and ameliorating social discontent in the Eurasian states. Some call for much larger commitments to meet pressing health needs in Eurasia, perhaps by shifting aid from democratization and economic reform programs. Many urge caution in taking on new Eurasian health aid commitments unilaterally. The states face interrelated and costly healthcare, public health infrastructure, and environmental problems—such as deteriorating hospitals, failing water and sanitary systems, radiation hazards in Kazakhstan's Semipalatinsk nuclear testing site, and pollution around the Aral Sea—that demand large-scale, sustained, and in many cases, multinational attention. Congress and the executive branch have clashed for several years over how much aid to provide for Eurasia. Annual U.S. health aid to the Eurasian states rose somewhat after 9/11. One possible way to address the need for more health assistance in the region would be to increase the percent of foreign aid devoted to health or to establish Congressional guidelines for the amount of aid to be provided for health assistance to Eurasia. Either of these changes would require further shifts in U.S. policy, which for a long time focused on democratization and economic reforms and arms control in Eurasia. Also, there may be a need to consider longer-term health aid commitments, particularly if U.S. assistance is targeted more to healthcare institution-building and reform efforts that aim to bolster the ability of the Eurasian states to meet their own needs. In recent years, FREEDOM Support Act authorized health assistance has been supplemented by funding from other accounts, seemingly reflecting a greater recognition of specific health needs in Eurasia. The regional states have received $84.2 million from the Child Survival and Health Programs Fund (CSH) account since FY2001 and $13.5 million from the Global HIV/AIDS initiative since FY2005. In addition, Russia and Ukraine received $2.2 million in Economic Support Funds devoted to healthcare improvements in FY2004. Other analysts urge Congress to alter the distribution of aid among the Eurasian states. Between FY1992 and FY2008, the largest aid amounts have gone to Armenia, Kazakhstan, Russia, Ukraine and Uzbekistan. Much less health assistance has been provided to Azerbaijan, Belarus, Moldova, and Turkmenistan. Some experts maintain that this distribution of aid is not clearly matched to the health status of the states. Instead, a number of considerations seem to influence decision-making on the distribution of aid besides targeting it to the most needy Eurasian states, including the degree to which aid should be targeted to the closest or most strategic U.S. friends or to the most democratic and market-oriented states. Such determinations are complicated by the added desirability of targeting U.S. aid to Eurasian states where governments are receptive, honest, and efficient at carrying out healthcare reforms, although these conditions are scarcely met in any of the Eurasian states. In Russia and other Eurasian states, many critics charge, the governments are highly corrupt, inefficient, and not focused on health budgets, policies, and stewardship. In such conditions, U.S. and international medical assistance to the Eurasian states risks being undermined or redirected for political purposes. In some cases, Eurasian governments have blocked medical as well as other humanitarian aid to civilians for political and military purposes (such as in Chechnya), using it as a weapon to bring populations and separatist movements into line. To help circumvent problems with governments, some observers have argued that U.S. health aid should focus more on high-quality indigenous health-related NGOs in Eurasia, to ensure that aid is used properly and to strengthen long-term self-help capabilities, while others caution that in most of Eurasia, such local NGOs are still hard to find. Among possibly clashing U.S. aid objectives, U.S. health aid shifted to disaster assistance or to IDPs and refugees in an Eurasian state may shortchange health aid support for the rest of a country's population. This problem was avoided in the wake of the August 2008 Russia-Georgia conflict by providing supplemental funding for Georgia and directing that already allocated aid could not be reprogrammed without notification. USAID family planning programs in Eurasia must comply with policy promoting maternal health and the provision of modern contraception methods that counteract the inordinately high rates of abortion throughout the region. USAID has argued that while most Eurasian states have made at least some progress in health sector reform in recent years, a few have witnessed worsening health conditions since the early 1990s, and it will take several more years before they are ready to have such aid phased out. In a 2007 report analyzing the health situation in Europe and Eurasia, USAID judged Turkmenistan, Tajikistan, Kazakhstan, Kyrgyzstan, and Russia as the countries where health status was the poorest and where democratization and the transition to free markets appeared to be most vulnerable to setbacks because of health problems. Although public expenditures on health had increased in Eurasia over the years, they were still low relative to needs and contributed to a low supply of medicines, low quality of services, and low salaries for health workers, according to USAID. Appendix. Current Health-Related Legislation S.Res. 499 (Feingold). A resolution supporting the goals and ideals of World Malaria Day, and reaffirming United States leadership and support for efforts to combat malaria as a critical component of the President's Global Health Initiative. Introduced on April 22, 2010. Submitted in the Senate, considered, and agreed to without amendment and with a preamble by Unanimous Consent on April 22, 2010. H.R. 5121 (Clark). The Global Sexual and Reproductive Health Act of 2010. To promote the sexual and reproductive health of individuals and couples in developing countries, and for other purposes. Introduced on April 22, 2010. Referred to the House Committee on Foreign Affairs. H.R. 4933 (Lee). The Global Health Act of 2010. To establish a strategy to coordinate all health-related United States foreign assistance, to assist developing countries in improving delivery of health services, and to establish an initiative to assist developing countries in strengthening their indigenous health workforces, and for other purposes. Introduced on March 24, 2010. Referred to the Committee on Foreign Affairs and the Committee on Financial Services. S. 3135 (Durbin). The Global Health Care Cooperation Act. To enhance global healthcare cooperation, and for other purposes. Introduced on March 17, 2010. Referred to the Committee on the Judiciary. S.Res. 454 (Brown). A resolution supporting the goals of World Tuberculosis Day to raise awareness about tuberculosis. Introduced on March 15, 2010. Referred to the Committee on Foreign Relations. S. 1966 (Dodd). The Global Child Survival Act of 2009. To provide assistance to improve the health of newborns, children, and mothers in developing countries, and for other purposes. Introduced on October 28, 2009. Referred to the Committee on Foreign Relations. H.R. 3560 (Sires)/ S. 1591 (Murray). The 21 st Century Global Health Technology Act. To amend the Foreign Assistance Act of 1961, to establish the Health Technology Program in the United States Agency for International Development to research and develop technologies to improve global health, and for other purposes. The Senate version was introduced on August 6, 2009. Referred to the Committee on Foreign Relations. The House version was introduced on September 14, 2009. Referred to the Committee on Foreign Affairs. H.R. 1878 (Christopher Smith). The Global Autism Assistance Act of 2009. To establish a health and education grant program related to autism spectrum disorders, and for other purposes. Introduced on April 2, 2009. Referred to the House Committee on Foreign Affairs. H.Con.Res. 103 (Payne). Supporting the goals and ideals of Malaria Awareness Day. Introduced on April 21, 2009. Referred to the Committee on Foreign Relations. H.R. 1410 (McCollum). The Newborn, Child, and Mother Survival Act of 2009. To provide assistance to improve the health of newborns, children, and mothers in developing countries, and for other purposes. Introduced on March 10, 2009. Referred to the House Committee on Foreign Affairs.

After the collapse of the Soviet Union in 1991, all the newly independent Eurasian states faced economic dislocations, conflicts and population shifts, and more porous borders that contributed to rising communicable and non-communicable diseases such as HIV/AIDS and drug addiction. At the same time, the inherited healthcare systems were obsolete and unable to cope with existing health problems, let alone new challenges. Even before the Soviet Union collapsed, the United States provided it with some health assistance to address urgent needs, including vaccines for children. Since then, Eurasian Health issues have received increased U.S. attention. As part of recent concerns, a December 2008 Intelligence Community Assessment highlighted global threats posed to U.S. citizens and interests by increasing infectious diseases and other health problems originating outside U.S. borders, including in Eurasia. The assessment and estimate warned that increased political, military, social, and economic disorder in the Eurasian states could be worsened by the spread of disease and declining health, thereby setting back their democratic and free market reforms, and that such instability might further complicate U.S. arms control cooperation, efforts to contain the proliferation of weapons of mass destruction, and trade relations. In addition, the assessment and estimate cautioned that Eurasian militaries and populations could face increased ill-health, harming the national security of the Eurasian states and diminishing the effectiveness of the militaries in international peacekeeping. Also, military forces and populations with significant health-related problems could become agents for the spread of diseases among U.S. forces involved in international exercises and training and to the U.S. homeland population. After the terrorist attacks on the United States on September 11, 2001, the spread of anthrax by mail in the United States later in the year, and the rising global incidence of the West Nile virus, severe acute respiratory syndrome (SARS), the H5N1 ("bird flu") virus and the H1N1 ("swine flu") virus, there were heightened policy concerns about disease threats to the U.S. homeland. These concerns are increasingly shaping the debate over health policy and aid, including to Eurasia, where the major foci of U.S. policy long have been democratic and economic reforms and arms control, with health aid viewed as complementing reforms and as justified on humanitarian grounds. Although U.S. health aid for Eurasia has long been overshadowed by other U.S. aid priorities, it increased as a percentage of all U.S. foreign assistance to Eurasia after FY2002. This report provides an overview of health conditions in the Eurasian states, U.S. aid efforts in recent years, and issues which Congress might consider in providing health assistance to the Eurasian states.

CCS Primer An integrated CCS system would include three main steps: (1) capturing and separating CO 2 from other gases; (2) purifying, compressing, and transporting the captured CO 2 to the sequestration site; and (3) injecting the CO 2 in subsurface geological reservoirs. The most technologically challenging and costly step in the process is the capture step, which is capital-intensive to build and requires a considerable amount of energy to operate (the amount of energy a power plant uses to capture and compress CO 2 is that much less electricity the plant can deliver to its customers; this is sometimes referred to as the energy penalty or the parasitic load ). Figure 1 shows the CCS process schematically from source to storage. The transport and injection/storage steps of the CCS process are not technologically challenging per se, as compared to the capture step. Carbon dioxide pipelines are in use for EOR in regions of the United States today, and large quantities of fluids have been injected into the deep subsurface for a variety of purposes for decades, such as disposal of wastewater from oil and gas operations or of municipal wastewater. However, the transport and capture steps still face challenges, including economic and regulatory issues, rights-of-way, and questions regarding the permanence of CO 2 sequestration in deep geological reservoirs, as well as ownership and liability for the stored CO 2 , among others. CO2 Capture The first step in CCS is to capture CO 2 at the source and separate it from other gases. Currently, three main approaches are available to capture CO 2 from large-scale industrial facilities or power plants: (1) post-combustion capture, (2) precombustion capture, and (3) oxy-fuel combustion capture. For power plants, current commercial CO 2 capture systems theoretically could operate at 85%-95% capture efficiency—meaning that 85% to 95% of all the CO 2 produced during the combustion process could be captured before it goes up the stack into the atmosphere. In a worst-case scenario, energy penalty in the capture phase of the CCS process may increase the cost of electricity by 80% and reduce an electricity-generating plant's net capacity by 20%. Further, as much as 70%-90% of the total cost for CCS is associated with the capture and compression phases of CCS. Other estimates indicate that the energy penalty could be lower, resulting in smaller impacts to subsequent electricity costs. A detailed description and assessment of these capture technologies is provided in CRS Report R41325, Carbon Capture: A Technology Assessment , by [author name scrubbed]. Post-combustion Capture The process of post-combustion capture involves extracting CO 2 from the flue gas—the mix of gases produced that goes up the exhaust stack—following combustion of fossil fuels or biomass. Several commercially available technologies, some involving absorption using chemical solvents (such as an amine , see Figure 2 ), can in principle be used to capture large quantities of CO 2 from flue gases. In a vessel called an absorber, the flue gas is "scrubbed" with an amine solution, typically capturing 85% to 90% of the CO 2 . The CO 2 -laden solvent is then pumped to a second vessel, called a regenerator, where heat is applied (in the form of steam) to release the CO 2 . The resulting stream of concentrated CO 2 is then compressed and piped to a storage site, while the depleted solvent is recycled back to the absorber. Other than the Petra Nova plant (discussed in " Petra Nova: The First (and Only) Large U.S. Power Plant with CCS "), no large U.S. commercial electricity-generating plants currently capture large volumes of CO 2 (i.e., over 1 million tons per year). As the Petra Nova project indicates, the post-combustion capture process includes proven technologies that are commercially available today. Precombustion Capture The process of precombustion capture separates CO 2 from the fuel by combining the fuel with air and/or steam to produce hydrogen for combustion and a separate CO 2 stream that could be stored. For coal-fueled plants, this is accomplished by reacting coal with steam and oxygen at high temperature and pressure, a process called partial oxidation, or gasification ( Figure 3 ). The result is a gaseous fuel consisting mainly of carbon monoxide and hydrogen—a mixture known as synthesis gas, or syngas—which can be burned to generate electricity. After particulate impurities are removed from the syngas, a two-stage "shift reactor" converts the carbon monoxide to CO 2 via a reaction with steam (H 2 O). The result is a mixture of CO 2 and hydrogen. A chemical solvent, such as the widely used commercial product Selexol (which employs a glycol-based solvent), then captures the CO 2 , leaving a stream of nearly pure hydrogen that is burned in a combined cycle power plant to generate electricity—this is known as an integrated gasification combined-cycle plant (IGCC)—as depicted in Figure 3 . One example of precombustion capture technology in operation today is at the Great Plains Synfuels Plant in Beulah, ND. The Great Plains plant produces synthetic natural gas from lignite coal through a gasification process, and the natural gas is shipped out of the facility for sale in the natural gas market. The process also produces a stream of high-purity CO 2 , which is piped northward into Canada for use in enhanced oil recovery (EOR) at the Weyburn oil field. Oxy-Fuel Combustion Capture The process of oxy-fuel combustion capture uses pure oxygen instead of air for combustion and produces a flue gas that is mostly CO 2 and water, which are easily separable, after which the CO 2 can be compressed, transported, and stored ( Figure 4 ). Oxy-fuel combustion requires an oxygen production step, which would likely involve a cryogenic process (shown as the air separation unit in Figure 4 ). The advantage of using pure oxygen is that it eliminates the large amount of nitrogen in the flue gas stream. Currently oxy-fuel combustion projects are at the lab- or bench-scale ranging up to verification testing at a pilot scale. CO2 Transport After the CO 2 capture step, the gas is purified and compressed to produce a concentrated stream for transport. Pipelines are the most common method for transporting CO 2 in the United States. Currently, approximately 4,500 miles of pipelines transport CO 2 in the United States, predominately to oil fields, where it is used for EOR. Transporting CO 2 in pipelines is similar to transporting fuels such as natural gas and oil; it requires attention to design, monitoring for leaks, and protection against overpressure, especially in populated areas. Typically, CO 2 would be compressed prior to transportation into a supercritical state, making it dense like a liquid but fluid like a gas. Using ships may be feasible when CO 2 must be transported over large distances or overseas. Liquefied natural gas, propane, and butane are routinely shipped by marine tankers on a large scale worldwide. Ships transport CO 2 today, but at a small scale because of limited demand. Rail cars and trucks also can transport CO 2 , but this mode probably would be uneconomical for large-scale CCS operations. Costs for pipeline transport vary, depending on construction, operation and maintenance, and other factors, including right-of-way costs, regulatory fees, and more. The quantity and distance transported will mostly determine costs, which also will depend on whether the pipeline is onshore or offshore; the level of congestion along the route; and whether mountains, large rivers, or frozen ground are encountered. Shipping costs are unknown in any detail, because no large-scale CO 2 transport system via ship (in millions of tons of CO 2 per year, for example) is operating. Ship costs might be lower than pipeline transport for distances greater than 1,000 kilometers and for less than a few million tons of CO 2 transported per year. Even though regional CO 2 pipeline networks currently operate in the United States for EOR, developing a more expansive network for CCS could pose regulatory and economic challenges. Some observers note that development of a national CO 2 pipeline network that would address the broader issue of greenhouse gas reduction using CCS may require a concerted federal policy beyond the current joint federal-state regulatory policy. One recommendation from stakeholders is for federal regulators to build on state experience for siting CO 2 pipelines, for example. CO2 Sequestration Three main types of geological formations are being considered for carbon sequestration: (1) depleted oil and gas reservoirs, (2) deep saline reservoirs, and (3) unmineable coal seams. In each case, CO 2 would be injected in a supercritical state—a relatively dense fluid—below ground into a porous rock formation that holds or previously held fluids ( Figure 1 ). When CO 2 is injected at depths greater than about half a mile (800 meters) in a typical reservoir, the pressure keeps the injected CO 2 supercritical, making the CO 2 less likely to migrate out of the geological formation. The process also requires that the geological formation have an overlying caprock or relatively impermeable formation, such as shale, so that injected CO2 remains trapped underground ( Figure 1 ). Injecting CO 2 into deep geological formations uses existing technologies that have been primarily developed and used by the oil and gas industry and that potentially could be adapted for long-term storage and monitoring of CO 2 . DOE's Regional Carbon Sequestration Partnership Initiative has been actively pursuing a three-phase approach to the sequestration step in the CCS process since 2003. It is currently in the development phase. The development phase includes implementation of large-scale field testing of approximately 1 million tons of CO 2 per project to confirm the safety, permanence, and economics of industrial-scale CO 2 storage in seven different regions of the United States. The development phase began in 2008 and is projected to last through 2018 and possibly beyond. The storage capacity for CO 2 in geological formations is potentially huge if all the sedimentary basins in the world are considered. In the United States alone, DOE has estimated the total storage capacity to range between about 2.6 trillion and 22 trillion tons of CO 2 (see Table 1 ). The suitability of any particular site, however, depends on many factors, including proximity to CO 2 sources and other reservoir-specific qualities such as porosity, permeability, and potential for leakage. For CCS to succeed, it is assumed that each reservoir type would permanently store the vast majority of injected CO 2 , keeping the gas isolated from the atmosphere in perpetuity. That assumption is untested, although part of the DOE CCS R&D program has been devoted to experimenting and modeling the behavior of large quantities of injected CO 2 . Theoretically—and without consideration of costs, regulatory issues, public acceptance, infrastructure needs, liability, ownership, and other issues—the United States could store its total CO 2 emissions from large stationary sources (at the current rate of emissions) for centuries. Oil and Gas Reservoirs Pumping CO 2 into oil and gas reservoirs to boost production (that is, enhanced oil recovery) is practiced in the petroleum industry today. The United States is a world leader in this technology, and oil and gas operators inject approximately 68 million tons of CO 2 underground each year to help recover oil and gas resources. Most of the CO 2 used for EOR in the United States comes from naturally occurring geologic formations, however, not from industrial sources. Using CO 2 from industrial emitters has appeal because the costs of capture and transport from the facility could be partially offset by revenues from oil and gas production. Both of the currently operating large electricity-generating plants with CCS, Boundary Dam and Petra Nova (discussed below in " Coal-Fired Power Plants with CCS "), offset some of the costs by selling the captured CO 2 for EOR. Carbon dioxide can be used for EOR onshore or offshore. To date, most U.S. CO 2 projects associated with EOR are onshore, with the bulk of activities in western Texas. Carbon dioxide also can be injected into oil and gas reservoirs that are completely depleted, which would serve the purpose of long-term sequestration but without any offsetting benefit from oil and gas production. Deep Saline Reservoirs Some rocks in sedimentary basins contain saline fluids—brines or brackish water unsuitable for agriculture or drinking. As with oil and gas, deep saline reservoirs can be found onshore and offshore; they are often part of oil and gas reservoirs and share many characteristics. The oil industry routinely injects brines recovered during oil production into saline reservoirs for disposal. As Table 1 shows, deep saline reservoirs constitute the largest potential for storing CO 2 by far. However, unlike oil and gas reservoirs, storing CO 2 in deep saline reservoirs does not have the potential to enhance the production of oil and gas or to offset costs of CCS with revenues from the produced oil and gas. Unmineable Coal Seams U.S. coal resources that are not mineable with current technology are those in which the coal beds are not thick enough, are too deep, or lack structural integrity adequate for mining. Even if they cannot be mined, coal beds are commonly permeable and can trap gases, such as methane, which can be extracted (a resource known as coal-bed methane , or CBM). Methane and other gases are physically bound (adsorbed) to the coal. Studies indicate that CO 2 binds to coal even more tightly than methane binds to coal. CO 2 injected into permeable coal seams could displace methane, which could be recovered by wells and brought to the surface, providing a source of revenue to offset the costs of CO 2 injection. Unlike EOR, injecting CO 2 and displacing, capturing, and selling CBM (a process known as enhanced coal bed methane recovery , or ECBM) to offset the costs of CCS is not yet part of commercial production. Currently, nearly all CBM is produced by removing water trapped in the coal seam, which reduces the pressure and enables the release of the methane gas from the coal. Carbon Utilization The concept of carbon utilization has gained increasingly widespread interest within Congress and in the private sector as a means for capturing CO 2 and storing it in potentially useful and commercially viable products, thereby reducing emissions to the atmosphere, and for offsetting the cost of CO 2 capture. The carbon utilization process is often referred to in legislative language and elsewhere as CCUS. (See, for example, S. 2803 , S. 2997 , H.R. 2296 , discussed below in " CCS-Related Legislation in the 115th Congress .") P.L. 115-123 , the Bipartisan Budget Act of 2018, defines carbon utilization as the fixation of such qualified carbon oxide through photosynthesis or chemosynthesis, such as through the growing of algae of bacteria; the chemical conversion of such qualified carbon oxide to a material or chemical compound in which such qualified carbon oxide is securely stored; and the use of such qualified carbon oxide for any other purpose for which a commercial market exists (with the exception of use as a tertiary injectant in a qualified enhanced oil or natural gas recovery project), as determined by the Secretary [of the Treasury]. Figure 2 illustrates an array of potential utilization pathways ranging from food and fuels to solid building materials like cement to fertilizers. DOE notes that many of the uses shown in Figure 2 are small scale and typically emit the CO 2 back to the atmosphere after use, negating the initial reduction in overall CO 2 emissions. DOE sponsors research to develop technologies capable of manufacturing stable products using CO 2 and storing it in a form that will not escape to the atmosphere. The four main areas of DOE-sponsored research in this area are for (1) cement; (2) polycarbonate plastics; (3) mineralization (conversion of CO 2 to carbonates); and (4) enhanced oil (EOR) and gas recovery. Using CO 2 for EOR currently dominates the estimated 80 million tons of CO 2 used worldwide, and CCUS proponents indicate that EOR likely will continue as the dominant use in the short to medium term. Direct Air Capture Direct air capture (DAC) is an emerging set of technologies that aims to remove CO 2 directly from the atmosphere, as opposed to the point source capture of CO 2 from a source like a power plant (as described above in " CO2 Capture "). DAC systems typically employ a chemical capture system to separate CO 2 from ambient air, addition of energy to separate the captured CO 2 from the chemical substrate, and removal of the purified CO 2 to be stored permanently or utilized for other purposes ( Figure 5 ). DAC systems have the potential to be classified as net carbon negative, meaning that if the captured CO 2 is permanently sequestered or becomes part of long-lasting products such as cement or plastics, the end result would be a reduction in the atmospheric concentration of CO 2 . In addition, DAC systems can be sited almost anywhere, they do not need to be near power plants or other point sources of CO 2 emissions. They could be located, for example, close to manufacturing plants that require CO 2 as an input, and wouldn't need long pipeline systems to transport the captured CO 2 . The concentration of CO 2 in ambient air is far lower than the concentration found at most point sources. Thus, a recognized drawback of DAC systems is their high cost per ton of CO 2 captured, compared to the more conventional CCS technologies. A 2011 assessment estimated costs at roughly $600 per ton of captured CO 2 . A more recent assessment from one of the companies developing DAC technology, however, projects lower costs for commercially deployed plants between $94 and $232 per ton. By comparison, some estimate costs for conventional CCS from coal-fired electricity generating plants in the United States between $48 and $109 per ton. Legislation introduced in the 115 th Congress, S. 2602 (the USE IT Act, see Table 2 ), includes the purpose "to support carbon dioxide utilization and direct air capture research" among other purposes, and contains language for a technology prize that would be awarded for DAC projects that capture more than 10,000 tons per year at a cost of less than $200 per ton CO 2 captured. H.R. 4096 , the Carbon Capture Prize Act, would offer a prize for technology developed to reduce the amount of CO 2 in the atmosphere, which would include DAC technologies. Coal-Fired Power Plants with CCS Globally, two fossil-fueled power plants currently generate electricity and capture CO 2 in large quantities: the Boundary Dam plant in Canada and the Petra Nova plant in Texas. Both plants retrofitted post-combustion capture technology to units of existing plants. (The different types of carbon capture technologies are discussed above in " CCS Primer .") Petra Nova: The First (and Only) Large U.S. Power Plant with CCS The Petra Nova–W.A. Parish Generating Station is the first industrial-scale coal-fired electricity-generating plant with CCS to operate in the United States. On January 10, 2017, the plant began capturing approximately 5,000 tons of CO 2 per day from its 240-megawatt-equivalent slipstream using post-combustion capture technology. The capture technology is approximately 90% efficient (i.e., it captures about 90% of the CO 2 in the exhaust gas after the coal is burned to generate electricity) and is projected to capture between 1.4 million and 1.6 million tons of CO 2 each year. The captured CO 2 is transported via an 82-mile pipeline to the West Ranch oil field, where it is injected for enhanced oil recovery (EOR). NRG Energy, Inc., and JX Nippon Oil & Gas Exploration Corporation, the joint owners of the Petra Nova project, together with Hilcorp Energy Company (which handles the injection and EOR), expect to increase West Ranch oil production from 300 barrels per day before EOR to 15,000 barrels per day after EOR. DOE provided Petra Nova with more than $160 million from its Clean Coal Power Initiative (CCPI) Round 3 funding, using funds appropriated under the American Recovery and Reinvestment Act of 2009 (Recovery Act; P.L. 111-5 ) together with other DOE FER&D funding for a total of more than $190 million of federal funds for the $1 billion retrofit project. Petra Nova is the only CCPI Round 3 project that expended its Recovery Act funding and is currently operating. The three other CCPI Round 3 demonstration projects funded using Recovery Act appropriations, (as well as the FutureGen project—slated to receive nearly $1 billion in Recovery Act appropriations) all have been canceled, have been suspended, or remain in development. The Petra Nova plant is projected to capture more CO 2 per year than the other currently operating power plant with CCS, Canada's Boundary Dam (which is designed to capture about 1 million tons per year; see " Boundary Dam: World's First Addition of CCS to a Large Power Plant ," below). Petra Nova also generates more electricity than Boundary Dam, about 240 megawatts compared to Boundary Dam's 115 megawatts. Both projects retrofitted one unit of much larger multi-unit electricity-generating plants. The Petra Nova project retrofitted Unit 8 of the W.A. Parish power plant, which in total consists of four coal-fired units and six gas-fired units, comprising more than 3.7 gigawatts of gross capacity, making it one of the largest U.S. power plants. In 2015, the entire W.A. Parish complex emitted nearly 15 million tons of CO 2 from all of its generating units. The Petra Nova project reduces CO 2 emissions overall from the entire complex by about 11%. By comparison, in 2016, total U.S. CO 2 emissions from the electricity-generating sector were about 1.8 billion tons. The Petra Nova project would reduce that total by a small percentage (about 0.08%). However, according to DOE, a purpose of Petra Nova was to demonstrate that post-combustion capture and reuse can be done economically for existing plants when there is an opportunity to recover oil from nearby oilfields. DOE also has stated that the success of Petra Nova has the potential to enhance the long-term viability and sustainability of coal-fueled power plants across the United States and throughout the world. Boundary Dam: World's First Addition of CCS to a Large Power Plant The Boundary Dam project was the first commercial-scale power plant with CCS in the world to begin operations. Boundary Dam, a Canadian venture operated by SaskPower, cost approximately $1.3 billion according to one source. Of that amount, $800 million was for building the CCS process and the remaining $500 million was for retrofitting the Boundary Dam Unit 3 coal-fired generating unit. The project also received $240 million from the Canadian federal government. Boundary Dam started operating in October 2014, after a four-year construction and retrofit of the 150-megawatt generating unit. The final project was smaller than earlier plans to build a 300-megawatt CCS plant, but that original idea may have cost as much as $3.8 billion. The larger-scale project was discontinued because of the escalating costs. Similar to the Petra Nova project discussed above, Boundary Dam captures, transports, and sells most of its CO 2 for EOR, shipping 90% of the captured CO 2 via a 41-mile pipeline to the Weyburn Field in Saskatchewan. CO 2 not sold for EOR is injected and stored about 2.1 miles underground in a deep saline aquifer at a nearby experimental injection site. By April 2018, the plant had captured over 2 million tons of CO 2 since full-time operations began in October 2014. The 115-megawatt (net) plant plans to capture at least 1 million tons of CO 2 per year. The DOE CCS Program DOE has funded R&D of aspects of the three main steps leading to an integrated CCS system since 1997. Since FY2010, Congress has provided more than $5 billion total in annual appropriations for CCS activities at DOE. The Recovery Act provided an additional $3.4 billion to that total. CCS-focused R&D has come to dominate the coal program area within DOE FER&D since 2010. However, the Trump Administration's FY2019 budget request proposes to shift to other priorities, decreasing the overall FER&D budget by nearly $225 million compared to what Congress enacted for FY2018. The FY2019 budget request cites early-stage research as its focus: "This budget request focuses DOE resources toward early-stage R&D and reflects an increased reliance on the private sector to fund later-stage research." The Trump Administration's approach would be a reversal of Obama Administration and George W. Bush Administration DOE policies, which supported large carbon-capture demonstration projects and large injection and sequestration demonstration projects. The Administration previously proposed cuts to FER&D in its FY2018 budget request; however, Congress increased funding by nearly $59 million (9%) compared to FY2017. For FY2019, House-passed appropriations legislation would increase overall funding for DOE FER&D by over $58 million compared to the FY2018 amount, and $283 million above the Administration budget request. The Senate-passed version of the appropriations bill would fund DOE FER&D at about the same level as the FY2018 amount, $727 million, also substantially greater than the Administration's request for $502 million. Table 2 shows the funding for DOE CCS programs under FER&D from FY2010 through FY2018 and includes the President's FY2019 budget request. Table 2 groups mostly CCS-related programs under the Coal CCS and Power Systems category and the remainder of fossil energy spending under Other Fossil Energy R&D. This grouping follows how Congress has funded these programs. Congress did not accept the Administration's proposed restructuring of the FER&D portfolio in FY2018. Coal CCS and Power Systems Compared to the FY2018 total of $727 million enacted for all FER&D, the Administration's FY2019 request of $502 million would be a reduction of approximately 31%. Carbon capture and carbon storage ( Table 2 ) would receive $40 million total under the Administration's request, compared to nearly $200 million for FY2018, an 80% reduction. The Administration's FY2019 budget request would prioritize the Advanced Energy Systems (AES) account, requesting $175 million, $63 million above the FY2018-enacted amount, nearly a 44% increase. The budget request indicates that AES would focus on six activities: advanced combustion/gasification, advanced turbines, solid oxide fuel cells, advanced sensors and controls, power generation efficiency, and advanced energy materials. Other accounts under the Coal CCS & Power Systems program area are proposed to be funded slightly above or slightly below FY2018 levels, with the exception of CCS activities. Reductions to CCS-related funding would comprise nearly all of the proposed decreased funding for activities in the Coal CCS & Power Systems program area. Other Fossil Energy Research and Development The budget request for FY2019 proposes to decrease funding for programs under Other Fossil Energy R&D by nearly $87 million, a 35% reduction compared to FY2018. Program Direction ($60 million in FY2018) provides DOE headquarters support and federal field and contractor support of the FER&D programs overall. Program Direction and National Energy Technology Laboratory (NETL) Coal R&D together provide support to CCS-related activities directly and indirectly. The budget request proposes to decrease funding for Natural Gas Technologies and Unconventional Fossil activities compared to what Congress enacted in FY2018, from $90 million to $19.5 million for both programs combined. For FY2018, Congress increased funding for those activities (by $16 million compared to FY2017), which support collaborative research to foster development of shale gas resources, the reduction of methane emissions from natural gas infrastructure, and research on gas hydrates. The budget request proposes to eliminate funding for Transformational Coal Pilot programs (called New Fossil Pilot in FY2017). Congress provided $50 million for the program in FY2017 and $35 million in FY2018. CCS-Related Legislation in the 115th Congress A number of bills introduced in the 115 th Congress would potentially affect CCS in the United States. Several bills or provisions of bills address Internal Revenue Code, Section 45Q, providing tax credits for CO 2 capture and sequestration or use as a tertiary injectant for EOR or natural gas production ( S. 1535 , S. 1663 , S. 2256 , H.R. 1892 , H.R. 2010 , H.R. 3761 , H.R. 4857 , (see Appendix ). H.R. 1892 , the Bipartisan Budget Act of 2018, was enacted into law as P.L. 115-123 . The provisions of P.L. 115-123 that amended Section 45Q and their implications are discussed in more detail in the text box below. Other bills also would amend the Internal Revenue Code in ways affecting CCS. For example, S. 843 and H.R. 2011 would amend Section 142 of the Internal Revenue Code to allow qualified CO 2 capture facilities that capture 65% or more of their CO 2 emissions to be eligible for tax-exempt private activity bonds. The bills assert that allowing tax-exempt financing for the purchase of capital equipment that is used to capture carbon dioxide will reduce the costs of developing carbon dioxide capture projects, accelerate their deployment, and, in conjunction with carbon dioxide utilization and long-term storage, help the United States meet critical environmental, economic, and national security goals. Several bills would address federal efforts to enhance CCS or emphasize different aspects of the process across three different federal agency and departmental jurisdictions: EPA, DOE, and the Department of Agriculture. S. 2602 , for example, would authorize activities under EPA jurisdiction to support direct air capture and utilization of CO 2 , and would include carbon capture infrastructure projects as eligible under the FAST Act, as part of the bill's intent to expedite the permitting process for CCS. The legislation would add CCS infrastructure projects explicitly as eligible covered projects, meaning any infrastructure construction activity requiring authorization or environmental review by a federal agency. S. 2803 and H.R. 5745 would amend the Energy Policy Act of 2005 ( P.L. 109-58 ) to authorize DOE to further its CCS research, development, and deployment (RD&D) activities, and place a greater emphasis on CO 2 utilization. S. 2803 would also authorize a project aimed to achieve net-negative CO 2 emissions—projects utilizing biomass and fossil fuels to produce electricity, fuels, or chemicals—with a net removal of CO 2 from the atmosphere. S. 2997 would authorize the Secretary of Agriculture to pursue biomass-related CCS R&D projects, and would authorize the use of loans or loan guarantees for biomass-related CO 2 capture and utilization activities. H.R. 2296 would focus on DOE CCS-related activities and require the department to evaluate its RD&D projects and make recommendations whether each project should continue to receive funding based on progress toward its CCS goals. H.R. 4096 would establish a $5 million prize for CCS-related technology development and commercialization, pursuant to Section 24 of the Stevenson-Wydler Technology Innovation Act of 1980 (15 U.S.C. 3719). H.R. 5745 would authorize or encourage RD&D activities across the spectrum of CCS, including carbon capture, carbon sequestration, carbon utilization, and carbon removal (including direct air capture), and would authorize a $15 million prize competition to develop direct air capture technology. The bill also would establish a task force to assess the potential for a national system of CO 2 pipelines. Discussion Currently the Petra Nova plant in Texas is the sole U.S. commercial large-scale fossil-fueled power plant with CCS, capturing over 1 million tons of CO 2 annually. The Boundary Dam power plant in Canada is the only other commercial fossil-fueled electricity generating plant in the world operating with CCS and capturing a nearly equivalent volume of CO 2 . Both plants offset a portion of the cost of CCS by selling CO 2 for the purpose of enhanced oil recovery. Some CCS proponents have hailed the expanded tax credit provision enacted as part of P.L. 115-123 , increasing the value of tax credits under Section 45Q of the Internal Revenue Code, as a potential "game changer" for incentivizing more development of large-scale CCS deployment like Petra Nova and Boundary Dam. Some CCS proponents advocate for other incentives, such as tax-exempt private activity bonds, and enabling eligibility of master limited partnerships for CCS infrastructure projects, which could also increase the financial attractiveness of large-scale capital-intensive CCS endeavors. According to CCS proponents, private activity bonds would allow CCS project developers access to tax-exempt debt, thus lowering their capital costs. Master limited partnerships would allow a corporate structure to combine the tax benefits of a partnership with a corporation's ability to raise capital, reducing the cost of equity and providing access to capital on more favorable terms, according to proponents. Members of Congress have introduced legislation that would authorize these financial incentives, as well as a suite of other bills aimed at advancing CCS by making CCS infrastructure projects eligible under the FAST Act (42 U.S.C. 4370m(6)), supporting increased research and development for conventional CCS and for carbon utilization technologies and direct air capture of CO 2 . Several bills would authorize technology prizes for advances in CCS R&D, including for utilization technologies and direct air capture. P.L. 115-123 was enacted on February 9, 2018, and it likely will take time to evaluate the impact on U.S. CCS activities. Other factors, such as the price of oil, which could affect demand for EOR and thus CO 2 , and the price of natural gas—which could affect the substitution of natural gas for coal in electricity production—will also shape the extent and rapidity of CCS adoption as well. Enactment of other legislation introduced in the 115 th Congress ( Appendix ) that would provide additional incentives for CCS could also influence future CCS activities. Ultimately the success of legislative approaches advocated by bill sponsors, and more broadly by CCS proponents, will be measured by how those approaches reduce costs for CCS, through financial incentives, technology development, and commercially viable CO 2 -based products, so that the suite of CCS technologies would be more broadly deployed. Absent a policy mandate for reducing CO 2 emissions, or rewarding CO 2 capture and storage or utilization (apart from the 45Q tax incentives enacted in P.L. 115-123 ), there is broad agreement that costs for CCS would need to decrease before the technologies are commercially deployed across the nation. The issue of greater CCS deployment is fundamental to the underlying reason CCS is deemed important by a range of proponents: to reduce CO 2 emissions (or reduce the concentration of CO 2 in the atmosphere) and help mitigate against human-induced climate change. The conventional concept of CCS whereby CO 2 emissions from large stationary sources in the United States, such as fossil fuel electricity generating plants, refineries, cement plants, and others was recognized early on as a potential pathway to reducing a large amount greenhouse gas emissions from a relatively small number of point sources. The U.S. fossil fuel electricity generation sector alone emitted 1.8 billion tons of CO 2 in 2016, or 34% of total U.S. CO 2 emissions (5.31 billion tons) that year. The emerging technologies for utilizing CO 2 for a variety of uses and products (carbon utilization, see Figure 5 ) has energized some CCS advocates because of the commercial potential and prospects for the sequestration of CO 2 in long-lasting products such as cements and plastics. A challenge for utilization advocates is whether the market for carbon utilization products and uses is sufficiently large so that the amount of CO 2 captured or removed from the atmosphere has some measurable effect on human-induced climate change. Direct air capture (DAC) also has energized some CCS advocates as it offers the promise of net-negative carbon removal if the CO 2 removed by DAC is permanently stored or sequestered. The challenge for DAC is fairly straightforward—how to reduce the cost per ton of CO 2 removed.

Carbon capture and sequestration (or storage)—known as CCS—is a process that involves capturing man-made carbon dioxide (CO2) at its source and storing it permanently underground. (CCS is sometimes referred to as CCUS—carbon capture, utilization, and storage.) CCS could reduce the amount of CO2—an important greenhouse gas—emitted to the atmosphere from the burning of fossil fuels at power plants and other large industrial facilities. The concept of carbon utilization has gained interest within Congress and in the private sector as a means for capturing CO2 and converting it into potentially commercially viable products, such as chemicals, fuels, cements, and plastics, thereby reducing emissions to the atmosphere and helping offset the cost of CO2 capture. Direct air capture is also an emerging technology, with the promise to remove atmospheric CO2 directly and reduce its concentration. The U.S. Department of Energy (DOE) has funded research and development (R&D) of aspects of CCS since 1997 within its Fossil Energy Research and Development (FER&D) portfolio. Since FY2010, Congress has provided more than $5 billion total in appropriations for DOE CCS-related activities. The Trump Administration proposed to reduce FER&D funding substantially in its FY2018 and FY2019 budget requests, but Congress has not agreed to the proposed reductions. In FY2018, Congress increased funding for DOE FER&D by nearly $59 million (9%) compared to FY2017, and the House- and Senate-passed appropriations bills for FY2019 would match or increase the appropriated amount compared to what Congress enacted for FY2018 ($727 million). The Petra Nova plant in Texas is the only U.S. fossil-fueled power plant currently generating electricity and capturing CO2 in large quantities (over 1 million tons per year). Globally, the Boundary Dam plant in Canada is the only other large-scale fossil-fueled power plant with CCS. Both facilities retrofitted post-combustion capture technology to units of existing plants, and both offset a portion of the cost of CCS by selling captured CO2 for the purpose of enhanced oil recovery (EOR). Some CCS proponents point to the expanded Section 45Q of the Internal Revenue Code tax credits for CO2 capture and sequestration or its use as a tertiary injectant for EOR or natural gas production that were enacted as part of P.L. 115-123 as a significant step toward incentivizing more development of large-scale CCS deployment like Petra Nova and Boundary Dam. A number of bills introduced in the 115th Congress potentially would affect CCS in the United States. Several bills or provisions of bills address the Section 45Q tax credits (S. 1535, S. 1663, S. 2256, H.R. 1892, H.R. 2010, H.R. 3761, H.R. 4857). H.R. 1892, the Bipartisan Budget Act of 2018, enacted into law as P.L. 115-123, amended Section 45Q and increased the amount of the tax credit from $20 to $50 per ton of CO2 for permanent sequestration, increased it from $10 to $35 for EOR purposes, and effectively removed the 75 million ton cap on the total amount of CO2 injected underground, among other changes. Some proponents suggest that enactment of this provision could be a "game changer" for CCS, leading to more widespread adoption of the technology, although others question whether the increased incentives are large enough to affect CCS deployment. Other bills address a suite of measures to advance CCS. Several would provide additional financial incentives, such as tax-exempt private activity bonds, and provisions that would enable eligibility of master limited partnerships for CCS infrastructure projects (S. 843, S. 2005, H.R. 2011, and H.R. 4118). One bill (S. 2602) could help advance CCS by making CCS infrastructure projects eligible under the FAST Act (42 U.S.C. 4370m(6)). Other bills (S. 2803, S. 2997, H.R. 2296, H.R. 5745) would support increased R&D for CCS, carbon utilization technologies, and direct air capture of CO2. One bill (H.R. 4096) would authorize a $5 million prize to promote advances in CCS technology research and development. There is broad agreement that costs for CCS would need to decrease before the technologies could be deployed commercially across the nation. The issue of greater CCS deployment is fundamental to the underlying reason CCS is deemed important by a range of proponents: to reduce CO2 emissions (or reduce the concentration of CO2 in the atmosphere) and to help mitigate against human-induced climate change.

Introduction Over the past couple of decades, the courts and Congress have been grappling with tobacco-related issues, among them, the Food and Drug Administration's (FDA's) authority to regulate tobacco under the Federal Food, Drug, and Cosmetic Act (FFDCA); the Master Settlement Agreement (MSA) that resulted from lawsuits by states' attorneys general against tobacco companies; federal, private party, and foreign lawsuits against tobacco companies; limits on tobacco advertising; and restrictions on selling and distributing tobacco to minors. This report concerns all of the above issues except the FDA's authority to regulate tobacco products, which is covered in a separate CRS report. State Suits and the Master Settlement Agreement Beginning in 1994, 41 states and Puerto Rico began filing lawsuits against tobacco companies for reimbursement of tobacco-related medical expenses, particularly Medicaid expenditures. In November 1998, attorneys general from 46 states, the District of Columbia, and five U.S. territories signed the Master Settlement Agreement (MSA) with the major tobacco companies. Four states—Mississippi, Florida, Texas, and Minnesota—did not join the MSA, but instead settled individually with the tobacco companies. The MSA did not settle individual, union, private health care, or class action suits. Under the terms of the settlement, states will receive annual payments worth $206 billion over the next 26 years followed by unspecified subsequent payments to continue in perpetuity. Each state needed to and did obtain its trial court's approval to receive the MSA funds. The MSA also prohibited certain advertising, marketing, and promotion of tobacco products (see " Tobacco Advertising: Federal Regulations, MSA Restrictions, and Local Ordinances " below). According to a March 2007 article by the American Bar Association Journal, of the $61 million paid to the states by tobacco companies, states had spent less than 8% on anti-smoking endeavors. Government Accountability Office figures indicate that states have spent even less on tobacco control, which it defines as efforts to include prevention, education, enforcement, and cessation services. States had allocated 30% of their MSA payments to health care, including Medicaid, health insurance, and hospitals; 22.9% towards budget shortfalls; 7.1% to general purposes; 6% towards infrastructure; 5.5% to education; 5.4% to debt service on securitized funds; 3.5% on tobacco control; and 7.8% to other projects. The states had not allocated 11.9% of their MSA payments. As noted, the MSA grew out of lawsuits by the states seeking reimbursement for their medical expenses on behalf of tobacco users. If a third party, such as a tobacco company, causes an illness or injury to someone, and a state provides medical care for that illness or injury, as, for example, out of Medicaid funds, then the state may sue the third party for reimbursement of such funds. Because the federal government pays for at least 50% of each state's Medicaid costs, by law the federal government is entitled to its share of any reimbursements of Medicaid funds that a state receives from a third party that caused an illness or injury on which Medicaid funds were expended. With respect to the MSA, however, Congress enacted P.L. 106-31 (2000), which authorizes the states to keep reimbursements they receive from third parties. The Federal Lawsuit The federal lawsuit against major tobacco companies and industry trade groups began under the Clinton Administration in 1999 as a way for the U.S. government to recover tobacco-related medical costs paid by federal health care programs. The Department of Justice (DOJ) was seeking: (1) restitution for money paid by the federal government's health care programs for treatment and care of persons with tobacco-related diseases; (2) a disgorgement of the profits that the tobacco industry allegedly earned by violating the Racketeer Influenced and Corrupt Organizations Act (RICO); and (3) orders preventing fraud and future violations of the law, such as racketeering or making false, deceptive, or misleading statements about cigarettes; as well as orders that the defendants take certain actions, such as issuing corrective statements, disclosing research, and funding smoking cessation programs. Ultimately, the United States could not recover any funds from the defendants. In 2000, the U.S. District Court for the District of Columbia dismissed two claims by the government that would have provided for recovery under the Medical Care Recovery Act as well as under the Medicare Secondary Payer Act provisions of the Social Security Act. The suit then proceeded under two RICO claims, 18 U.S.C. Section 1962(c) and (d). Section 1962(c) criminalizes the association of persons, including corporations, with enterprises that conduct their affairs through "a pattern of racketeering activity," which means that they commit two or more specified crimes within 10 years. Section 1962(d) outlaws conspiracies to violate Section 1962(c) or related provisions regarding racketeering activities. The government alleged that a pattern of racketeering activity existed because the defendants defrauded "individual smokers of their property (i.e., the money they spent on cigarettes)" and sought disgorgement of certain profits. The defendants challenged the right of the government to seek disgorgement of profits. Although the district court ruled in favor of the United States, in 2004, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) reversed and ruled in favor of the defendants. Thus, the court of appeals allowed only forward-looking injunctive relief. The United States could not recover the $280 billion disgorgement that had been sought for tobacco profits earned since 1971 for marketing to youth. The court of appeals stated that injunctive relief under RICO must focus on preventing future wrongdoing rather than on punishing past conduct. Noting that Congress explicitly crafted a set of remedial measures in the RICO statute and likely did not intend to provide other remedies, the court of appeals was "reluctant" to infer an additional remedy such as disgorgement. In August 2006, after a nine month trial, the U.S. District Court for the District of Columbia ruled that the defendants had violated RICO. The court found that the tobacco companies and trade industry organizations had conspired "to deceive the American public about the health effects of smoking and environmental tobacco smoke, the addictiveness of nicotine, the health benefits from low tar, 'light' cigarettes, and their manipulation of the design and composition of cigarettes in order to sustain nicotine addiction." Although the court of appeals prevented the district court from imposing the remedy of disgorgement, the district court ordered the defendants to pay DOJ's legal costs, which totaled approximately $1.93 million. The district court also enjoined the defendants from using descriptors such as low-tar, light, mild, and natural on their cigarette packaging and advertisements; ordered the defendants to place "onserts" or stickers with corrective statements on their packaging and to issue statements in newspapers and on television and retail displays; and extended the length of time that tobacco companies must make documents produced in litigation available to the public, a requirement that originated in the MSA. In March 2007, the U.S. District Court for the District of Columbia responded to a motion by certain defendants for clarification of the court's August 2006 order restricting the defendants' use of marketing descriptors such as natural and ultra light. Noting that RICO provisions have effect outside the United States if the illegal activity abroad "causes a 'substantial effect' within the United States," the court concluded that the defendants were prohibited from using such marketing descriptors and express or implied health messages internationally as well as in the United States. The district court order did not take effect immediately because of the appellate court's stay and the pending appeal, discussed below. Both the tobacco companies and the DOJ filed notices of appeal with the D.C. Circuit. On May 22, 2009, the court of appeals issued its decision largely upholding the district court's finding of liability against the nine cigarette manufacturers. The appeals court also upheld the district court's remedial order that had imposed the numerous affirmative and negative duties on the defendants while denying the government's proposed remedy of a counter-marketing campaign, smoking cessation program, youth smoking reduction program, and monitoring scheme. Furthermore, the appeals court rejected the government's request to seize billions of dollars in corporate profit from companies that include Altria Group, R.J. Reynolds, and Brown & Williamson. The court of appeals also partly vacated the district court's remedial order and remanded for further proceedings on four discrete issues. These included vacating the remedial order with respect to the prohibition on health messages or descriptors and ordering the district court "to reformulate [its] injunction so as to exempt foreign activities that have no substantial, direct, and foreseeable domestic effects." It remains to be seen how this order will affect the district court's earlier March 2007 decision that the provisions in the remedial order that prohibit defendants from using express or implied health messages apply to the defendants' actions taken outside the United States. Selected Private Party Suits Prior to 1992, tobacco lawsuits were typically individual product liability and negligence suits brought by smokers or their relatives seeking damages for smoking-related illnesses. The tobacco industry generally prevailed in these cases by arguing that the Federal Cigarette Labeling and Advertising Act (FCLAA), which requires warning labels, preempted plaintiffs' claims that the tobacco companies had a duty to warn consumers. In some cases, however, tobacco manufacturers prevailed by arguing that smokers assumed the risks of smoking. Then, in 1992, in Cipollone v. Liggett Group, Inc. , the U.S. Supreme Court made it more feasible for smokers to recover. Although the Court held that federal laws requiring warning labels precluded states from imposing additional requirements or prohibitions on cigarette advertising and labeling, and therefore precluded lawsuits alleging that the federally required warning labels were inadequate, the Court stated that federal law did not preclude "state-law damages actions." Examples of state-law damages actions include failure-to-warn lawsuits based on tobacco companies' "testing or research practices or other actions unrelated to advertising or promotion," or claims of breach of express warranty, fraudulent representation, and conspiracy. This section now examines selected suits brought by private parties after Cipollone . In addition to the class action and individual suits discussed below, tobacco companies have been sued by their own shareholders for decreased stock prices due to deceptive practices, and by insurance companies for medical expenses resulting from fraud, conspiracy, racketeering, misrepresentation, and antitrust violations. Cigarette manufacturers have also been sued under legal theories that include negligence, strict liability, defective design, public nuisance, antitrust laws, and unfair trade practices. Caronia v. Philip Morris Long-term cigarette smokers filed a class action suit, Caronia v. Philip Morris U.S.A., Inc. , seeking to have the manufacturer provide low dose computed tomography (CT) scans for lung cancer on an annual basis or more frequently if the scan shows signs of cancer. The plaintiffs alleged that Philip Morris's "wrongful design, manufacturing, and marketing" placed them at a higher risk for lung cancer. Essentially, the plaintiffs were trying to hold Philip Morris liable for not producing a safer cigarette. The federal district court dismissed the plaintiffs' defective design claims. In a separate order after additional briefing, the court granted Philip Morris's motion to dismiss. Even though the court held that New York would likely recognize a cause of action for medical monitoring, the plaintiffs had not alleged that absent Philip Morris's failure to produce a safer cigarette they would not face an increased need for medical screening —even if Philip Morris had made a safer cigarette, the plaintiffs would still face an increased risk for lung cancer and an increased need for medical screening due to smoking. The court granted Philip Morris's motion for summary judgment on the implied warranty claim, finding that there was no breach of the warranty that the cigarettes were suitable for their foreseeable use. Schwab v. Philip Morris In the federal class action lawsuit Schwab v. Philip Morris U.S.A., Inc. , lead plaintiff Barbara Schwab sued six tobacco companies in the U.S. District Court for the Eastern District of New York, alleging that the tobacco industry committed fraud and misled customers by marketing light cigarettes as less dangerous than regular cigarettes. The Schwab case became the first light cigarettes, or "lights," case to receive class certification from any federal court. The district court found that the MSA did not preclude the suit because, in the MSA, the states, not individual smokers, were compensated. On appeal, the U.S. Court of Appeals for the Second Circuit decertified the class action lawsuit, finding that the "class action suffers from an insurmountable deficit of collective legal or factual questions" and therefore did not meet a requirement under Rule 23 of the Federal Rules of Civil Procedure that "questions of law or fact common to class members predominate over any questions affecting only individual members." Engle v. Liggett Group, Inc. In most states, courts reportedly have denied class action status to plaintiffs for private lawsuits against tobacco companies. However, in Florida, the Circuit Court of Miami-Dade County granted class action status in Engle v. Liggett Group . In Engle , a jury awarded $145 billion in punitive damages against tobacco companies and industry trade groups. After the jury verdict, however, Florida's Third District Court of Appeal decertified the class of up to 700,000 Florida smokers. On December 21, 2006, the Florida Supreme Court upheld the decision to decertify the class. The court stated that causation and the proportion of the defendants' fault were too individualized to be litigated as a class action suit. Such issues included whether cigarettes, or some other factor, caused the plaintiffs' illnesses, and the percentage of fault that should be attributed to each defendant tobacco company if a plaintiff smoked multiple brands. The court did uphold smaller individual damage awards of $2,850,000 and $4,023,000 for two Florida cancer patients. The U.S. Supreme Court denied certiorari in the Engle case. The Florida Supreme Court decision did not prevent individual smokers (or families of deceased smokers) from filing individual lawsuits instead of a class action. The court's opinion upheld most of the jury's findings that cigarettes are addictive, defective, and unreasonably dangerous products that cause diseases. This aspect of the court's decision will give plaintiffs a significant advantage in any individual lawsuits against the same defendants because, under the doctrine of collateral estoppel, the individuals will not have to prove these findings again—that cigarettes are addictive, defective, and unreasonably dangerous. According to one tobacco company's filing with the Securities and Exchange Commission, "[a]s of April 11, 2008, RJR Tobacco had been served in 1,931 Engle Progeny Cases in both state and federal courts in Florida. These cases include approximately 8,178 plaintiffs." The company also stated that "[t]he number of cases will increase due to a delay in the processing of cases in the Florida court system." Other sources have reported that as of 2010 "4000 related cases have been filed and are awaiting trial in Florida." Post- Engle , there have been mixed results in the individual suits. In one of the first suits, a Fort Lauderdale jury awarded a widow $8 million in damages against Altria, the parent company of Philip Morris. Additionally, a Fort Lauderdale jury awarded a plaintiff nearly $300 million in damages in a September 2008 case. Subsequently, however, a state jury in St. Petersburg, FL, delivered a verdict in favor of R.J. Reynolds, where the plaintiff was also a widow of a smoker who died of lung cancer. Although juries had returned verdicts favorable to plaintiffs initially in post- Engle cases, tobacco defendants received a string of victories later. Price v. Philip Morris On December 15, 2005, the Supreme Court of Illinois overturned a verdict of $7.1 billion in compensatory damages and $3 billion in punitive damages in the consumer-fraud and deceptive trade practices class action of Price v. Philip Morris U.S.A., Inc. An Illinois circuit court had certified a class that consisted of 1.14 million plaintiffs who bought Cambridge Lights cigarettes and Marlboro Lights cigarettes in Illinois from the time that the cigarettes were first placed on the market until February 2001. The plaintiffs alleged that tobacco companies committed fraud by advertising light cigarettes as having lower tar and nicotine levels and leading consumers to think that such cigarettes were safer to smoke than full flavor cigarettes. The Illinois Supreme Court ruled against the plaintiffs and held that the Federal Trade Commission (FTC) had authorized light and low tar labeling and therefore that Philip Morris U.S.A., Inc. could not be held liable as long as the company complied with FTC requirements, even if the terms were false or misleading. The U.S. Supreme Court denied certiorari on November 27, 2006. Since this decision, the Supreme Court decided Altria Group, Inc. v. Good . In this case, the Court addressed whether the Federal Cigarette Labeling and Advertising Act (FCLAA) preempted a state law claim that Philip Morris USA (PMUSA) and its parent company Altria Group violated the Maine Unfair Trade Practices Act (MUTPA) by using "light" and "low tar" descriptors on cigarettes, thereby delivering the message that light cigarettes deliver less tar and nicotine to consumers than regular brands, while knowing such message to be untrue. The Court held that the plaintiffs' claims were not expressly preempted by the FCLAA because their claims under the MUTPA are predicated on the general duty not to deceive. The Court further rejected PMUSA's argument that the state law claims were impliedly preempted because of its contention that the FTC has for decades promoted the development and consumption of low-tar cigarettes, encouraged consumers to rely on representations of tar and nicotine content in choosing among cigarette brands, and authorized the use of such descriptors. In holding that the FCLAA neither expressly nor impliedly preempted the plaintiffs' claims, the Court's decision appears to allow other state law claims of fraud based on the use of descriptors such as "light" and "low tar" to go forward. California Cases In August 2002, the California Supreme Court enabled individuals to sue tobacco companies by holding that a statute granting tobacco manufacturers immunity from products liability suits applied only from the date of the statute's enactment on January 1, 1988, until the statute's repeal effective January 1, 1998. The court found that general tort principles applied to conduct before and after the 10-year immunity period. In a separate case decided on the same day, the court also found that the immunity statute did not prohibit lawsuits alleging that tobacco additives create an unreasonably dangerous product "that exposed smokers to dangers beyond those commonly known to be associated with cigarette smoking." In a subsequent ruling, Grisham v. Philip Morris , the California Supreme Court held that the state's two year statute of limitations for filing a physical injury claim starts to run after a "smoker is diagnosed with a disease caused by the cigarettes." The ruling did not address whether the statute of limitations would have run if an individual was diagnosed with more than one illness, "[f]or example, if a smoker were diagnosed with emphysema five years ago and then lung cancer last month—but only files suit after the lung cancer diagnosis—the statute of limitations may have run." Defendant tobacco companies had argued that the statute of limitations should begin when smokers discover they are addicted to cigarettes. Foreign Suits in U.S. Federal Courts The governments of Guatemala, Nicaragua, and Ukraine sued major American tobacco companies in the U.S. District Court for the District of Columbia for money they had spent on medical care for their citizens' tobacco-related illnesses. The government of Guatemala, for example, alleged that the tobacco companies misrepresented the dangers of cigarette smoking, and as a result, the Guatemalan government waited before making efforts to shrink its smoking population. Reasoning that "the injury that [the nations] purportedly suffered occurred only as a consequence of the harm to individual smokers," the district court dismissed the lawsuit. The U.S. Court of Appeals for the D.C. Circuit affirmed the dismissal, noting that it concurred with seven circuits "that the alleged injuries of the third-party payors are too remote to have been proximately caused by the defendants' alleged conduct." The court also held that the foreign governments did not have standing "unless there is a clear indication by the Supreme Court or one of the two coordinate branches of government to grant such standing" to foreign nations to sue in the United States on behalf of their foreign citizens. The foreign governments had argued that they were suing on behalf of their people and were "seeking to protect their governments' treasuries." On October 29, 2001, the U.S. Supreme Court denied certiorari. Tobacco Advertising: Federal Regulations, MSA Restrictions, and Local Ordinances67 The Federal Cigarette Labeling and Advertising Act (FCLAA) limits advertising of tobacco products. The act prevents advertising of cigarettes, little cigars, and smokeless tobacco via electronic communications under the jurisdiction of the Federal Communication Commission, such as radio and wire communications, as well as broadcast, satellite, and cable television. In combination with other federal statutes, the act requires health warning labels on cigarette and smokeless tobacco packaging, as well as on all cigarette and most smokeless tobacco advertisements. The health warnings must be rotated several times per year according to a manufacturer-submitted plan approved by the Federal Trade Commission. Because of the FCLAA's preemption provision, states cannot impose their own health warning labels on cigarettes. The FCLAA's preemption provisions do not apply to the MSA because the states and tobacco manufacturers voluntarily agreed to waive "any and all claims that the provisions of this Agreement violate the state or federal constitutions." The MSA restricted tobacco advertising in several ways, although it did not restrict certain forms of advertising, such as print and online advertisements or marketing inside retail locations. The MSA banned cartoons; tobacco advertising on public transportation; sponsorship of certain team and league sports; stadium naming rights; gifts to minors of non-tobacco merchandise in exchange for proofs of purchase of tobacco products; free samples of tobacco products in places other than adult-only facilities; signs outside stores larger than 14 square feet; and billboards in arenas, stadiums, malls, and arcades. However, the MSA allows advertisements that are located within and not visible outside of adult-only facilities. Within MSA limitations, tobacco companies may still sponsor certain musical, sporting, and cultural events. The MSA also bans the sale and distribution of merchandise with tobacco product brand names, except for at brand-name sponsored events. The MSA prohibits payments to the media for the promotion, mention, or use of tobacco products, except for adult-only media. Moreover, the MSA prohibits tobacco companies from targeting or promoting tobacco to minors. Though states' attorneys general signed, and trial courts ratified the MSA, several states and cities created additional restrictions on tobacco advertising. For example, Baltimore passed ordinances prohibiting tobacco and alcohol advertisements on billboards, except for commercial and industrial zones of the city. The U.S. Court of Appeals for the Fourth Circuit upheld Baltimore's ordinances in two cases, finding that they do not violate the First Amendment. In 1999, the Massachusetts Attorney General promulgated advertising restrictions—on cigarettes, smokeless tobacco, little cigars, and cigars—that he intended to fill the gaps left by the MSA. The regulations prohibited all sizes of outdoor tobacco advertisements within 1,000 feet of playgrounds, schools, and parks, including advertisements located within a store that were visible from the outside of that store. The rules also imposed a similar 1,000-foot state ban on point-of-sale retail displays if the displays were less than five feet tall and located in stores accessible to youth. Additionally, the attorney general restricted tobacco promotions, samples, and cigar labels; banned self-service displays; and required customers to have contact with a sales person before handling or purchasing tobacco products. In 2001, however, the U.S. Supreme Court held in Lorillard Tobacco Co. v. Reilly that the FCLAA preempted Massachusetts's outdoor advertising and point-of-sale restrictions for cigarettes, because the FCLAA preempts state regulations of cigarette advertising and promotion. Therefore, the Court struck down that portion of the regulations. The Court noted, however, that the FCLAA preemption provisions do not apply to smokeless tobacco or cigars, or restrictions on cigarette sales. After determining that the restrictions on smokeless tobacco and cigars were not preempted by the FCLAA, the Court had to reach the issue of whether Massachusetts's outdoor and point-of-sale advertising regulations violated the First Amendment, which guarantees freedom of speech. Though Massachusetts had a compelling interest in protecting youth from tobacco products, the Court found that the restrictions on outdoor advertising of cigars and smokeless tobacco were overbroad in that they prohibited advertising "in a substantial portion of the major metropolitan areas of Massachusetts," included oral communications, and imposed burdens on retailers with limited advertising budgets. The Court also upheld challenges by smokeless tobacco and cigar companies to the outdoor advertising restrictions on the grounds that adults have a right to information and the tobacco industry has a right to communicate truthful speech on legal products. The Justices then struck down the similar 1,000-foot state ban on point-of-sale retail displays for cigars and smokeless tobacco under five feet tall in stores accessible to youth. They noted that the prohibition did not advance the goal of preventing minors from using tobacco products because some children are taller than five feet and others can look up at their surroundings. According to one source, at least 20 state and local laws have been repealed as a result of Lorillard . Finally, as to the question of Massachusetts's regulation of cigarette, smokeless tobacco, and cigar sales, the petitioners did not argue that the FCLAA preempted Massachusetts law. As a result, the Court evaluated arguments from cigarette, smokeless tobacco, and cigar petitioners that certain sales restrictions violated the First Amendment. The Court upheld restrictions banning self-service displays and requiring customers to have contact with a sales person before handling or purchasing tobacco products. According to the Justices, the state had a substantial interest in preventing minors from accessing tobacco products, and the regulation was narrowly tailored so as not to significantly affect adult access to tobacco products. Restrictions on Selling and Distributing to Minors All 50 states ban tobacco sales to individuals under age 18, and federal law plays a role in this restriction. The Public Health Service Act authorizes the Secretary of Health and Human Services (HHS) to "make an allotment each fiscal year for each state" to be used for "activities to prevent and treat substance abuse." Under a 1992 amendment to this statute, sponsored by Representative Michael Synar and known as the "Synar Amendment," the Secretary may make such grants "only if the State has in effect a law providing that it is unlawful for any manufacturer, retailer, or distributor of tobacco products to sell or distribute such product to any individual under the age of 18." Under the Synar Amendment, states must enforce their bans through annual random, unannounced inspections. If a state fails to comply with the federal enforcement provisions and reporting requirements on its enforcement activities, the federal government may reduce that state's federal funding for substance abuse treatment. According to the HHS regulations, the goal of the Synar Amendment's random inspections requirement is to achieve 80% or higher compliance with laws prohibiting tobacco sales and the distribution of tobacco products to individuals under 18. In 2008, the Supreme Court decided Rowe v. New Hampshire Motor Transport Association , where it held that two Maine laws aimed at restricting minors' access to cigarettes through the internet were preempted by the Federal Aviation Administration Authorization Act of 1994 (FAAA). The FAAA prohibited states from "enact[ing] or enforc[ing] a law ... related to a price, route, or service of any motor carrier ... with respect to the transportation of property." In 2003, Maine passed two laws that instituted requirements for shipping and delivery sales of tobacco products that attempted to end sales to minors. Violators of either provision could receive civil penalties. The first provision required tobacco retailers to use delivery services that verify that, if the purchaser of the tobacco products was under 27 years old, the purchaser had a valid government photo identification that indicated the purchaser was of legal age to buy tobacco products. That provision also required the purchaser to be the addressee and to sign for the products. The second provision provided that a person was "deemed to know" that a shipment contained tobacco products if the package was marked on the outside by a tobacco retailer (1) "to indicate that the contents are tobacco products" and (2) with the retailer's name and Maine tobacco license number. A person, such as a delivery service, was also "deemed to know" that the package contained tobacco if it came "from a person listed as an unlicensed tobacco retailer." In other words, as the Supreme Court stated, the second provision "imposes civil liability upon the carrier, not simply for its knowing transport of (unlicensed) tobacco, but for the carrier's failure sufficiently to examine every package ." The state argued that such laws helped the state to stop minors from gaining access to cigarettes. In finding that the FAAA preempted Maine's mail-order tobacco product delivery laws, the Court noted that Maine's laws had a "significant impact" on carrier rates, routes, or services. The Court reasoned that Maine's laws had the effect of substituting "government commands for 'competitive market forces' in determining ... the services that motor carriers will provide." The Court also found that Maine's laws would be preempted regardless of whether, as Maine alleged, the overturning of Maine's laws would hurt its efforts to stop underage smoking. Justice Ginsburg's concurrence stated that a "large regulatory gap [was] left by an application of the FAAA['s] preemption provision, which affected state enforcement strategies to prevent tobacco sales to minors." The 2009 FSPTCA, however, ensures that the FDA will become much more involved in stopping minors from obtaining tobacco products. Under the act, the FDA has reissued its 1996 regulation which, among other restrictions, prohibits the sale of cigarettes or smokeless tobacco to persons under 18, requires that retailers check photo ID to verify the age of purchasers under the age of 27, and prohibits tobacco-product vending machines except in adult-only facilities. Modified Risk and Artificial or Natural Flavor Cigarettes The cigarette industry has historically used a test methodology initially set forth by the Federal Trade Commission (FTC) in 1967 to determine tar and nicotine ratings of cigarettes. This method, which relies on the use of a machine "to produce uniform, standardized data about the tar and nicotine yields of mainstream cigarette smoke," is known as the FTC Test Method or the Cambridge Filter Method. In 1966, the FTC issued a guidance document that informed major cigarette manufacturers that factual statements of tar and nicotine content would be permitted if they were based on the FTC Method. In litigation regarding light and low-tar cigarettes, tobacco manufacturers often reference this guidance document as well as other actions of the FTC as evidence that the FTC authorized the use of descriptors such as "light" or "lower tar and nicotine," and that because of this, they cannot be held liable for any misleading or deceptive practices. On December 8, 2008, the FTC published a notice that it had rescinded the 1966 guidance document. It stated that the scientific consensus is that "machine-based measurements of tar and nicotine yields using the Cambridge Filter Method 'do not offer smokers meaningful information on the amount of tar and nicotine they will receive from a cigarette, or on the relative amounts of tar and nicotine exposure they are likely to receive from smoking different brands of cigarettes.'" In its notice of rescission, the FTC declared that although cigarette manufacturers have adopted descriptive terms such as "light" and "ultra low," the Commission "has neither defined those terms, nor provided guidance or authorization as to use of the descriptors." The Commission declined to initiate a proceeding to ban all use of descriptors because the district court had entered an order requiring tobacco manufacturers to do so in the government's RICO lawsuit against tobacco companies ( United States v. Philip Morris ). Furthermore, the Commission indicated that any continued use of descriptors or reference to the testing method would be subject to the FTC Act's prohibition against deceptive acts or practices. The FDA, however, has issued new regulations for the testing, reporting, and public disclosure of tobacco product ingredients and smoke constituents, including tar and nicotine levels, to replace the FTC method. The FSPTCA specifically prohibits manufacturers from marketing "modified risk tobacco products" (MRTP) without prior FDA approval. MRTP's are defined as any product whose labeling or advertising explicitly or implicitly suggests that the product is less risky than other tobacco products, whose manufacturer has taken any action that "would be reasonably expected to result in consumers believing" that the product reduces risk, or whose labeling or advertising uses descriptors such as "light," "mild," or "low" to characterize the level of a substance in the product. The FSPTCA also specifies that all manufacturers must cease using terms such as "light" and "low-tar" to describe their low-yield brands. As mentioned previously, the MRTP provisions of the act were upheld by a federal district court in Commonwealth Brands v. U.S . The FSPTCA also prohibits the use of any additive, with the exception of menthol, that acts as a "characterizing flavor" of the cigarette or its smoke. This provision acts as a prohibition on all artificial and natural flavors in cigarettes with an exception for menthol flavorings.

Over the past couple of decades, the courts and Congress have been grappling with tobacco-related issues, among them, the Food and Drug Administration's (FDA's) authority to regulate certain tobacco products under the Federal Food, Drug, and Cosmetic Act (FFDCA); the Master Settlement Agreement (MSA) that resulted from lawsuits brought by states' attorneys general against tobacco companies; federal, private party, and foreign lawsuits against tobacco companies; limits on tobacco advertising; restrictions on selling and distributing tobacco to minors; and the Federal Trade Commission's rescission of its 1966 guidance document relating to tar and nicotine yields in cigarettes. This report addresses the above issues, with the exception of the FDA's authority to regulate tobacco products. For information on that topic see CRS Report R41304, FDA Final Rule Restricting the Sale and Distribution of Cigarettes and Smokeless Tobacco, by [author name scrubbed] and [author name scrubbed]. In the 1990s, states' attorneys general brought lawsuits for reimbursement of their states' tobacco-related medical expenses. They reached a settlement with tobacco companies in 1997, but the settlement did not garner the congressional approval needed for implementation. In 1998, 46 states, the District of Columbia, five U.S. territories, and the tobacco industry signed the MSA, worth $206 billion over 26 years. In 1999, the Clinton Administration filed a lawsuit against major tobacco companies and industry trade groups to recoup federal tobacco-related medical costs. In 2006, a federal district court held that the tobacco companies violated two provisions under the Racketeer Influenced and Corrupt Organization Act (RICO) by, among other things, making false statements about the health effects of smoking. Among other remedies, the court ordered them to remove descriptors such as light, low-tar, natural, mild, and ultra light from their packaging. In 2012, the court ordered them to issue factual statements to counter the false statements that were part of the RICO verdict. Since the U.S. Supreme Court's 1992 decision in Cipollone v. Liggett Group Inc., individual and class action lawsuits have been brought against tobacco companies under theories such as fraudulent representation, conspiracy, breach of express warranty, and failure to warn. The private party suit section of this report discusses selected state class actions. Suits brought in federal courts by foreign governments for medical care costs resulting from tobacco-related illnesses have not been successful. Tobacco advertising is restricted at the federal, state, and local levels. The Federal Cigarette Labeling and Advertising Act (FCLAA), the Family Smoking Prevention and Tobacco Control Act (FSPTCA), state laws, the MSA, and local ordinances limit tobacco advertising in ways such as prohibiting radio and television advertisements, compelling the use of health warning labels, limiting the use of terms that imply decreased health risks, banning the use of cartoons, and requiring individuals to have contact with a sales person before purchasing tobacco products. Additionally, federal law plays a role in enforcing laws that prohibit tobacco sales and marketing to minors.

Purpose, Scope, Method, and Structure1 For many years, Congress has debated the risks of projected climate change and what, if any, federal action might be appropriate to address those risks. In 2013, the Government Accountability Office (GAO) identified the changing climate (see Text Box below) as one of the 30 most significant risks facing the federal government. The purpose of this report is to provide background to Congress regarding efforts under way to identify and address through adaptation potential vulnerabilities of federal agencies' resources (lands, facilities, operations, personnel) to projected climate change. To date, the executive branch has guided federal agency climate change adaptation planning, although some Members of Congress have introduced bills to promote adaptation. President Obama established adaptation as a prominent part of his Climate Action Plan, released in June 2013. The November 2013 Executive Order 13653, Preparing the United States for the Impacts of Climate Change , continued the Administration's focus on federal climate change preparedness through agency and department adaptation planning. As of December 2014, more than 30 federal departments and agencies had, to varying degrees, produced climate change adaptation plans, vulnerability assessments, adaptation milestones, or adaptation performance metrics to address the potential vulnerabilities of their missions, property, operations, and/or personnel to climate change. Agency efforts identified wide-ranging vulnerabilities that could result from climate changes, as well as some opportunities. For Congress, federal adaptation efforts may raise questions of authorization, appropriations, and oversight. For example, some Members of Congress may be concerned that federal agency climate change adaptation planning may divert resources and attention from other, more near-term asset management and mission challenges. In contrast, other Members may believe that current federal action to adapt to climate change is insufficient. Key policy issues include determining the level, nature, and mechanisms for investment in federal agency adaptation. This report aims to synthesize information on the federal government's efforts to adapt itself to a changing climate. It is largely based on a CRS review of the adaptation planning documents released by selected federal departments and agencies as of late 2014, as well as several reviews by other organizations. Part I of the report provides an introduction to federal adaptation efforts and challenges and a synthesis of these efforts. Part II provides summaries of these efforts at the department and/or agency levels. The report's focus is the state of climate change knowledge and planning by federal agencies addressing the potential vulnerabilities of their missions, property, operations, and/or personnel related to projected climate change. The review is not intended to address how agencies and their programs may help or hinder nonfederal entities in adapting to climate change, although the lines between these topics are sometimes blurry. For example, agencies may consider that achieving their core missions may be at risk unless they assist nonfederal entities in addressing climate change-related risks. Programs within the Department of Agriculture (USDA) may consider that they must assist agricultural producers in anticipating and preparing for climate change in order to maintain productivity. Or the Environmental Protection Agency (EPA), which has a mission to help communities finance drinking water infrastructure, may consider that expanding the water utility sector's understanding of climate change risks is important to delivering future water services. This report is not comprehensive. Instead, it reviews adaptation plans of selected agencies, aims to illustrate federal actions to prepare and adapt the government to projected climate change, and offers emergent issues and questions for Congress. Part I: Synthesis and Possible Issues for Congress Irrespective of driving causes, strong evidence shows that the United States' climate has been changing in recent decades. Most scientific theory and modeling forecast that climatic variables, such as temperature, precipitation, lengths of seasons, and permafrost patterns, will continue changing and may become less predictable. GAO concluded that the federal government faces multiple fiscal exposures to climate change including, but not limited to its role as (1) the owner or operator of extensive infrastructure such as defense facilities and federal property vulnerable to climate impacts, (2) the insurer of property and crops vulnerable to climate impacts, (3) the provider of data and technical assistance to state and local governments responsible for managing the impacts of climate change on their activities, and (4) the provider of aid in response to disasters. Many federal agencies have identified specific ways in which climate change factors, such as altered precipitation patterns, soil moisture, or ocean conditions, bring risks and opportunities. As examples, numerous federally owned and federally supported assets may face increasing flood risk as a result of projected sea-level rise. The opening of Arctic waters with less summer sea ice increases opportunities for resource development, tourism, and shipping, while also raising concerns for security, safety, and protection of natural and cultural resources. Similarly, while many factors contribute to the incidence of wildfires, some researchers expect further warming and, in some areas, precipitation changes to increase risks of wildfires on federally owned lands. Additional researchers have identified highways, railways, and aviation facilities that have experienced failures in recent years due to high temperatures and other extreme weather, which are expected to increase with climate change. The Department of Defense (DOD) expects that thawing permafrost and rising sea levels will affect military training, installations, and land management in some locations. The Department of Health and Human Services (HHS) considers that climate change will affect the department's mission and strategic goals. USDA's Animal and Plant Health Inspection Service (APHIS) expects that changing climate conditions will increase demand for genetically engineered crops, resulting in a corresponding increase in numbers of permits, field trials, inspections, and other demands on APHIS resources. Numerous resource managers, engineers, economists, and others have identified benefits of anticipating and preparing for climate change. For example, some analysis suggests that every dollar spent on certain risk mitigation projects to reduce the consequences of natural disasters can generate several times more in monetary benefits. Based on such findings, many researchers and observers believe that anticipating the wide array of likely impacts and reducing risks through adaptation measures would be more efficient than incurring damage, responding to the immediate event, and then adapting reactively. The benefits of adaptation are expected to increase as the climate system moves further and further from historical "climate normals," and as man-made and natural systems increasingly exceed their thresholds of tolerance and resilience. A range of stakeholders has recommended that federal agencies begin the adaptation process. What is meant by "adaptation" to ongoing and expected climate change varies widely. For some, adaptation may be development of new varieties of plants that will grow optimally in the expected climate. For others, it may mean new investments to address opportunities and risks associated with the opening of sea routes in the Arctic, or to protect or replace infrastructure at risk (e.g., from flooding with more extreme rainfall or from higher temperatures). For others, it may entail examining assumptions built into decision-support models—for example, for projecting electric load demand by consumers for heating and cooling, and then planning future capacity needs on that basis. Background on Climate Change The federal agency climate change adaptation plans discussed in this report aimed to use a common set of projected changes in temperature and precipitation for the continental United States. The following four figures illustrate some of the ranges of projections that agencies used when identifying potential impacts of climate changes and plans to adapt to them. These projections are no longer the most recent projections, but are provided in this report because they are those used by most agencies in their existing adaptation plans. They are not dramatically different from updated modeling. Overarching Federal Policy and Processes In recent years, the executive branch has increased the federal government's planning efforts to adapt to projected impacts of a changing climate. Two recent cross-agency initiatives, the Climate Data Initiative and the Climate Resilience Fund (both discussed later), may support agencies' own efforts as well as the assistance they provide to the public and state and local governments. For several decades, some agencies have invested in relatively small amounts of research to support adaptation to climate change. However, few if any agencies have comprehensively assessed how climate change may affect their abilities to achieve their authorized missions and abilities to safeguard their properties and personnel. Since 2009, Obama Administration initiatives have generally increased the priority, number of participants, and specificity of products and actions aimed at federal adaptation to climate change. Executive Orders and High-Level Bodies Executive Order (E.O.) 13514 , Federal Leadership in Environmental, Energy, and Economic Performance , in October 2009, directed agencies to begin a formal process of Strategic Sustainability Performance Planning that included steps to develop agency climate change adaptation plans. Section 8(i) of the executive order requires that each federal agency evaluate agency climate change risks and vulnerabilities to manage both the short- and long-term effects of climate change on the agency's mission and operations. On November 1, 2013, President Obama strengthened existing directives with E.O. 13653, Preparing the United States for the Impacts of Climate Change . The executive order reshuffled and upgraded preceding organizational arrangements. Notably, it sunset and built on the work of the Interagency Climate Change Adaptation Task Force (CCATF), begun in 2009 (discussed later). In its place, E.O. 13653 established a higher-level coordinating Council on Climate Preparedness and Resilience (the Council), chaired by the White House and drawing on at least 33 White House offices and federal agencies, to be represented at the Deputy Secretary level. The Council's administration was provided by the Council on Environmental Quality (CEQ). The executive order also added, as a co-chair of the Council, the Assistant to the President for Homeland Security and Counterterrorism, apparently to improve coordination. Among the mandates to the Council were preparation of an interagency inventory and assessment of changes to land- and water-related policies, programs, and regulations necessary to make watersheds, natural resources, and ecosystems—and the communities and economies that depend on them—more resilient to a changing climate. E.O. 13653 also required agencies to track their implementation of federal high-priority adaptation actions. E.O. 13653 also created a State, Local, and Tribal Leaders Task Force on Climate Preparedness and Resilience composed of invited elected officials including 8 governors, 16 county and local officials, and 2 tribal leaders. At its final meeting on July 16, 2014, the Task Force provided recommendations to the Council. In response, the Administration announced additional efforts to support nonfederal climate preparedness such as assistance to tribes and investing in the rural electric system. (As these are outside the scope of this report, the announced initiatives are not discussed further here.) In October 2014, the Council published "Priority Agenda: Enhancing the Climate Resilience of America's Natural Resources." It reports the initial inventory, assessment, and plan called for in Section 3 of E.O. 13653, compiled by a Climate and Natural Resource Working Group (CNRWG) composed of the Departments of Defense, Interior, and Agriculture, EPA, NOAA, the Federal Emergency Management Agency (FEMA), and the U.S. Army Corps of Engineers (USACE or the Corps). The report, or "Agenda," identifies four priority strategies to make U.S. natural resources more resilient to a changing climate: 1. foster climate-resilient lands and waters; 2. manage and enhance U.S. carbon sinks; 3. enhance community preparedness and resilience by utilizing and sustaining natural resources; and 4. modernize federal programs, investments, and delivery of services to build resilience and enhance sequestration of biological carbon. Under the direction of the interagency Council on Climate Preparedness and Resilience, the CNRWG will track the implementation of this Priority Agenda in coordination with the existing efforts to implement the National Ocean Policy; the National Action Plan: Priorities for Managing Freshwater Resources in a Changing Climate; and the National Fish, Wildlife and Plants Climate Adaptation Strategy. In 2015, federal agencies will conduct a 12-month appraisal of implementation. Executive Guidance to Agencies Pursuant to E.O. 13514, a set of 2011 Implementing Instructions directed that [t]hrough adaptation planning, each agency will identify aspects of climate change that are likely to impact the agency's ability to achieve its mission and sustain its operations and respond strategically. Adaptation planning will help an agency reduce the negative effects and take advantage of new opportunities that climate change may bring. Integration of climate change adaptation planning into the operations, policies, and programs of the Federal Government will ensure that resources are invested wisely and that Federal services and operations remain effective in current and future climate conditions. Implementing Instructions relied on common planning steps identified by the CCATF for federal agencies: set a mandate to adapt with clear objectives and metrics; understand how climate is changing; apply understanding to assess implications for agency mission and operations; develop, prioritize, and implement actions; evaluate and learn; and build awareness and skills. Presumably, the magnitudes of each of these steps are not equal. For example, much effort would be entailed in the step of development, prioritization, and implementation of actions. The CCATF also offered two guiding principles for agencies' efforts to build federal resilience to a changing climate; agencies should ensure that "[f]ederal resources are invested wisely," and the federal government's operations and services remain effective in a changing climate. In many cases, government agencies were expected to seek efficient decisions, for example, by selecting options in which the benefits of adaptation to climate change would exceed the costs. In practice, formal cost-benefit analyses may be difficult to produce or have wide ranges of certainty. The 2013 E.O. 13653 in some ways promoted "mainstreaming" of climate change efforts into existing processes and operations, rather than establishing adjunct offices and separate sets of activities. E.O. 13653 Section 2(c) charged a variety of interagency working groups with ensuring that climate change risk considerations were incorporated into their processes. Those groups included the Steering Committee on Federal Infrastructure Permitting, the Task Force on Ports, the Interagency Working Group on Coordination of Domestic Energy Development and Permitting, and the Federal Interagency Working Group on Environmental Justice. Many observers would consider more mainstreaming a positive and important objective. Some instances of mainstreaming adaptation efforts in agencies are identified in a later section of this report. On December 18, 2014, CEQ issued updated draft guidance for review and public comment on when and how federal agencies should consider the effects of GHG emissions and climate change in their evaluations of proposed federal actions under the National Environmental Policy Act (NEPA). The draft guidance "counsels agencies to use the information developed during the [NEPA] review to consider alternatives that are more resilient to the effects of a changing climate.... " The draft guidance would apply to all proposed federal actions including site-specific actions, grants for or funding of small-scale or broad-scale activities, rulemakings, and land and resource management decisions. It does not cover actions over which agencies have no discretion or control, including actions carrying out congressional directions. To illustrate some ways in which climate changes may be relevant, the guidance provides the following description: For example, a proposed action may require water from a stream that has diminishing quantities of available water because of decreased snow pack in the mountains, or add heat to a water body that is exposed to increasing atmospheric temperatures. Such considerations are squarely within the realm of NEPA, informing decisions on whether to proceed with and how to design the proposed action so as to minimize impacts on the environment, as well as informing possible adaptation measures to address these impacts, ultimately enabling the selection of smarter, more resilient actions. The temporal bounds for considering climate change risks to a project under NEPA review would be determined by the life span of the proposed project, so that this guidance might be most relevant to long-lived projects including infrastructure that may have a useful life of several decades or more. The guidance, among other recommendations, suggests that agencies periodically engage their environmental justice experts, and potentially the Federal Interagency Working Group on Environmental Justice, to identify approaches to mitigate potential adverse effects on vulnerable communities including minority and low-income populations. Interagency Coordination Effective coordination across agencies and programs has been a concern expressed by some stakeholders. Overarching coordination occurs through the Council on Climate Preparedness and Resilience established by E.O. 13653, described above. The Council convened a Climate and Natural Resources Working Group (CNRWG), which published in October 2014 a "Priority Agenda: Enhancing the Climate Resilience of America's Natural Resources," identifying federal and nongovernmental actions aimed at protecting important landscapes and developing new science, planning and tools to foster climate-resilient lands and waters; enhancing U.S. carbon sinks such as forests, grasslands, wetlands and coastal areas; promoting innovative 21 st century infrastructure that integrates natural systems into community development, including green stormwater infrastructure; and modernizing Federal programs, investments, and services to build resilience and enhance carbon storage. The Priority Agenda outlined further interagency monitoring and evaluation of these efforts: Under the direction of the interagency Council on Climate Preparedness and Resilience, the CNRWG will track the implementation of this Priority Agenda in coordination with the existing efforts to implement the National Ocean Policy, the National Action Plan: Priorities for Managing Freshwater Resources in a Changing Climate, and the National Fish, Wildlife and Plants Climate Adaptation Strategy. In 2015, Federal agencies will conduct a 12 month appraisal of implementation. There exist additional mechanisms for information sharing such as through FedCenter.gov and an Interagency Forum on Climate Change Impacts and Adaptations. The latter appears to have limited participation. To facilitate agency adaptation planning, the Administration has supported cross-agency data exchange efforts such as the Climate Data Initiative, described below, and announcements to officials from FedCenter.gov, "the Federal government's home for comprehensive environmental stewardship and compliance assistance information for Federal facility managers and their agencies." Within some departments such as the Department of the Interior, coordination among agencies appears to be strong and substantive. In others, coordination mechanisms among subagency programs are less evident, though they may operate effectively through informal practices rather than through formal bodies. Mainstreaming Climate Change Considerations into Line Operations of Agencies Overall, there have been growing efforts in many agencies to increase attention to potential climate changes and consideration of how future changes may affect their mainline missions and operations. This is often referred to as "mainstreaming." Numerous federal policies and programs exist that may reduce agencies' vulnerabilities to climate change, but are not labeled as "adaptation" projects or do not have explicit mandates to support adaptation to climate change. Because they are not directly tied to climate change adaptation in mission or title, it may be difficult to identify them. For example, the requirement in E.O. 13514, "Federal Leadership in Environmental, Energy, and Economic Performance," that agencies reduce their potable water intensity by 2% annually through FY2020, would likely improve agencies' resilience to climate-induced shortages, but are not expressly categorized as climate change adaptation programs. In some instances, programs closely related to adaptation might be more effectively employed rather than if agencies created separate climate change adaptation tasks. The Climate Data Initiative In March 2014, President Obama announced a new Climate Data Initiative, at http://climate.data.gov , to provide "resources to help companies, communities, and citizens understand and prepare for the impacts of coastal flooding and sea-level rise. Over time, this community will expand to include more datasets." The web portal provides access to federal climate change-related statistics and information. This portal may help alleviate some of the data accessibility issues that federal agencies identified (discussed later in this report). The data sets available at this portal may help agencies with their own climate vulnerability assessments and planning efforts, and may help to identify gaps and redundancies in the data available, as well as to evaluate the data's quality and relevance. Synthesis of Agency Adaptation Plans and Example Actions Almost 40 Federal Agencies Have Identified Adaptation Efforts As of December 1, 2014, 38 federal departments and agencies had produced initial (2012) Climate Change Adaptation Plans and, in most cases, second-round (2014) Plans; vulnerability assessments; adaptation plans with milestones; and/or metrics to evaluate adaptation performance. Few, if any, departments or agencies have prepared comprehensive, quantitative assessments of the vulnerabilities of their missions and programs to projected climate change. DOD is perhaps the farthest along in assessing its vulnerabilities; Secretary Hagel stated in October 2014 that the department had nearly completed a baseline survey of its nearly 7,000 bases, installations, and other facilities that would be used to integrate climate change considerations into planning, operations, and training. Most agencies' assessments have been at a "high level"—broad views with generalized information, though some have been preparing detailed assessments for locations that appear to have mission-critical vulnerabilities. Many agencies remain primarily in stages of "fact-finding," initial analysis, and broad planning, and sometimes outreach and training for personnel. Some agencies appeared in late 2014 to be in early stages; they appear to have done little thus far to assess the potential risks of climate change specifically to their property, operations, or personnel, though they may conduct scientific research or produce data or decision-making tools to serve their customers (e.g., the public, state and local agencies, etc.). For example, the Departments of Energy and Health and Human Services (HHS), and the Tennessee Valley Authority (TVA), among others, released climate change adaptation plans dated in 2014 that do not contain evidence of having conducted the vulnerability assessments or adaptation planning required by Section 5, "Federal Agency Planning for Climate Change Related Risk," of E.O. 13653. Their "plans" may contain many pages of descriptions in general terms of potential climate change impacts, but do not evidence the location- and event-specific analysis displayed by many other agencies. In some cases, it is also apparent that little updating occurred in the 2014 releases of planned actions identified in the 2012 documents. Acknowledgements of the modicum of current information on adaptation planning in these agencies, and explanations of the reasons (e.g., other pressing priorities, greater priority to serving the agencies' customers, lack of financial or expert resources, etc.) might be more useful to Congress and other readers than the generalized and outdated presentations provided. CRS found few specific adaptation actions, either planned or taken, that tangibly alter federal vulnerabilities at this point in time. Certainly, selected actions resulting in risk reductions are apparent in some agencies. Some may provide significant risk reductions over time. This seems especially likely where agencies have identified mission-critical infrastructure that may be vulnerable to certain aspects of climate change, or secondary effects that may result from, say, outages or overload of electricity supply during extreme events. These examples appear to represent the leading edge rather than the norm. The challenge in identifying on-the-ground adaptation actions may reflect the high level of aggregation of most agency-level reporting. It is likely that some federal programs are acting to reduce their vulnerabilities to climate in ways that may not be captured in agency-level planning processes. Also, some agencies have begun pilot activities that, pending positive evaluations, may be propagated more broadly for risk reductions. Agencies Are Adopting Common Approaches CRS found that federal agencies are largely using a set of common approaches in their climate change adaptation efforts. These include the following: researching, assessing, and planning (which are the main focus and deliverables of current relevant executive orders); implementing initial actions that are obvious, easy, and offer low- to no-regret options; developing general options and "decision tools" transferable to other situations; demonstrating response measures or pilot programs that, if successful, could be disseminated within an agency or by partner organizations; and arranging outreach and training to federal personnel and contractors. Some Agencies Are Mainstreaming Consideration of Climate Change Risks Climate change has long been addressed adjunct to the line missions of agencies. That is, in most agencies, climate change has been researched and analyzed in specialized staff offices that were not generally integral to the mission-oriented "line" operations of the agency. As federal efforts to prepare for climate change have expanded, some observers expressed concerns that adaptation efforts might evolve as parallel, side-lined, or redundant efforts, rather than integrated into agency operations. The November 2013 E.O. 13653 encouraged agencies to "mainstream" consideration of future climate changes into their line operations. CRS found that some agencies have moved beyond general awareness-building and broad policy statements, and some have transitioned from stand-alone climate change teams and efforts (producing primarily reports) toward "mainstreaming" climate change data and considerations into programmatic decisions and actions. An official from DOD voiced this approach as follows: "... [T]he crux of this report is, rather than creating a stovepipe within the DOD organizational structure to deal with climate change, we are going to integrate climate change considerations into the normal processes, the day-to-day jobs of everybody." A few active examples include the following: The Northwoods Climate Change Response Framework of the U.S. Forest Service in northern Wisconsin. It encompasses a team of land management agencies, private forest owners, conservation organizations, and others to share information and experience, develop tools to factor climate change into decision making, and implement those new tools. The Exotic Plant Management Teams of the National Park Service (NPS) identify, control, and manage plant species that are new to, and may have substantial impacts on, park resources. Such efforts may help protect parks from invasive species whose ranges shift because of climate change, although the teams' mandate is broader than, and not formally part of, NPS's climate adaptation framework. A 2012 National Aeronautics and Space Administration (NASA) Facilities Design Guide incorporated climate change-related principles that "could be used by NASA facilities project managers when determining design requirements and writing statements of work, and by Architect-Engineer firms who might have limited experience working with NASA." This guidance is limited to principles and references to requirements and standards, and is a step toward considering what design modifications might be merited in a particular project. The Army Corps of Engineers (USACE or the Corps) has launched the Comprehensive Evaluation of Projects with Respect to Sea Level Change (SLC) (CESL) to screen and provide an initial assessment of the vulnerability of its coastal projects to sea-level change in the 50- and 100-year planning horizons. It is a web-based tool that allows users to enter data, view project information, view SLC curves for tidal gauges at or near project sites, view Extreme Water Level information, and view projects on a map interface. DOD has identified the Hampton Roads, VA, region, which houses the largest concentration of U.S. military sites in the world, as experiencing recurrent flooding today. The department has begun to address a projected sea-level rise there of 1.5 feet over the next 20 to 50 years. While CRS identified these examples, CRS was not able to identify widespread changes in federal decision making, management, or operations associated with adaptation to projected climate change. A recent academic survey of four federal land management agencies concluded that "These adaptation efforts within agencies, however, all represent initiatives promulgated at the headquarters level. Ultimately, to be considered effective, these policies must result in changes to decision making practices 'on the ground' by agency resource managers connected with the resource in question." Many Agencies Have Identified Climate Change Risks to Their Operations To date, many agencies have invested the majority of their efforts in understanding their vulnerabilities to, or benefits from, climate change. Agency officials and observers have identified a number of ways in which climate shifts may affect agencies' operations and assets, including the following examples: Arctic sea ice melting allows increased activity in the Far North, prompting the U.S. Coast Guard and DOD to increase attention to an evolving Arctic Strategy for safety, security, resource development, and environmental protection. DOD, in its FY 2014 Climate Change Adaptation Roadmap , concluded that "A changing climate will have real impacts on our military and the way it executes its missions. The military could be called upon more often to support civil authorities, and provide humanitarian assistance and disaster relief in the face of more frequent and more intense natural disasters. Our coastal installations are vulnerable to rising sea levels and increased flooding, while droughts, wildfires, and more extreme temperatures could threaten many of our training activities. Our supply chains could be impacted, and we will need to ensure our critical equipment works under more extreme weather conditions. Weather has always affected military operations, and as the climate changes, the way we execute operations may be altered or constrained." The report further noted that climate change-related effects have been observed at DOD facilities. "The Department of Agriculture estimates an increase of as much as 100 percent in the number of acres burned by wildfires annually by 2050, putting residents and firefighting employees at greater risk, further impacting the agency's budget and resources, and reducing its capacity to provide other critical services. Fire suppression funding has already grown from 16 percent in 1995 to 42 percent of the U.S. Forest Service's budget." USDA's Farm Service Agency (FSA) is evaluating whether its commodity crop programs encourage adaptation to a changing climate or the status quo. Many NASA facilities have been damaged or closed temporarily in recent years by tornadoes, hurricanes, flooding, and wildfires. An agency-wide assessment noted that more than two-thirds of its infrastructure property value—assets worth about $20 billion—are within 16 vertical feet of current sea level and at risk from sea-level rise (see Figure 5 ) alone. The assessment found that "changing climate will impact facility operations (e.g., water management, energy demands), natural resources (e.g., tidal marsh habitat and increase in invasive species, increase in pest species), infrastructure that is vital to mission success (e.g., flooded buildings and launch assets, buildings too hot to work in), quality of life in the community (e.g., increased number of hot days), and the region's economy (e.g., increased percentage of public funds for utility costs, firefighting, and flood control)." NASA identified climate-related vulnerabilities to its missions including launch capabilities, space operations, ground systems, and training and test facilities. NASA is pursuing detailed analysis and planning at a minimum of eight facilities. NPS found that "The widespread nature of climate change effects amplifies ongoing resource impacts such as habitat fragmentation, water scarcity, pollution, invasive species, etc." It plans to "mainstream" climate change adaptation at a policy level; it is proposing that its fundamental mission of preserving lands in their historical condition may need to be rethought in an era of shifting climates and habitats. NPS is also analyzing specific park and facility issues associated with climate change. EPA plans to examine how climate change may put at risk more contaminant releases due to severe weather, flooding, or sea-level rise at Corrective Action sites, Superfund sites, Brownfield sites, chemical storage facilities, or landfills. Saltwater intrusion and increased ground water salinity in coastal aquifers may also increase the permeability of clay liners installed at waste sites such as landfills, allowing contaminants to spread to nearby properties. Contaminant releases may increase the risk of adverse health and environmental impacts. The Text Box above describes an action at Hoover Dam that could help improve an agency's resilience to a changing climate, though it is not an adaptation to projected climate change per se. The likelihood of complementary benefits of actions that improve the resilience of agencies to climate changes and that provide other benefits may make it difficult to discern and evaluate, now and in the future, the degree to which agencies are making adaptations and what effect they may have. Most agencies and multiagency consortia are regionalizing their approaches to climate change adaptation. This facilitates their assessments according to physically linked locations. Looking more broadly, this is also a complicating factor as definitions of regions often differ across programs and agencies. They often are not consistent with the eight geographic regions used under the United States Global Change Research Program (USGCRP) and the nine plus Alaska and Hawaii used by the National Climatic Data Center (NCDC) for science and climate monitoring purposes. (See Figure 6 .) DOI uses Landscape Conservation Cooperatives (LCCs) and Climate Science Centers (CSCs) as geographic coordinating units. The Bureau of Land Management (BLM) further uses regions for Rapid Ecological Assessments (REAs) to support vulnerability and adaptation assessments. NOAA relies on centers of Regional Integrated Science and Assessments (RISAs), in addition to NCDC's regions. EPA uses the USGCRP regions and adds a "Montane" region in the Intermountain West, though these do not correspond with EPA's organizational Regional Offices. The different definitions of regions present a challenge within and across agencies, as well as to stakeholders, in accessing relevant information and understanding climate change impacts and related programs. Figure 6 illustrates some of the major federal regional schemes used by various agencies, and also overlays state and congressional district boundaries. The different regional schemes are tied to the agencies' varying missions and resources; however practical, the differences also pose challenges for sharing and interpreting information across agencies and with the public. (This is discussed later in this report.) (A URL below Figure 6 provides access to an interactive PDF version of this map that allows the user to turn on and off map layers to facilitate viewing and comparing of different boundary definitions.) In sum, most agencies have planning efforts under way to identify the vulnerabilities and opportunities of their missions, assets, and personnel to climate change. Much of the current adaptation planning appears confined to information gathering and analysis at a high level. A number of agencies focus almost exclusively on how they may help their clients (e.g., states, businesses, specific populations, etc.) understand risks and understand adaptation planning, but have done little to understand the vulnerabilities or opportunities to the federal agency itself. Among those agencies that have begun implementation, measures to adapt appear mostly as pilot or demonstration efforts. A number of agencies acknowledge that they have not moved substantially into implementing adaptation actions. A few federal entities, including DOD, EPA, NASA, and the Department of Transportation (DOT), appear to be among the more advanced in preparing their assets, programs, and operations for climate change. (Other agencies may have focused their attention primarily on assisting their clients to anticipate and prepare for climate change.) Agencies Have Identified Some Specific Benefits of Adaptation A number of agency action plans have identified some of the benefits that could arise from planning for climate change adaptation. Examples include the following: identifying actions that have no cost or would have net benefits regardless of the magnitude of future climate change impacts (e.g., EPA/OPPTS, identifying where toxic chemicals are stored in existing flood zones); limiting federal financial liability for disaster losses and encouraging efficient risk management by private decision makers (e.g., increasing community preparedness for extreme weather events); modifying infrastructure specifications or considering locations for new facilities to be compatible with uncertain future climate conditions (e.g., NASA's review and re-specification of building requirements); making assets and operations robust to potential disruptions of water or energy supplies (e.g., making arrangements for national laboratories to maintain essential operations when water supplies become extremely low); facilitating more rapid and efficient responses to acute weather events where and when they occur; and identifying potential emerging opportunities with climate change such as increasing accessibility of Arctic resources or lengthening growing seasons in some locations. Most of these benefits are abstract, as relatively few adaptation activities have yet been carried out. Evaluations may be planned to develop empirical, and possibly quantitative, information about the effectiveness, costs, and benefits of various adaptation measures. Agencies Face Adaptation Challenges Most reports on climate change adaptation identify "barriers" to effective adaptation. For example, a 2009 GAO review of the status of federal adaptation efforts concluded the following: The challenges faced by federal, state, and local officials in their efforts to adapt fell into three categories, based on our analysis of questionnaire results, site visits, and available studies. First, available attention and resources are focused on more immediate needs, making it difficult for adaptation efforts to compete for limited funds. Second, insufficient site-specific data, such as local projections of expected changes, makes it hard to predict the impacts of climate change, and thus hard for officials to justify the current costs of adaptation efforts for potentially less certain future benefits. Third, adaptation efforts are constrained by a lack of clear roles and responsibilities among federal, state, and local agencies. Evidently, the attention to vulnerabilities and adaptation at the White House level has resulted in a great deal of effort at communication and report-writing in most agencies. Beyond reports, there remain challenges of sharing useful information, making programmatic decisions, and carrying out first-priority measures that reduce agency vulnerabilities. Three of the most frequently cited challenges are funding, information management and use, and uncertainty. Each is discussed below. Funding Adaptation competes with other agency priorities and missions. Recent reports have cited "lack of funding" as a primary challenge to adaptation. Resources for fact-finding, assessment, and decision-making resources may be most readily identifiable. In contrast, adaptations may take place as actions incremental to and obscured within existing program efforts. For example, adaptation plans may call for updating climate data in decision models or operational plans, or may require changing the types of materials or locations for infrastructure projects. The costs of such adaptation efforts may be difficult to estimate or identify in agency budget requests. Only a few agencies specifically requested appropriations in the FY2016 or earlier budget requests for adaptation activities. Current budget constraints and federal budget scrutiny may not permit greater financial resources for federal adaptation actions. While the President's FY2016 budget request and other recent announcements (e.g., executive order on flooding and proposed FEMA rules) may mention adaptation (or "resilience") to climate change, most pertain to programs outside the narrow scope of this report: assessments and actions that agencies may be undertaking to address potential risks to their missions, property, operations, and personnel . For further detail or updates on climate change adaptation plans by individual agencies, the report provides contact information for CRS analysts at the end of each agency section in Part II. Information Management and Use Multiple federal agencies, as well as nonfederal entities, readily acknowledge that finding and accessing the climate and related data they need—and having the right skill sets to use those data—remain important obstacles to preparing for climate change. For example, federal officials often lack information applicable to their particular agencies, programs, or localities, especially regarding climate data (recent and projected). Agencies identified challenges in acquiring information on projections of demographic, economic, technological, and other factors that might influence choices among options. For example, a number of agencies identified lack of information on facilities and other built infrastructure (e.g., dams, roadways, railways, etc.) as a key need to further develop their adaptation plans under E.O. 13514 and E.O.13653. Acquiring information to inform adaptation decisions is not solely a lack of precise information, but also its disarray or difficulty to use from a user's perspective. In response, the Obama Administration initiated an Internet portal ( http://www.data.gov/climate/ ) intended to provide eventually a one-stop shop for climate-related data and tools. The website provides data sets, mapping tools, and "challenges" to nonfederal entities to help address specific problems by developing applications (i.e., apps) or other solutions. Its initial phases incorporated agency information related to coastal flooding, resilience of food supply, and ecosystems. Some agencies are also tackling this access problem. The U.S. Geological Survey (USGS), for example, sees among its functions the responsibility to provide climate change information to other agencies within DOI (and to nonfederal entities) to assist them in adaptation assessment. It, along with DOD, DHS, and the National Geospatial Intelligence Agency, provides data sets containing mapping information on infrastructure and geographical features that can assist federal and nonfederal organizations with climate preparedness. There are several data portals in various agencies with climate-related data, and the location and distinctions among them may not be clear to most potential users. President Obama, in June 2013 and again in March 2014, announced a "climate data initiative" to make relevant data more easily accessible (discussed earlier). One effort to make climate projections more easily available is a publicly available archive of high-resolution ("downscaled") results from the latest phase of global climate modeling (CMIP5). Another is the USGCRP's MATCH portal, a Metadata Access Tool for Climate and Health, which offers centralized access to thousands of government-held data sets related to health, the environment, and climate science. The ability of organizations to take advantage of climate change-related information is also critical. A number of reports suggest that improving in-house expertise to use such information may be important, as well as institutional flexibility to adapt to new information. Uncertainty Planning and decision making in the face of uncertainty are a challenge in many fields. For adaptation action, the wide range of uncertainty in global climate projections increases over time, and increases as regional and local trends and impacts are protected. Uncertainties also are greater for variables other than annual average surface-air temperature (e.g., precipitation, runoff) and for more regional or local precision. The federal adaptation planner is tasked with acquiring and using future climate scenarios and meshing those projections and their uncertainties with local and historical information and science relevant to federal missions, property, personnel, and/or operations. Planning for climate change means trying to discern when that change may become important and how—when it may exceed the weather or environmental variability to which the existing assets or operations may already be adapted. Statistical methods become important to making robust decisions, and determining which statistical measures to use is an element of ongoing research. (See Text Box below.) A question of particular concern for planning adaptation regards the existence and timing of potential "tipping points," at which climate change exceeds the tolerance of existing climate-related systems and may change abruptly, and in possibly unexpected ways. Issues for Congress To date, the White House has guided federal agency climate change adaptation planning. As agencies continue their planning efforts, Congress may opt to oversee adaptation efforts, consider responses to third parties' recent and past recommendations regarding federal adaptation, and provide advice or statutory direction to the executive branch or specific agencies, as well as consider the funding and data used to support these efforts. Congress may consider the following: reviewing the significance and nature of the climate change risks to the federal government (including the distribution and timing of those risks); evaluating which, if any, preparations and adaptations are cost-beneficial and feasible; and assessing whether to alter specific agencies' existing authorities. Congress may act to provide federal agencies direction on whether and how adaptation efforts are to be organized and funded, and their performance measured and evaluated (e.g., effectiveness at reducing damage to property, lives, and habitat relative to the federal and private investment of an adaptation measure). Congress may decide to review the accessibility of adaptation-relevant information and the strategies under way to improve it, and consider options for authorities, directions, and resources to overcome data management and accessibility challenges. Congress may consider the role, costs, and benefits of adapting federal agencies to projected climate change. Considerations may arise in the broader context of whether and how to address climate change, as well as in other public policy concerns such as policies affecting natural disaster preparedness; ocean, energy, environmental, agricultural, and federal lands management; national and international security; public health; and public finance and budgets. There are complementarities and trade-offs among major adaptation approaches and actions in these broader fields of policy. Congress may seek improved information and analysis to support examination of the socioeconomic, distributional, political, and moral dimensions of various adaptation approaches, of making policy choices under uncertainty, and of appropriate federal and nonfederal roles and responsibilities. Part II: Summaries of Adaptation Plans in Some Federal Departments and Agencies More than 30 federal departments and agencies have produced reports on their climate change adaptation efforts. Agencies' adaptation plans are available from many agencies as appendixes to their 2012 and 2014 sustainability performance plans. CRS has researched materials beyond what is included in these documents, but has not comprehensively identified or reviewed information from all agencies regarding their climate change adaptation efforts. Additional agencies and updates may be added to the summaries in this section, subject to congressional interest. For further information on specific departments and agencies, each section that follows identifies relevant CRS experts. Department of Agriculture The Department of Agriculture (USDA) is responsible for the management of 193 million acres of national forests and grasslands in the National Forest System, and provides assistance in managing the nation's 1.3 billion acres of farm, ranch, and private forest lands through public and private partnerships. Studies have suggested that climate change will have a varying impact on agricultural production. The overall impact to agricultural production depends partly on the direction, magnitude, and rate of changes in temperature and precipitation. Producers have, and continue to, adapt to these changes; however, the long-term response to climate change may require new management techniques and technologies. Similarly, some research indicates that climate variability is reshaping forest landscapes by altering the frequency, intensity, and timing of disturbance events (e.g., wildfires, precipitation events, and insect and disease infestations) that influence the structure, composition, and function of the forest and grassland ecosystems. Forest ecosystems have inherent characteristics that enhance their capacity to survive disturbance events (resistance) or facilitate recovery after disturbance (resilience). Despite this inherent capacity, current thinking suggests that the rapid pace and magnitude of climate change may exceed the resistance and resilience capacity of many forests. Forest ecosystems and agricultural land also play a role in mitigating against rising carbon levels: growing vegetation removes carbon from the atmosphere and stores ("sequesters") it in wood and soil. Carbon is released back into the atmosphere during some disturbance events (e.g., a forest fire). Thus, appropriate management of disturbances may be critical for avoiding potential future releases of large amounts of carbon. In June 2011, USDA issued Departmental Regulation 1070-001, establishing USDA's Official Policy Statement on Climate Change Adaptation within the Office of the Chief Economist. This policy recognized the Climate Change Program Office (CCPO) as the point of contact for development of the Adaptation Plan required by Executive Order 13514, and called for department-wide integration of climate change adaptation planning and actions. The department's Adaptation Plan was updated in 2014 in response to E.O. 13653. In addition to climate change adaptation activities, the CCPO represents USDA to the U.S. Global Change Research Program (USGCRP), chairs the USDA Global Change Task Force, oversees departmental greenhouse gas accounting capabilities and responsibilities, and directs international climate change initiatives. Under the direction of the CCPO, USDA offices and agencies provided input for the USDA Climate Change Adaptation Plan in addition to identifying vulnerabilities to key agency resources and mission areas. The USDA Climate Change Adaptation Report includes specific plans from the following USDA agencies and offices: Agricultural Research Service (ARS), Animal and Plant Health Inspection Service (APHIS), CCPO, Farm Service Agency (FSA), Foreign Agricultural Service (FAS), Forest Service (FS), Grain Inspection Packers and Stockyards Administration (GIPSA), National Agricultural Statistics Service (NASS), National Institute of Food and Agriculture (NIFA), Natural Resources Conservation Service (NRCS), Risk Management Agency (RMA), and Rural Development (RD). Each agency identified specific actions related to climate change adaptation, and provided timelines, performance metrics, and agency leads in a tabular format as appendixes to individual plan documents. The full plan and individual sections can be found on USDA's climate change website, http://www.usda.gov/oce/climate_change/adaptation/adaptation_plan.htm . Adaptation-Related Activities Of USDA's four overall strategic goals in its strategic plan for FY2010-FY2015, one is specifically related to climate adaptation; Goal 2 states that USDA will "ensure our national forests and private working lands are conserved, restored, and made more resilient to climate change, while enhancing our water resources." While other strategic goals allude to varying challenges associated with climate change adaptation, this goal is reflected throughout the annual budget request, adaptation plan, and office and specific agency activities. Although a full accounting of department-wide adaptation activities is beyond the scope of this report, a brief description of activities is provided below regarding the department overall, followed by selected offices and agencies. Department-Level Activities As previously stated, the department's Climate Change Program Office has primary responsibility for coordinating and leading USDA's response to climate change, including the following: analysis, planning, and research coordination; development of climate change response strategies; providing liaison with other federal agencies; informing department leadership of related scientific developments and policy issues; and ensuring climate change concerns are fully integrated into USDA's research, planning, and decision-making processes. At the department level, USDA participates in a number of interagency efforts including the Council on Climate Preparedness and Resilience, U.S. Global Change Research Program, National Climate Assessment, National Fish, Wildlife and Plants Climate Adaptation Strategy Implementation Team, Agricultural Air Quality Task Force, Joint Fire Science Program, and the National Interagency Fire Center. In February 2014, USDA announced the creation of regional hubs for risk adaption and mitigation to climate change. These hubs are based on existing statutory authorities within USDA, and do not require additional resources. Hub locations were chosen through a competitive, internal application process among USDA facilities (see Figure 7 ). The purpose of these hubs is to (1) provide technical support for agricultural producers and landowners responding to climate change, (2) assess and monitor the risk to agricultural production, and (3) conduct research and education to the department's clients about the effect of climate change on agriculture and forests. Forest Service The U.S. Forest Service (FS) is an agency within USDA with a mission to sustain the health, diversity, and productivity of the nation's forests and grasslands to meet the needs of present and future generations. FS is responsible for managing national forests and grasslands, conducting forestry research, and providing assistance to state, private, and international forestry agencies. Each of these FS mission areas has activities related to the effects of climate variability and change on forest ecosystems. While the CCPO has primary responsibility for organizing and leading USDA climate change activities, FS's mission increases its presence in climate change activities above those of most other agencies at USDA. In fulfilling the FS mission, the agency has identified several intertwined roles regarding climate change management including federal land management, research, and engagement and outreach with other forestry managers. As a land manager, FS addresses climate change through strategic planning and policy initiatives regarding the management of the National Forest System. FS also is responsible for responding to active wildfires on federal lands and on nonfederal lands by request. In the FS Research and Development office, climate change research is one of five priority areas for emphasis, and the Global Change Research Strategy 2009-2019 includes research on adaptation, mitigation, and decision-support strategies. Through the State and Private Forestry office, FS provides technical and financial assistance to states and private forest landowners, including a program to fund restoration and other forest health management projects. Several of the USDA Regional Climate Hubs (see Figure 7 ) are operated in partnership with both Research and Development and State and Private Forestry activities. FS also conducts a regular forest inventory and analysis program that provides both a baseline on ecosystem composition and monitoring of changes across time. In addition, FS addresses climate change in international forestry issues through policy engagement and technical cooperation to develop capacity and strengthen existing institutions related to forest governance and management worldwide. The Climate Change Resource Center is a compilation of FS's related research, outreach, and management activities. This resource provides land managers and other decision makers—private and public—with information, research, decision-support models, maps, and simulations. These tools may be used to incorporate climate change management activities into planning and project management. FS developed several policy initiatives in accordance with E.O. 13514 and E.O. 13653. The agency published the Strategic Framework for Responding to Climate Change, which set forth seven goals as the overarching structure for agency strategies, priorities, policy decisions, and resource allocations for responding to climate change. To implement the strategic framework, FS published the National Roadmap for Responding to Climate Change in 2011. The roadmap describes three interconnected modes of action for FS response: assessing current risks, vulnerabilities, policies, and gaps in knowledge; engaging employees and stakeholders to seek solutions; and managing for resilience through adaptation and mitigation strategies. From the action items in the roadmap, FS developed a performance scorecard to measure progress, with the goal of each national forest and grassland achieving 7 out of 10 of the scorecard's benchmarks by 2015. A 2011 baseline measurement found that 16% of the national forests already achieved the performance goals. In 2013, 49% of the national forests were in compliance. For the national forests, the National Roadmap for Responding to Climate Change outlined how the agency plans to address major stressors from climate variability and provide direction for landscape restoration goals. FS is establishing a restoration and resilience policy to provide a foundational policy for sustainable management of the national forests. As part of the policy, the agency is focusing on restoration strategies aimed to improve the capacity of the ecosystem to withstand stressors and return to specified desired conditions post-disturbance. The desired conditions are to be determined at the landscape level by assessing the adaptive capacity and enhancing the resistance and resilience of forest ecosystems. The FS 2012 Planning Rule, through which the agency makes land use decisions for the national forests as directed by the National Forest Management Act, provides an adaptive framework for incorporating resilience goals into land management planning and decision making. The adaptive framework includes an expanded inventory and monitoring system as part of the planning process to assess progress toward the restoration goals and refocus efforts as necessary. FS also has several programs to accelerate restoration activities in the national forests, including the Collaborative Forest Landscape Restoration Program, which leverages local resources to encourage large-scale, long-term restoration projects. Natural Resources Conservation Service The Natural Resources Conservation Service (NRCS) has primary responsibility for assisting private landowners with addressing natural resource concerns. In addition to providing technical assistance related to soil and water, the agency also administers a number of financial incentive programs that pay farmers and ranchers to alter production practices to achieve environmental benefits. NRCS conducted an internal examination of these programs and technical resources, and found that conservation practices prescribed within these programs were effective at both mitigation of greenhouse gases (GHGs) and climate change adaptation. Existing practices such as residue management, forest stand improvement, cover crops, and prescribed grazing may make agricultural systems more resilient to changes in climate. The NRCS adaptation report makes few action recommendations that would require congressional action. The report states that integrating adaptation to changes in climate can be developed within the current NRCS conservation structure. Adjustments to traditional conservation planning approaches will be required in order to focus on a more holistic approach to conservation delivery that includes flexibilities for producers to adapt to changing climate conditions. Agricultural Research Service The Agricultural Research Service (ARS) is the in-house research agency at USDA. The agency is organized into "National Programs" that coordinate the research carried out by ARS. Under the National Climate Change, Soils, and Emissions program (NP #212), ARS works "to improve the quality of atmosphere and soil resources affected by, and having an effect on agriculture and to understand the effects of, and prepare agriculture for, adaptation to climate change." ARS research activities within NP# 212 support a number of soil and atmospheric research projects, including mechanisms for enabling agriculture to adapt to climate change. As part of this effort, ARS is also co-leading the collaborative research project known as the Agricultural Model Intercomparison and Improvement Project (AgMIP), with a goal to improve the characterization of risk of hunger and world food security due to climate change, and to enhance adaptation capacity in developing and developed countries. Risk Management Agency The Risk Management Agency (RMA) offers federal crop insurance and other production risk management products through a network of private-sector entities. RMA also funds partnerships with state departments of agriculture, universities, and other public or private organizations to develop risk management tools to assist producers in minimizing their risks and adapting to increased risks from climate change, drought, and other weather-related conditions. In 2010, RMA released a report on the potential effects of climate change on crop insurance. The report found that the effects will vary greatly across the country, with production in the South and Southeast more negatively impacted than production in the West. Another such collaboration is with Oregon State University to build PRISM—a climate and weather web portal that houses USDA's climatological data. The agency is also changing program implementation procedures including the establishment of emergency adjustment procedures for catastrophic loss events to ensure that the crop insurance program reflects changes in the climate and agronomics for crops currently covered; the expansion of programs to ensure that crop insurance coverage is available to new areas where crops are grown due to changes in the climate; the development and maintenance of maps for identification of at-risk areas; and the development of special provisions to address unique crop or regional conditions that pose potential program vulnerabilities. Congress has shifted risk management for agriculture away from ad hoc disaster payments and toward more permanent disaster support programs and federal crop insurance, as authorized in the 2014 farm bill ( P.L. 113-79 , §1501 and Title XI of P.L. 113-79). As RMA adapts these risk management programs to a changing climate, shifts in traditional production and the continued use of historical crop yield data could prove to be a challenge. Extreme weather events and possible increased production damage could prove costly to the current system. National Institute of Food and Agriculture The National Institute of Food and Agriculture (NIFA) supports research, education, and extension programs in the Land-Grant University System and other organizations. The agency does not perform research, education, or extension, but rather provides funds and national leadership in these areas. Climate change is a "priority science area" at NIFA. Projects are administered through the Institute of Bioenergy, Climate, and Environment (IBCE), a division of NIFA that manages programs to help agricultural, forest, and range production systems adapt to climate variables. Most NIFA-funded grants that are focused on climate change are multimillion-dollar, integrated, transdisciplinary projects that address the adaptation of food, feed, and fiber production systems to changing climates and the goal of reducing greenhouse gas emissions and increasing carbon sequestration in the agriculture and forestry sectors. According to NIFA's adaptation report, the agency anticipates the need to balance an increasing demand for scientific research, modeling, educational programs, and extension activities in order to address climate change issues with other research, education, and extension needs for agriculture. For example, investigations of climate stressors and tipping points could become more important to climate adaptation science research, and would have to be balanced with susceptible areas of crop and livestock production research and formal and informal state educational programs. Animal and Plant Health Inspection Service The Animal and Plant Health Inspection Service (APHIS) is tasked with protecting and promoting the health of U.S. agriculture and natural resources. As climate changes, pests and diseases can pose increased threats to the agricultural industry. The primary role of APHIS in USDA's climate change response is to analyze and anticipate changes in these threats. APHIS focuses on plant health response programs, early-warning systems for and management of vector-borne diseases—diseases spread by insects—in livestock and wild animal populations, trade regulations and management in regard to international disease outbreaks, emergency preparedness for both pest and disease emergencies as well as natural disasters and biosecurity hazards, and collaboration with federal, state, local, academic, and business community partners, and other stakeholders. According to the APHIS adaptation report, the agency does not anticipate that climate change will require a modification of its statutory authority. The agency plans to continue to adopt regulations and policies to address new or shifting pest and disease scenarios. Farm Service Agency The Farm Service Agency (FSA) administers a number of financial incentives for farmers and ranchers through farm loans and commodity, disaster, and conservation programs. FSA identified three climate change adaptation actions in the USDA adaptation report, including amending policy to facilitate adaptation, providing outreach to producers through the existing FSA service center structure and USDA's new climate change hubs, and conducting a "continuity of operations" exercise to prepare for an increase in large-scale crop failures resulting from climate change. With the passage of the Agricultural Act of 2014 ( P.L. 113-79 , the 2014 farm bill), Congress reauthorized a number of the existing programs FSA cited as necessary for its response to climate change (e.g., the Conservation Reserve Program, the Conservation Reserve Enhancement Program, loan programs, and disaster programs). Congress did not, however, amend these existing programs to specifically change the agency's current limited use for adaptation. In most cases, the agency's use of these programs has continued relatively unchanged since the issuance of the adaptation plan. Issues for Congress Agriculture and forestry face a number of challenges (e.g., weather, disease, pests) that could be substantially affected by a changing climate. As the federal entity tasked with providing "leadership on food, agriculture, natural resources, rural development, nutrition, and related issues based on sound public policy, the best available science, and efficient management," USDA could play an integral role in assisting U.S. producers with climate adaptation. A number of challenges related to climate change and its role in agricultural and forestry adaptation remain for USDA. First, existing federal policies both help and hinder adaptation-related activities. For example, many of USDA's programs rely on voluntary participation by producers. This could slow the application of adaptation-related activities and reduce the agriculture industry's ability to adapt to climate change in the long term. Producers are not required to adopt practices recommended by USDA, or, if paid to do so, are not required to maintain practices beyond the period for which payment is received. Similarly, FS technical and financial assistance programs also rely on voluntary participation by nonfederal forest landowners. Second, federal funding for research, conservation, outreach, and other adaptation-related activities has declined in recent years. While some private-sector funding has increased over time to fill some of the gap in public spending—namely in research and conservation—there is growing concern among some that private-sector funding focuses primarily on taking existing technologies to market (i.e., more applied research), and does not focus on basic problems and/or longer-term challenges that the agricultural and forestry sectors may face in the future, such as adaptation to climate variability. The rising of cost of suppressing wildfires—both on federal and nonfederal land—is another funding concern. Finally, while there is recognition at the department level that a coordinated response to climate adaptation may be most effective, agency-level actions appear to diverge in some respects. A number of USDA agencies have developed adaptation plans, but the diversity of agency mission areas has resulted in an inconsistent application of those plans. Some USDA agencies have recognized the need to adapt current programs to potential effects of climate change, and have carried out adaption measures with tangible results, such as RMA's expansion of program coverage to new areas in which crops are grown due to changes in the climate and agronomics. Other USDA agencies have identified the need for adaptation, but lack the program flexibility or funding to act, such as the cost to fully implement FS's restoration strategy for the national forests. For More USDA Information USDA: [author name scrubbed], Specialist in Agricultural Conservation and Natural Resources Policy, [email address scrubbed] , [phone number scrubbed]. Forest Service: [author name scrubbed], Analyst in Natural Resources Policy, [email address scrubbed] , [phone number scrubbed]. Department of Commerce The Department of Commerce (DOC) is composed of 12 bureaus with a wide range of responsibilities. DOC focuses on five basic missions: promoting the development of U.S. business and increasing foreign trade; improving the nation's technological competitiveness; encouraging economic development; fostering environmental stewardship and assessment; and compiling, analyzing, and disseminating statistical information on the U.S. economy and population. On August 31, 2011, in response to E.O. 13514, the Secretary of Commerce signed Departmental Administrative Order (DAO) 216-18, which states that "it is the policy of the Department to undertake comprehensive climate change adaptation planning in order to ensure that the Department fulfills its mission and maintains its programs and operations in a changing climate." The DAO established a Climate Coordinating Committee to develop DOC's Climate Change Adaptation Strategy (CCAS). In June 2012, the strategy was released as an appendix to the 2012 update of DOC's Strategic Sustainability Performance Plan. In June 2014, the CCAS was updated to reflect lessons learned since the first strategy was released, and to incorporate guidance provided by the Council on Environmental Quality (CEQ) on implementing E.O. 13653. The CCAS identifies key climate change vulnerabilities and outlines the department's approach to addressing these vulnerabilities. Climate change vulnerabilities also were linked to priority adaptation actions that were updated for FY2014. The key climate change vulnerabilities and priority adaptation actions are organized by the following strategic themes: economic growth, science and information, environmental stewardship, and infrastructure, facilities, and operations management. Each of these themes is discussed below in more detail. The CCAS also presents five-year strategic goals for adaptation planning, describes how interagency coordination can be supported, addresses barriers to federal climate resilience investment, and identifies opportunities to support climate resilient investments by states, local communities, and tribes. Economic Growth Most of DOC's bureaus support economic growth by developing the tools, systems, policies, and technologies that foster U.S. competitiveness, improve efficiency, and facilitate the development of new businesses. Climate change may present challenges to U.S. businesses by interfering with their ability to produce, transport, and deliver goods and services. Sea-level rise and extreme weather events influenced by climate change could damage infrastructure and harm natural resource-dependent industries such as forestry, fishing, and agriculture. Businesses may be challenged to develop new technologies and processes to help themselves or others adapt. Climate change challenges may also present opportunities for businesses that satisfy the demand for clean energy and climate-friendly technologies. According to the CCAS, DOC will need to ensure it is positioned to assist companies to turn innovative products such as climate-friendly technologies into a competitive advantage for the U.S. economy. Moreover, the CCAS states that the department will need to enhance efforts to promote trade, economic and business development, innovation, entrepreneurship, supply chain information, best practices, and standards that consider climate change. In the CCAS, DOC identified the following adaptation actions to address economic growth in FY2014, and identified lead offices for each action within DOC: Factor in resiliency (including resiliency to the effects of climate change) into economic development investments. Lead Office /Bureau—Economic Development Administration (EDA) Help businesses capitalize on an increased demand for green technologies sparked by a changing climate. Lead Office/Bureau—International Trade Administration (ITA) Improve the ability to process patent application filings for climate change adaptation-related technologies in a timely manner. Lead Office/Bureau—U.S. Patent and Trademark Office (USPTO) Science and Information DOC science and information agencies enhance scientific knowledge and provide information to stakeholders to improve innovation and technology, support economic growth, and improve public safety. Climate change is anticipated to increase the need for climate, weather, economic, ecological, and demographic data in the private and public sectors. These data are needed to model and assess physical, biological, and social processes that may be altered by climate change; much of this data is significant to adaptation efforts of other federal agencies and departments. Enhancing understanding of climate-related changes to the U.S. economy, society, and the environment can improve decision making broadly. For example, buildings, infrastructure, and communities may suffer losses associated with climatic events such as drought, hurricanes, floods, and wildfires. By improving understanding of climate change, standards and practices can be developed to minimize risks to public safety and economic losses. DOC agencies will need to enhance information collection, scientific knowhow, and services capabilities to meet the data and knowledge needs of federal partners, state and local government, nongovernmental organizations, and businesses that are vulnerable to changing climate. DOC identified the following adaptation actions to address federal vulnerabilities related to science and information in FY2014: Continue coordinating climate and related ecological research and services partnerships within the department and with department partners to better understand climate variability and change and how climate variability and change may affect communities and ecological processes. Lead Office/Bureau—National Oceanic and Atmospheric Administration (NOAA) Develop frameworks and tools to help coral reef managers incorporate climate change information into effective decision making that minimizes their risks to climate change. Lead Office/Bureau—National Oceanic and Atmospheric Administration (NOAA) Develop performance-based standards and tools for new and retrofit building designs resistant to extremes of wind, storm surge, and fire and that prevent or mitigate collapse. Lead Office/Bureau—National Institute of Standards and Technology (NIST) Understand and prepare for ocean acidification. Lead Office/Bureau—National Oceanic and Atmospheric Administration (NOAA) Support adaptation decisions through the National Integrated Drought Information System (NIDIS). Lead Office/Bureau—National Oceanic and Atmospheric Administration (NOAA) Support adaptation decisions with climate data, forecasts, and tools in order for the nation to better respond to extreme weather and water events. Lead Office/Bureau—National Oceanic and Atmospheric Administration (NOAA) Develop climate change adaptation decision-support information for the Arctic region. Lead Office/Bureau—National Oceanic and Atmospheric Administration (NOAA) Environmental Stewardship Within DOC, the National Oceanic and Atmospheric Administration's (NOAA's) mission is to understand and predict changes in climate, weather, oceans, and coasts; to share that knowledge and information with others (including other federal entities); and to conserve and manage coastal and marine ecosystems and resources. Climate adaptation is a central element of NOAA's mission and its future vision of resilient ecosystems, communities, and economies. In many cases, existing approaches to natural resource management assume relatively static conditions. One of NOAA's tasks is modify management systems to increase resilience to rising sea level (and associated coastal flooding), higher air and water temperatures, ocean acidification, and droughts. For example, climate change may allow pathogens, parasites, and invasive species to live in new areas, which may affect the health of coastal and ocean ecosystems and species. Moreover, the distribution and abundance of fish stocks, protected species, and other marine organisms may shift with changing ocean conditions. According to the CCAS, NOAA will need to incorporate climate considerations into natural resource and coastal planning to maintain healthy and resilient coastal communities. DOC identified the following adaptation actions to address vulnerabilities related to environmental stewardship for which NOAA is the lead office: Continue developing networks of "sentinel sites" to coordinate assets and efforts to increase understanding of, and improve response to, sea-level change impacts on coastal ecosystems and adjacent communities. Track and assess climate-related impacts on U.S. marine ecosystems and the distribution of major fish stocks. Assess the climate vulnerability and resilience of fish stocks and fishing communities. Increase understanding of current and future climate impacts on living marine resources. Provide training to coastal communities to build their capacity to adapt to climate change. Enhance climate resilience of endangered corals. Develop climate-ready protection and recovery of Pacific Northwest salmon and other riverine-dependent species—projecting climate impacts and designing resilient salmon restoration projects. Inform and advance the use of natural and nature-based infrastructure for coastal resilience, including through increased understanding of the value of the ecosystem services and benefits provided. Infrastructure, Facilities, and Operations Management Climate change could affect DOC's performance and its ability to deliver its services effectively and efficiently. Climate change may affect DOC's facilities and infrastructure and impede its ability to carry out its missions and operations. DOC identified the following adaptation actions to address vulnerabilities related to infrastructure, facilities, and operations management in FY2014: Assess the vulnerability of the department's leased facilities to climate change. Lead Office/Bureau—Chief Financial Officer/Assistant Secretary for Administration Continue to work with the General Services Agency (GSA) to assess and analyze climate change vulnerabilities for real property assets GSA has assigned to the Department of Commerce. Lead Office/Bureau—Chief Financial Officer/Assistant Secretary for Administration Issues for Congress One of many challenges to implementing both short- and long-term actions related to climate change in ocean and marine areas is the need for coordination among federal agencies and other governmental entities. For example, elevated levels of carbon dioxide, warming oceans, and sea-level rise are expected to affect marine ecosystems, coastal infrastructure, and marine-related activities. Actions needed to meet these challenges will depend on many different federal, state, and local authorities. For broad regional and global changes, coordination is especially important for avoiding gaps or duplication in efforts related to climate change adaptation. Effective communication is also needed to ensure the free flow of information among agencies including state and local governments. According to the U.S. Commission on Ocean Policy, at the federal level, 11 of 15 Cabinet-level departments and 4 independent agencies play important roles in the development of ocean and coastal policy. Although the Administration has developed a national ocean policy, it remains an open question whether Congress will provide new authorities to improve coordination of efforts to mitigate, increase resilience to, and adapt to cross-cutting ocean issues, such as climate change. For More Department of Commerce Information [author name scrubbed], Analyst in Natural Resources Policy, [email address scrubbed] , [phone number scrubbed]. Department of Defense The Department of Defense (DOD) can be affected by climate change in several areas including potential impacts on geopolitics and national security interests that could result in military operations, risks to existing military infrastructure, and hindrances to readiness and the ability to execute missions. For example, the Air Force has found that the combination of thawing permafrost, decreasing sea ice, and rising sea levels on the Alaskan coast has increased coastal erosion at several Air Force radar early-warning and communication installations. The U.S. Army Corps of Engineers (USACE or the Corps) is an agency in DOD with both military and civilian responsibilities. The Corps' civil works activities associated with domestic water resources are discussed separately in a later section. Congressional Action and DOD Response In the National Defense Authorization Act for Fiscal Year 2008 ( P.L. 110-181 ), Congress required the first national security strategy and first national defense strategy prepared after January 2008 to include guidance for military planners to assess the risks of projected climate change to current and future mission of the armed forces; to update defense plans based on these assessments, including working with allies and partners to incorporate climate mitigation strategies, capacity building, and relevant research and development; and to develop the capabilities needed to reduce future impacts. Congress also required DOD to include in the first Quadrennial Defense Review (QDR) prepared after 2008 an analysis of "the capabilities of the armed forces to respond to the consequences of climate change, in particular, preparedness for natural disasters from extreme weather events and other missions the armed forces may be asked to support inside the United States and overseas." Subsequently, DOD included a discussion of climate change (and energy) in the 2010 QDR, and the Administration included a discussion of climate change in the 2010 national security strategy (the first of either documents published after 2008). According to DOD, the 2010 QDR is the foundation for the department's strategic policy on climate change adaptation. In 2012, pursuant to Executive Order 13514, DOD published a nine-page FY 2012 Climate Change Adaptation Roadmap , which laid out in broad strokes the challenges of climate change and the initial steps being taken by DOD. While these initial efforts were mandated by Congress and the President, DOD has continued to address the issue and is working to develop a more robust approach for managing the risks posed by climate change. DOD issued a brief FY2013 update to the Climate Change Adaptation Roadmap and a more robust Climate Change Adaptation Roadmap in FY2014, and included a discussion on climate change in the 2014 QDR, even though there was no legislative or executive dictate to do so. DOD Risks from Climate Change DOD considers climate change to pose two broad categories of risk: 1. Climate change could affect the type, scope, frequency, tactics, and location of military operations worldwide. 2. Climate change could impact the force structure and the effectiveness and configuration of bases, training facilities, and other infrastructure that DOD relies upon to execute its mission. 1. Effect of Climate Change on Military Operations Climate change can serve as a catalyst for conflict between nations, instability within nations, and more severe or frequent natural disasters and humanitarian crises. The military may be called upon to respond to these scenarios, potentially affecting the type, scope, frequency, and location of military operations. Climate change can also alter the physical environment within which DOD must operate. For example, sea-level rise could affect amphibious landings, and weather pattern changes could alter operational timing and intelligence-gathering capabilities from airborne platforms. Exacerbating Conflict and Instability Climate change can serve as "an accelerant of instability or conflict." Rising sea levels, rising temperatures, changing precipitation patterns, and competition for water, among other factors, could have significant geopolitical impacts contributing to "poverty, environmental degradation, the weakening of fragile governments and food and water scarcity." The 2014 National Intelligence Strategy stated the following: Many governments will face challenges to meet even the basic needs of their people as they confront demographic change, resource constraints, effects of climate change, and risks of global infectious disease outbreaks. These effects are threat multipliers that will aggravate stressors abroad such as poverty, environmental degradation, political instability, and social tensions—conditions that can enable terrorist activity and other forms of violence. The risk of conflict and mass atrocities may increase. According to news reports, the National Intelligence Council reportedly found that Sub-Saharan Africa, the Middle East, and Central and Southeast Asia are most vulnerable to climate change-related drought, flooding, extreme weather, and resulting food insecurity. DOD may be called upon to respond to climate change-related conflict or instability, thereby impacting the roles and missions of the military. Nonconflict Operations DOD has an established mission to conduct humanitarian assistance/disaster relief, and has long played a role in U.S. efforts to assist foreign populations, militaries, and governments. The historical DOD role in providing assistance and support to foreign nations can be regarded as serving three purposes: 1. responding to humanitarian and basic needs, 2. building foreign military capacity and capabilities, and 3. strengthening foreign governments' ability to deal with internal and international threats through state-building measures. The use of DOD to provide foreign assistance stems in general from the perception that DOD can contribute unique or vital capabilities and resources because it possesses the manpower, materiel, and organizational assets to respond to international needs. The United States may have a significant interest in having the military conduct selected nonconflict operations (such as training and capacity building) as a means of preempting conflict, instability, or humanitarian crises that could otherwise emerge. DOD has unique capabilities to address climate-related challenges. For example, a nuclear-powered aircraft carrier can produce more than 400,000 gallons of drinking water from sea water per day, thereby providing fresh water to remote seacoast populations in times of crisis. The Army Corps of Engineers possesses the capability to assist nations in developing the infrastructure necessary to manage critical government services such as water access and allocation. 2. Installations, Readiness, and Mission Assurance DOD maintains more than 555,000 facilities at more than 5,000 locations worldwide, covering 28 million acres. DOD installations are found in all 50 states, 7 U.S. territories, and 40 foreign countries. The total value of its buildings and structures is estimated at approximately $874 billion. Given the extent of the DOD infrastructure, adapting to climate change impacts that affect installations and facilities worldwide could require significant financial investments. DOD's operational readiness and capabilities depend on continued and reliable access to functioning installations (including ports and bases), and training and testing facilities. DOD's portfolio of installations faces direct risks from some impacts of climate change. Some of these risks include the following: sea-level rise, storm surge risks, and storm runoff at coastal installations; drought and competition for water resources with local populations; extreme heat and severe flooding; and changes in weather conditions that make training facilities unusable for their intended purpose (for example, a facility dedicated to alpine training may not be useable if warming temperatures result in insufficient snow depths). Climate change-related effects are already being observed at military installations worldwide. As the Strategic Environmental Research and Development Program found, "Climate-related effects already are being observed at DOD installations in every region of the United States and its coastal waters. The direction, degree, and rate of these changes will differ by region, as will the impacts to the military's infrastructure and capabilities." These impacts could increase the cost of maintaining installations and critical infrastructure, as well as impact the ability of the installations to support operations. DOD installations often rely on non-DOD infrastructure. Bases may rely on local towns or cities for food, housing, local workforce, and infrastructure (such as the maintenance of surrounding roads). Climate changes that affect these towns or cities could adversely affect the functionality of military installations located nearby. DOD Adaptation Plan and Other Actions In October 2014, DOD released its FY 2014 Climate Change Adaptation Roadmap . The roadmap outlines three broad goals for addressing climate change: 1. identifying and assessing the effects of climate change, 2. managing risks associated with climate change by integrating climate change considerations into department planning and policy, and 3. collaborating with other agencies, foreign governments, international organizations, and industry to meet the challenges of climate change. DOD is already incorporating climate change considerations into installation and training plans, and is beginning to include the science and strategic implications of climate change in formal military training and education. In recent testimony, Dr. Daniel Chiu, Deputy Assistant Secretary of Defense for Strategy and Force Development stated, "the Department initiated in 2013 a review of existing directives, policies, manuals, and associated guidance document and criteria to identify which ones should incorporate considerations of a changing climate. The initial screen reviewed 58 documents and identified 28 policies, programs and procedures for update; five have already been updated, all dealing with installations." In addition to DOD's climate change adaptation roadmap, DOD also established goals related to the reduction of energy, water, and fuel use, as well as the reduction of greenhouse gas emissions and more sustainable practices as part of its strategic sustainability plan. Meeting these goals may contribute to more climate-resilient installations and activities. DOD Research on the Impact of Climate Change According to DOD, "more comprehensive and region/installation-specific vulnerability assessments are needed to determine which adaptive responses are appropriate." Given the pace of climate change, many of its potential effects on DOD could take time to develop. In addition to the efforts currently under way (as described above), DOD intends to research climate system modeling, environmental process models, and assessment and adaptation methods. This effort could help inform a strategic approach to managing the risks of climate change. Regarding DOD's efforts to collect and analyze data regarding the vulnerabilities of its installations to climate change, GAO concluded that "[w]ithout a plan, including interim milestones to gauge progress, DOD may not finish its assessments in a timely and complete manner." GAO recommended that DOD develop a plan with milestones, and provide further information to installation planners, clarifying actions that should be taken to account for climate change in planning documents, and clarify the processes used to compare military construction projects for funding to include consideration of potential climate change impacts. DOD concurred with GAO's recommendations and explained how they will be implemented. Much of the research is conducted by DOD in partnership with DOE and EPA under DOD's Strategic Environmental Research and Development Program (SERDP). SERDP, established in 1990 to coordinate environmental research across military services, has been tasked with developing climate change assessment tools for DOD installations. Under this program, DOD is producing several reports focusing on adaptation science and vulnerability and impact assessment (see Table 2 ). Military Department Adaptation Activities The Under Secretary of Defense for Acquisition, Technology, and Logistics is the Senior Sustainability Official responsible for implementing E.O. 13514 and overseeing climate change adaptation. The Deputy Under Secretary of Defense (Installations and Environment) is responsible for overseeing implementation of DOD climate change adaptation efforts, and published the FY 2014 Climate Change Adaptation Roadmap . In addition, each military department is undertaking climate change adaptation activities. The Army has formed a climate change working group, which is working on incorporating climate change considerations into policies, guidance, and plans; assessing vulnerabilities across locations and missions; and performing pilot demonstrations at two locations to include climate change concerns in installation plans. To support these efforts, the Army Science Board issued a report, Planning for Climate Change: Actions for the Army to Better Adapt to the Effects of Climate Change in 2030 (November 2013), and the Office of the Assistant Secretary of the Army (Installations, Energy, and Environment) released a report, High-level Climate Change Vulnerability Assessment (December 2013), which "provides an overview of potential Army installation vulnerabilities to climate change." The Air Force's 2010-2030 Strategic Environment Assessment includes climate change as a strategic consideration. The Air Force is also developing installation management plans that include climate change impacts for two coastal installations. The Navy's climate change adaptation activities appear to be the most fully developed within DOD. The Navy's Task Force Climate Change was established in May 2009, earlier than the other military services or establishment of the DOD-wide task force. Figure 8 shows an example of facility-specific assessments that have been initiated. The Navy released its first Arctic Roadmap in 2009 (four years before the DOD-wide Arctic Strategy was released) and a Climate Change Roadmap in April 2010 (three years before the DOD-wide roadmap was released). The Navy does not intend to issue an updated climate change roadmap, as all the military services now work within the DOD-wide task force and roadmap. Issues for Congress The Arctic and Beyond According to the November 2013 Department of Defense Arctic Strategy, Fiscal constraints may delay or deny needed investment in Arctic capabilities, and may curtail Arctic training and operations. As the Department downsizes to meet budgetary targets, it will have to prioritize engagements for the resulting smaller force. There is also a risk that desired investments in Arctic capabilities may not compete successfully against other requirements in the Department's budgetary priorities. As such, DOD's approach is to monitor changes in the Arctic and the geostrategic situation to "determine the appropriate timing for future capability investment." Given the fiscal environment and DOD's acknowledgement that it may not prioritize Arctic investment, Congress may consider where climate change should rank in the list of DOD priorities, and to what extent DOD should dedicate limited resources to the potential risks posed by climate change generally, and to the evolving arctic climate specifically. In addition to the Arctic, Congress may consider the extent to which DOD is preparing now for the potential effects that climate change may have globally. Congress may examine the extent to which DOD is 1. identifying regions of the world most vulnerable to climate change, 2. incorporating climate change impacts into plans, operations, and infrastructure maintenance in these regions, and 3. dedicating sufficient resources to mitigate climate change risks in these regions. Industrial Base Congress may also consider whether and to what extent DOD should examine the potential risks climate change poses to the industrial base supporting DOD. As discussed above, climate-related effects are already being observed at numerous DOD installations. DOD and the services are working to develop predictive models, evaluate the impact of climate change, and incorporate climate change into installation management. It is unclear whether DOD plans to take a similar systematic approach to determine what impact, if any, climate change may have on critical industrial base facilities, such as shipyards, or whether DOD plans to evaluate the extent to which contractors are adequately preparing for potential environmental change. For More DOD Information [author name scrubbed], Specialist in Defense Policy, [email address scrubbed] , [phone number scrubbed]. U.S. Army Corps of Engineers (Civil Works) The Army Corps of Engineers (USACE or the Corps) is an agency in DOD with both military and civilian responsibilities. Under its civil works program, the Corps plans, builds, operates, and maintains a wide range of water resources facilities (e.g., dams, levees, navigational channels) throughout the country. These facilities are sensitive to changes in climate, in particular changes in hydrologic (e.g., droughts, floods, runoff) and coastal processes (e.g., storms, sea-level rise, sediment transport). Climate change is expected to affect all Corps mission areas and activities such as its responsibilities for navigation, flood control, hydropower, and ecosystem restoration. The effects of altered climate are of particular concern where Corps projects have documented vulnerabilities due to flooding (e.g., flood control projects in the Sacramento area or in Greater New Orleans), drought (e.g., water supply projects on the Apalachicola-Chattahoochee-Flint River), and wetland degradation/sea-level rise (e.g., ecosystem restoration projects in coastal Louisiana and the Florida Everglades). A complete assessment of the vulnerability of Corps projects has yet to be completed. The Corps has outlined its role in responding to climate change as (1) characterizing and understanding potential threats to its missions and operations, and (2) engineering and deploying adaptation strategies and policies that reduce these threats. While the Corps is itself a user of actionable climate science knowledge, it considers the conduct of climate science to be outside of its primary mission. Efforts to respond to climate change may not directly affect the decision making of nonfederal entities. However, many nonfederal entities rely on infrastructure operated or built by the Corps, and are thus affected by its policies (e.g., operations of reservoirs, planning standards for levees, etc.). Additionally, many of the issues encountered by the Corps are common to managers of nonfederal water resources infrastructure; thus Corps adaptation strategies may be translatable to other agencies and decision makers. Adaptation-Related Activities The Corps conducts its climate change planning under the Obama Administration's broader climate change policy framework. In 2012 the Corps prepared and submitted a Climate Change Adaptation Plan and Report in accordance with Executive Order 13514. The Corps is a member of the federal Climate Change and Water Working Group (CCAWWG), an interagency working group that provides engineering and scientific collaborations in support of water management. The Corps also sits on the Water Resources Working Group, one of five interagency working groups established by the Council on Environmental Quality (CEQ) to develop a national strategy for adapting to climate change. These efforts inform other climate change-related work by the Corps at the agency level. The Corps carries out climate adaptation-related activities in accordance with its 2011 Climate Change Adaptation Policy Statement. According to this statement, it is Corps policy to integrate climate change planning and adaptation into agency missions, operations, programs, and projects, and to consider climate change adaptation at every step of the project development process. The policy established the USACE Climate Change Adaptation Steering Committee (ASC), chaired by the Chief of Engineers, to oversee and coordinate implementation of this policy. The Corps established a program in 2010, the Responses to Climate Change (RCC) program, to develop methods, policies, and processes to reduce the vulnerability of Corps facilities to climate change. To date, some of the primary activities under the Responses to Climate Change program have focused on the creation of assessment frameworks and tools to help characterize vulnerabilities of Corps projects. Future efforts are expected to further incorporate these changes into its planning. For example, in 2011 the Corps developed an Engineering Circular with the help of NOAA and USGS, which established guidance for assessing the effect of sea-level change impacts on coastal projects. The Corps also developed tools for project managers to understand these effects, including a web-based calculator to aid in assessing sea-level rise potential at Corps projects. The Corps is currently developing a screening process to assess the vulnerability of its projects to sea-level change, and is formulating additional guidance for developing and evaluating alternatives to address these changes at the project level. For areas in which less actionable science is available, the RCC program has focused largely on characterizing known needs and potential impacts. Through its work on the CCAWWG, the Corps has contributed to multiple interagency reports and forums identifying needed supporting information for water management decisions. For instance, in 2011 and 2013 the Corps and other agencies produced reports identifying needs for long-term and short-term water resources planning and management, respectively. Additionally, the Corps has coordinated workshops to familiarize water managers with changing assumptions due to climate change in project planning, design, and operations such as those related to potential changes in hydrologic extremes. In the future, it plans to build on this work to provide more specific guidance on incorporating these assumptions into project-level climate change impact assessments. The Corps is also conducting limited regional impact assessments and pilot studies under its RCC program. It is conducting regional climate impact assessments in specific areas such as Alaska, the Pacific Islands, eastern regions, and the Caribbean Basin. The Corps has also conducted pilot studies at specific locations to better understand the potential effects of climate change at Corps facilities throughout the nation. Issues for Congress Issues for Congress may include whether available information provides an actionable basis for changes to Corps project development and management, the extent to which the Corps and other water resources managers have the authority and capability (including funding) to implement alterations, and the extent to which Congress agrees with the specifics of these plans. If implemented, alterations to Corps projects may affect the established distribution of Corps project benefits (e.g., altered reservoir operations may provide more water for some purposes and less for others), and could thus prove controversial. Finally, Congress may also weigh in on the status and priority of information "gaps" identified in previous water resources planning forums, including the relative priority and adequacy of various research efforts. There are significant connections between the adaptation activities of the Corps and other federal agencies, both in the early stages of climate change planning and in day-to-day operations of water resources facilities. Congress may consider these connections as it provides further direction for Corps adaptation activities. In addition to its relationship with other federal agencies, Congress may also provide further guidance and direction for Corps work with nonfederal entities. For instance, Congress may weigh in on the Corps role in facilitating adaptation work related to levees that were constructed by the Corps but operated by nonfederal partners. For More Army Corps of Engineers Information Charles Stern, Specialist in Natural Resources Policy, [email address scrubbed] , [phone number scrubbed]. Environmental Protection Agency The Administrator of the Environmental Protection Agency (EPA), in a June 2011 Policy Statement on Climate Change Adaptation, declared that to fulfill EPA's mission of protecting human health and the environment, the agency must adapt to climate change. Much of EPA's work is organized by medium—preventing or reducing pollution in air, soils, and water. EPA also regulates certain chemicals (e.g., pesticides), works to prevent environmental emergencies such as unexpected pollution releases, and responds to releases including those associated with homeland security incidents. The Administrator at that time cautioned that EPA, its partners, and the regulated community may no longer reliably predict future accomplishments when assuming historical climate conditions. EPA enumerated ways in which its mission may be vulnerable to a changing climate, but has not conducted a detailed, quantitative assessment of the vulnerability of its mission to climate change. Among the potential vulnerabilities, EPA noted that projected higher air temperatures and more stagnant air masses may make it more difficult to achieve health-based standards for smog in some regions, with potentially adverse effects on health and regulatory compliance. Projected increases in flooding, prolonged drought, wildfires, and associated losses of vegetation increase risks of contamination of water and reduced ecosystem services such as water supply and filtration. More heavy rainfall events may increase fertilizer runoff from lands and augment harmful algal blooms in lakes and oceans. Flooding and sea-level rise could lead to contaminant releases from facilities that manage wastes or store hazardous materials, and/or disrupt access in waste management systems. Chemicals, such as pesticides and herbicides, may be used with different frequencies or in different ways. The report further noted that increasingly extreme weather events could divert EPA's resources to emergency responses and away from day-to-day responsibilities. EPA reports that the nation's water resources and infrastructure may be particularly susceptible to climate change. Variable climate conditions, including changes in precipitation (amount, timing, form, and location), changes in the intensity and frequency of extreme weather events, and sea-level rise can result in increased coastal and inland flooding, shoreline erosion, saltwater infiltration into groundwater resources, and diminished supplies of freshwater resources. These events can threaten water utilities' ability to serve their essential functions; and can alter the quality and function of lakes, estuaries, and other water resources and aquatic ecosystems. For the most part, EPA's adaptation plan concerns potential effects of climate change on achieving EPA's mission. The agency also stated that it has begun to assess "the safety of its personnel, the safe and continued operation of its buildings and other critical assets (e.g., vehicles), and the integrity of its grants and procurement systems" to changes in the climate. Elements of risks to EPA's infrastructure, personnel, and operations are visible in some of the National Program Offices' and Regional Offices' Implementation Plans. EPA's Adaptation-Related Activities EPA released an updated Climate Change Adaptation Plan in October 2014. EPA's adaptation-related efforts were also evident in the agency's budget request for FY2015. In its Congressional Justification for FY2014, the agency set three Strategic Measures for climate adaptation activities, to achieve by 2015, with performance metrics to measure agency-wide integration of climate change vulnerability assessments and plans: integration of science trend and scenario information into five scientific models and/or decision-support tools used in implementing agency environmental management programs, consistent with existing authorities; integration of science trend and scenario information into five rulemaking processes to further EPA's mission, consistent with existing authorities; and consideration of impacts and adaptive measures into five major grant, loan, contract, or technical assistance programs, consistent with existing authorities. These adaptation-related performance metrics did not appear in EPA's FY2015 Congressional Justification. EPA was among the first federal agencies to release implementation plans across all of its programs and geographic regions to facilitate their adaptation to climate change. In most cases, these implementation plans identify program- and location-specific vulnerabilities and needs for further assessment, though they also identify some concrete actions and timetables. Common actions across offices include the following: increased training of staff on science, engineering, risks, and options to anticipate, monitor, and respond to emerging climate challenges; consideration of options for greater reliance on distributed energy to reduce vulnerabilities of EPA offices and operations—especially of emergency response resources—to grid and telecommunication interruptions possible with extreme events or high cooling demand for electricity; and enhancing priority of EPA facilities' water conservation in drought-susceptible areas. EPA's climate adaptation policy gives emphasis to developing external partnerships, and has a goal of mitigating impacts on the nation's most vulnerable populations including children and the elderly, and minority, low-income, and indigenous populations. In many cases, EPA's documents reflect the agency's view that it occupies one niche in a broader societal response to climate changes. For example, EPA Region 6's adaptation implementation plan notes that "[i]n some cases, market forces will continue to push desired outcomes even without the Agency's involvement.... The federal government has an important and unique role in climate change adaptation, but is only one part of a broader effort that must include public and private partners throughout the country and internationally." Likewise, the Office of Solid Waste and Emergency Response explicitly asked, "Does EPA have a unique or lead role or technical expertise ... ?," as it evaluated opportunities and set priorities in a resource-constrained environment. EPA's Adaptation Implementation Plans lay out actions to be undertaken in its own programs and through work with partners in the private sector and with public agencies at the federal, state, local, and international levels. For example, the agency is assisting selected communities, states, and businesses to revise design guidelines for water treatment systems, develop extreme heat warning systems with selected cities, and help coastal communities prepare for sea-level rise. EPA appears to have reduced some of its early adaptation activities as other agencies have expanded related efforts such as in urban heat warning systems and coastal zone analysis. These supplement ongoing EPA observational and research activities related to climate change. Some highlights of EPA's adaptation plans for individual office operations are identified below. Office of Administration and Resource Management (OARM) . EPA will consider enhancing the resilience of existing agency facilities in coastal areas to protect them from severe weather, flood damage, and sea-level rise, and work with the General Services Administration (GSA) to account for climate change in design and construction of new or leased facilities. A particular example is incorporation of considering resilience to climate change into GreenCheck, OARM's process to evaluate building projects. The effort aims to ensure that EPA laboratories—which need water for experiments and building cooling—are prepared to respond in drought or adverse water quality events. Likewise, facilities will prepare to reduce reliance on the electrical grid, which may suffer interruption with weather events and rising temperatures. Also, the agency may need to redirect personnel to assist emergency management, assess environmental damage, or test sites for contamination following severe weather or other climate-related events. Office of Air and Radiation (OAR) . OAR plans to review and revise information regarding the potential impacts of climate change on concentrations of criteria air pollutants (such as ozone and particulate matter) as well as indoor air quality. Better understanding of climate change on air pollution may inform outreach to citizens as well as guidance and tools for partners. OAR will consider whether research indicates that the office needs to modify the analytical tools and models used for developing and implementing regulations. Office of Chemical Safety and Pollution Prevention (OCSPP). EPA is concerned that changes in the climate could affect exposures to chemicals by altering environmental patterns or use patterns. The office intends to ensure that its tools and methods reasonably reflect environmental changes, including climate changes, and how these may affect assessments of the rate, timing and/or frequency of chemical uses, or alter disease or invasive species distributions. Historical weather data sets may be updated. The office will consider new pathways and changes in chemical behavior that may result from a changing climate. In addition, the office may acquire better data on the locations of existing facilities such as chemical storage in low-lying areas that may be susceptible to flooding. The agency notes that it has not assessed potential changes to exposures for some kinds of chemicals, such as lead or asbestos used in buildings, and how they may be altered by any changes in fires, high winds, or flooding. Office of Water. The Office of Water strategy is to "integrate climate change considerations and awareness into day-to-day management decisions for clean water and drinking water programs at national, Regional, State, Tribe, and local levels." Program areas covered by adaptation initiatives include water infrastructure, watersheds and wetlands, coastal and ocean waters, and water quality. Priority adaptation initiatives include, among others, (1) encouraging climate change consideration in managing the Clean Water and Drinking Water State Revolving Loan Fund programs, (2) developing screening criteria to identify water sector utilities in coastal areas that may be at risk of inundation from storm surges, (3) building state and local capacity to protect watersheds, (4) expanding WaterSense partners and products, (5) identifying ways to integrate climate change considerations into water quality management planning, and (6) promoting the use of an Extreme Events Workshop Planner for water utilities. EPA also integrated climate change into wetland program grants. Under the Climate Ready Water Utilities (CRWU) Initiative, EPA has developed a climate change risk assessment tool (Climate Resilience Evaluation and Awareness Tool, or CREAT). In FY2015, EPA plans to promote climate change adaptation by water, wastewater and stormwater systems by increasing the role of the CRWU Initiative in emergency response and preparedness efforts. EPA proposes to use funds realigned from the water security program for this purpose and to develop and distribute a more robust climate resilience evaluation tool that incorporates sea-level rise and storm surge components, and allows mapping of facilities. Office of Solid Waste and Emergency Response (OSWER) . Among 23 OSWER priority actions over three years, several will increase outreach and informational tools to prepare to manage possible surges in waste and debris from the impacts of extreme climate-related events. This would entail cooperation with the Department of Homeland Security (DHS). Efforts to prevent contamination from chemical releases will involve enhanced inspector training and guidelines. Regarding waste cleanup, OSWER offices will gather further information, increase outreach, and in some cases require grantees to consider potentially changing climate conditions when evaluating alternative measures. In addition, the agency has begun to apply screening analysis mapping to identify the sites most likely to be vulnerable to climate change. Office of Research and Development (ORD). ORD will work with OARM to identify and reduce vulnerabilities of laboratory assets, and identify particular facilities that may be most vulnerable to severe weather or flooding. ORD will also need to safeguard and maintain continuity of other research assets such as field experiments, equipment, archived samples, and personnel from extreme temperature and precipitation. ORD reports it has incorporated criteria for climate change adaptation in grant development. Office of Enforcement and Compliance A ssistance (OECA). Federal laws broadly hold federal facilities to the same standards of environmental compliance as others in the regulated community. In some instances, OECA will inspect facilities that manage hazardous wastes, oil, toxic chemicals, and/or discharge stormwater in FEMA flood zones to determine environmental compliance and recommend best management practices to avoid unexpected releases. Beyond the actions of program offices highlighted above, EPA Regional Offices have undertaken additional types of actions. One example is working with the National Response Framework and the National Disaster Recovery Framework to incorporate climate adaptations into post-disaster redevelopment plans. Another is developing methods to identify the most vulnerable populations within regions. Some regions are developing plans to alert schools and other susceptible populations to air quality emergencies that may increase with climate change, such as wildfire pollution episodes. EPA's adaptation plan also emphasizes that climate change impacts may be most severe on certain already vulnerable populations, including the elderly and low-income communities, as well as tribes. The agency has established a principle to give priority to addressing the vulnerabilities to climate change of these people and communities. Reports on Accomplishments EPA has not prepared comprehensive quantitative assessments of the vulnerability of health and environmental protection to climate change. Some limited studies are available. Though the agency set three quantitative Strategic Measures to achieve by 2015—to incorporate consideration of climate change into decision tools, grants or assistance, and rulemakings (see above)—the October 2014 report included little specific discussion of progress toward achieving those quantitative measures. It cited only inclusion of a Climate Assessment Tool within the broader watershed and water quality analysis tool, BASINS, available to help regional, state, and local agencies assess water resource and management issues. Often in cooperation with other federal agencies or state or local governments, EPA has produced a number of resources intended to assist the agency in helping others (communities, tribes, private companies, etc.) anticipate and respond to climate change. One of EPA's earliest efforts, with the Centers for Disease Control and Prevention (CDC), the National Weather Service (NWS), and nongovernmental organizations, was support for development of Heat Health Watch/Warning Systems to reduce deaths related to extreme heat events that may increase with climate change. For example, EPA helped the Philadelphia Department of Public Health develop a heat warning system that one study estimated saved 117 lives between 1995 and1998, with benefits that greatly exceeded the costs of the system. The approach has been replicated and tailored to numerous other localities. Issues for Congress As Congress oversees EPA operations and considers related budget proposals and priorities, there are multiple issues it may consider with regard to climate change adaptation: Does EPA's research and that of other agencies and institutions meet the needs of EPA's programs for reliable climate change-related data and models, in order to identify potential risks and their locations? Through what mechanisms are EPA's information needs identified? Are climate change data accessible to the regulated community and the public? Are there specific questions of authority that may arise as EPA pursues adaptation measures? For example, EPA noted in its 2012 Adaptation Plan that it may need to determine the extent of its authorities to consider climate change impacts in setting standards or issuing permits. Similarly, relationships between EPA's statutory authorities and various expenditures for climate initiatives may be of oversight interest. Could metrics of adaptation outcomes (rather than agency activities) for health and the environment be quantified in budget justifications? What may be the challenges? Could quantitative metrics related to effectiveness of adaptation activities be meaningful and effective? In the water sector, many EPA adaptation activities are compatible with, but may fall outside, the core statutory responsibilities. It may be difficult to discern the level of resources allocated to climate change adaptation activities separately from spending on core mission activities, or to determine whether focus on climate change may have an effect on implementation of core statutory missions. Is the allocation of resources allotted to adaptation planning and initiatives in this or other programs adversely affecting congressionally required functions? For More EPA Information [author name scrubbed], Specialist in Environmental and Energy Policy, [email address scrubbed] , [phone number scrubbed]. [author name scrubbed], Specialist in Environmental Policy, [email address scrubbed] , [phone number scrubbed]. Federal Emergency Management Agency The Department of Homeland Security's (DHS's) Federal Emergency Management Agency (FEMA) has the primary mission to reduce the loss of life and property from all hazards, including man-made and natural disasters. FEMA accomplishes this mission by leading and supporting the nation in a risk-based, comprehensive emergency management system of preparedness, protection, response, recovery, and mitigation. Through this mission, FEMA has a lead role in guiding nationwide adaptation to the impacts of climate change related to extreme weather events. Scientific research organizations have highlighted the potential impact of climate change as it relates to the frequency, and potential severity, of extreme weather events. FEMA expects that climate change will adjust the likelihood and magnitude of certain extreme weather events, but not create novel threats. Therefore, FEMA expects that the nation will experience more natural disasters of certain types—namely meteorological phenomena such as heavy precipitation events, flooding, heat waves, and droughts—that may also produce greater damages when they strike communities. When the prospective change in likelihood and severity of threats is accounted for, it may result in new risk for communities across the nation. Not all changes to risks will have negative outcomes for the nation or individual communities. It is possible, for instance, that the likelihood of certain extreme weather events will decrease in a particular region with changing climate conditions such as a lower likelihood of drought in a region. Changes to risk are also unlikely to be consistent across geographic regions of the nation. Further, future risk to extreme weather events may be offset or exacerbated by other correlated or uncorrelated factors. For example, enhanced building design or other technological advancements may reduce physical vulnerability to a particular extreme weather event. As these types of natural disasters already threaten the nation, FEMA is primarily working to integrate climate change adaptation into existing programs and policies that mitigate these threats, as opposed to developing additional, climate change-specific programs/policies. FEMA's Adaptation-Related Activities In a strategic plan, FEMA has identified climate change as a key "driver" of future needs for emergency management. In a supporting assessment of this driver of future needs, the agency noted that the implications of climate change on emergency management may be exacerbated by other projected changes including aging infrastructure, forecasts of lower government budgets, and increasing demographic concentration in cities and coastal areas. In review of these strategic assessments, FEMA has identified actions to integrate climate change adaptation planning into its existing programs, policies, and operations. In addition to its agency-specific work, FEMA, as a component of DHS, has led a DHS Task Force set up to evaluate the risks of climate change effects to DHS missions and operations. Working in conjunction with other components of DHS such as the U.S. Coast Guard and U.S. Customs and Border Protection (CBP), FEMA has contributed to the development of several DHS-wide policy documents on climate change adaptation, including a 2010 Climate Change Adaptation Report , 2012 Climate Change Adaptation Roadmap , 2013 DHS Climate Action Plan , and 2014 "Addendum" to the DHS Climate Action Plan . These documents comply with adaptation planning requirements initiated under E.O. 13514. FEMA was also one of the seven departments and agencies specifically identified in E.O. 13653 that were directed to "complete an inventory and assessment of proposed and completed changes to their land- and water-related policies, programs, and regulations" to make U.S. natural resources more resilient to a changing climate. To fulfill this requirement, FEMA was a participating agency in the Climate and Natural Resource Working Group (CNRWG), which published in October 2014 a "Priority Agenda: Enhancing the Climate Resilience of America's Natural Resources." Analyzing the array of policy documents noted above, FEMA has committed to fulfilling a broad set of actions related to climate change adaptation, such as (but not limited to) increasing its internal training and communications for FEMA emergency management staff on the connections between climate change and emergency management programs and functions; improving its existing cost-benefit analysis methods for post-disaster assistance programs provided through the Stafford Act, such as the Public Assistance and Hazard Mitigation Grant Program, to incorporate future flood risks (e.g., sea-level rise) and other climate factors; updating risk assessment models that FEMA currently provides to accurately account for possible increases in risk due to climate change, including the Threat Hazard Identification Risk Assessment; and advance and participate in intergovernmental and "whole of community" partnerships to address specific extreme weather events that may increase in frequency and intensity with climate change, such as through the National Cohesive Wildland Fire Management Strategy and the National Drought Resilience Partnerships. Prior to its FY2015 budget request, the Administration did not request or receive funding specifically related to climate change adaptation activities for FEMA. However, the strategic planning activities of FEMA's Office of Policy and Program Analysis related to climate change have been cited in past budget justification documents. In the FY2015 supplemental budget request, labeled the "Opportunity, Growth, and Security Initiative," the Administration requested $400 million for the Pre-Disaster Mitigation (PDM) grant program. If appropriated by Congress for FY2015 or in other future fiscal years, this type of funding could be used by communities to adapt to extreme weather events exacerbated by climate change, in addition to other types of disasters. A general lack of specific funding for climate change adaptation may reflect FEMA's objective to integrate adaptation activities into existing programs, thus making it difficult to specifically identify funding for adaptation activities in appropriated resources for current programs. Arguably, any funding directed toward the general goal of emergency preparedness may assist the nation as it adapts to changing likelihoods of extreme weather events, in addition to other disasters. For More FEMA Information [author name scrubbed], Analyst in Emergency Management and Homeland Security Policy, [email address scrubbed] , [phone number scrubbed]. Department of Health and Human Services HHS is the lead federal agency responsible for researching and responding to the health effects of climate change. According to the most recent version of the HHS climate adaptation plan, the Office of the Assistant Secretary for Health (OASH) within HHS is the lead office on climate adaptation. OASH works closely with the "Office of the Assistant Secretary for Administration (ASA), Office of the Assistant Secretary for Preparedness and Response (ASPR), Centers for Disease Control and Prevention (CDC), and the National Institutes of Health (NIH)." Adaptation-Related Activities Activities to address climate change within HHS are multipronged and in different stages of development. For example, some activities are an extension of ongoing work, led by ASPR, to prevent, prepare for, and respond to public health emergencies and disasters. As noted in the HHS plan, "ASPR has a major role in identifying communities and at-risk individuals most vulnerable to disasters as climate change progresses." Other activities, led by the CDC and NIH, involve collecting data and creating mapping tools to track the effects of climate change and assess potential health impacts. Many of these efforts are preliminary, focused on establishing the infrastructure necessary to ameliorate the potential impacts of climate change (e.g., identifying key personnel, programs, and policies that need updating or replacement; assessing facilities and infrastructure). One of these efforts is expected to produce a special report that "will be an evidence-based, quantitative assessment of the observed and projected climate change impacts on human health in the United States." A draft of the report is expected in early 2015. The 2014 climate adaptation plan presents vulnerability assessments for populations and HHS missions. It identifies climate-related health risks affecting the U.S. population, including deaths and illnesses from heat stress; injuries and illnesses due to extreme weather events (e.g., severe storms, heat waves); respiratory and cardiovascular illness and deaths caused by smoke from heat-related and drought-related wildfires, as well as changes in air pollution, particularly ozone smog; allergic illnesses from elevated pollen levels, caused by more vigorous weed growth and longer pollen seasons; changing rates and ranges of infectious diseases carried by insects or in food and water; threats to the safety and availability of food and water supplies; and greater levels of mental and emotional stress in response to climate change and extreme weather-related emergencies. According to the plan, those most vulnerable in general—children, the elderly, those living in poverty, those with underlying health conditions, and those living in certain geographic areas—are also at increased health risk from the effects of climate change. The HHS plan also includes (1) NIH efforts to identify and protect vulnerable populations, (2) CDC programs to help state and local governments prepare for the potential impacts of climate change on populations within their jurisdictions, and (3) work by the Substance Abuse and Mental Health Services Administration to help states, territories, tribes, and local governments respond to the behavioral health impacts of climate change. HHS has not conducted a formal risk assessment of climate change on its brick-and-mortar facilities; however, the adaptation plan notes that HHS intends to partner with the General Services Administration to "address the vulnerabilities of these sites and facilities to incremental climate change and variability." Issues for the 114th Congress Adapting the health care and public health sectors to respond to climate change generally involves infrastructure and activities already in place; however, to optimally address climate change concerns, such activities may need to be expanded. As Congress considers the issues associated with the HHS climate adaptation plan, Members may assess the extent to which the existing public health preparedness and disaster response infrastructure is sufficient to handle the anticipated impacts of climate change over different periods of time—the next 1 to 5 years, the next 5 to 10 years, and beyond. Congress may also want to get a better sense of the level of current and projected HHS spending for the various initiatives included in its climate adaptation plan. For More HHS Information [author name scrubbed], Specialist in Public Health and Epidemiology, [email address scrubbed] , [phone number scrubbed]. Department of the Interior The Department of the Interior (DOI) has a wide range of responsibilities primarily related to managing lands and resources throughout the nation. For example, DOI houses three of the four major federal land management agencies. Together, these agencies—the Bureau of Land Management (BLM), the Fish and Wildlife Service (FWS), and the National Park Service (NPS)—manage approximately 20% of the nation's lands and related cultural and natural resources, as shown in Figure 9 . The department also manages 35,000 miles of coastline and 1.76 billion acres of the Outer Continental Shelf, and has considerable responsibilities for water and power resources. Among the properties managed by DOI are the nation's national parks, monuments, and recreation areas; national wildlife refuges; other public lands and resources including forested lands and rangelands; lands held in trust for Native American Indians; and more than 300 dams and reservoirs owned and operated by the Bureau of Reclamation (Reclamation). DOI facilities provide large quantities of water and produce considerable hydroelectric power for communities and farmers in the 17 western states. The department is also responsible for managing energy and mineral resources located below ground and offshore. This includes oil and gas leasing, as well as leasing for certain renewable resource development. It also provides financial and technical to U.S. territories. Through its agencies, DOI manages and monitors species and their habitats, as well as ecosystems. In addition to its cultural and natural resource stewardship role, the department plays an important role in providing scientific information to other federal agencies, states, local and tribal governments, and other nonfederal entities. For example, DOI's U.S. Geological Survey (USGS) and other agencies play a large role in measuring and monitoring resources and developing science-based tools for land and water resource managers nationwide. The department also is involved in numerous private-public partnerships involving monitoring, research, and resource management. Because of DOI's widespread land and resource management responsibilities, including protection of threatened and endangered species, its operations and missions are particularly sensitive to climate conditions, whether they are due to naturally occurring climate variability or the predicted intermediate and long-term effects of climate change. Multiple climate factors affect DOI's ongoing operations; among the likely key climate change effects for the department are changing soil and air temperatures, precipitation patterns, streamflow and runoff, sea-level rise, habitat conditions, and extreme events such as storms, floods, and droughts. For example, climate conditions can affect the health and well-being of fish and wildlife; they also can expand or restrict access to and development of natural resources and infrastructure upon which many communities and industries depend. More detailed examples are discussed below in the individual summaries of agency climate adaptation plans. Issues for Congress regarding DOI agency climate change adaptation activities are discussed at the end of this DOI overview section, due to overlap among many of the issues at the agency level. DOI Adaptation-Related Activities DOI has undertaken numerous activities related to climate change adaptation. In accordance with E.O. 13514, the department has issued Strategic Sustainability Performance Plans since FY2010, and more recently, Climate Change Adaptation Plans. The 2014 Climate Change Adaptation Plan (2014 CCAP) includes a brief summary of DOI's Climate Change Adaptation policy, a brief assessment of DOI climate-related vulnerabilities, and a description of current and planned climate change adaptation implementation strategies. The department's focus through the 2014 Climate Change Adaptation Plan is to increase the resilience of DOI facilities and resources in the face of climate vulnerability. DOI also issued a climate change adaptation plan for FY2013, and on December 20, 2012, issued a Departmental Manual for Climate Change Policy . These DOI plans and policies apply to all DOI agencies. Many of these actions build upon DOI's 20-year history of increasingly ecologically based—or landscape scale—management, and incorporate several different programs and activities undertaken by the department under various initiatives of different names in the past. For example, to address the growing need for collaboration, to streamline funding, and to reduce duplicative efforts among agencies, several interagency science committees, initiatives, programs, and projects (CIPPs) have been created within DOI—all of which may play a role in the department's and broader federal agency climate science and adaptation. DOI also plays a role in the President's Climate Action Plan through activities such as accelerating clean energy permits and conserving land and water resources through a variety of mechanisms including grants and private-public partnerships. DOI also addresses climate change impacts through department-wide secretarial orders. Secretarial Order (S.O.) 3289, issued in September 2009 and amended in February 2010, provides the primary guidance for DOI agencies, and established "a Department-wide approach for applying scientific tools to increase understanding of climate change and to coordinate an effective response to its impacts on tribes and on the land, water, ocean, fish and wildlife, and cultural heritage resources that the Department manages." Pursuant to S.O. 3289, DOI has created or reorganized several different department-wide initiatives. Major initiatives include the establishment of a Climate Change Response Council and the creation and renaming of eight regional Climate Service Centers, the National Climate Change and Wildlife Science Center, and Landscape Conservation Centers. These initiatives are briefly described below. Another secretarial order, S.O. 3297, addresses water resources management. Activities under S.O. 3297 are discussed in the USGS and Bureau of Reclamation sections below. DOI Climate Change Adaptation Plan for 2014 The DOI Climate Change Adaptation Plan (CCAP) for 2014 describes department-wide vulnerabilities to climate change in three key mission areas: natural and cultural resources, people and communities, and infrastructure and equipment. The plan also includes "guiding principles" covering a range of natural and cultural resource factors, and states that "[I]t is the policy of the Department to effectively and efficiently adapt to the challenges posed by climate change to its mission, programs, operations, and personnel." The guiding principles are organized into eleven areas: (1) Science; (2) Ecosystem-Based Management; (3) Ecosystems and Wildlife; (4) Energy, Mining, and Water; (5) Cultural and Heritage Resources; (6) Minority Populations and Low Income Populations; (7) American Indians, Alaska Natives, and Insular Areas; (8) Coordination and Partnerships; (9) Human Health and Safety; (10) Public Use and Enjoyment; and (11) Infrastructure and Equipment. A summary of current and planned agency climate change adaptation strategies is also included in the 2014 CCAP. The 2013 CCAP also included implementation direction and discussed "near-term actions." According to the department, the 2013 CCAP focused on assessing climate change vulnerabilities, whereas, the 2014 CCAP focuses on "addressing" climate change adaptation through secretarial orders and other policy guidance. DOI's Energy and Climate Council is responsible for implementing the CCAP. The Energy and Climate Council was established under S.O. 3289. DOI activities also are likely to receive funding from the Administration's Climate Resilience Fund. DOI also produces annual Strategic Sustainability Performance Plans pursuant to Executive Order 13514, which include numerous goals ranging from greenhouse gas emissions reduction to climate change resilience. Other DOI-Wide Adaptation Initiatives Climate Change Response Council. DOI's Climate Change Response Council—created pursuant to S.O. 3289 in 2009—is charged with coordinating a department-wide strategy to increase scientific understanding and develop tools to address the impacts of climate change on natural and cultural resources. The Council is in the Office of the Secretary, where the Secretary serves as the Chair, the Deputy Secretary as the Vice-Chair, and the Counselor to the Secretary as a second Vice-Chair; other members include the Assistant Secretaries, agency Directors, and the Solicitor. The Council coordinates all climate change activities with all relevant federal departments and agencies, including the Council on Environmental Quality, the Office of Energy and Climate Change, the Office of Science and Technology Policy, the National Science and Technology Council, the Department of Agriculture, the Department of Commerce, the Department of Defense, and the Environmental Protection Agency. National Climate Change and Wildlife Science Center (NCCWSC) and DOI Climate Science Centers (CSCs). These eight regional centers support research, assessment, and synthesis of global change data for use at regional levels, including undertaking research relevant to on-the-ground managers. (See Figure 10 .) The NCCWSC is located at the USGS headquarters in Reston, VA. S.O. 3289 broadened the missions of the CSCs, which were once known as "regional hubs" of the NCCWSC; their missions now encompass other climate change impacts on DOI's resources. The CSCs were established to evaluate global climate change models to scales appropriate for natural resource managers, identify science priorities, and facilitate departmental data integration and outreach to collaborators and stakeholders including other federal agencies. Further, in FY2013, DOI required these centers to incorporate climate change adaptation into their policies, studies, and programs. For FY2014, the Administration proposed to use the centers to conduct adaptation planning for issues such as sea-level rise and drought, work with tribal communities, and create a system for facilitating adaptation coordination among DOI agencies. USGS manages and maintains the centers. Landscape Conservation Cooperatives (LCCs) . These centers were created in 2009 under S.O. 3289, and are part of a network designed to ameliorate the effects of climate change on land and water resources. The LCCs are an amalgam of research institutions, federal resource managers and scientists, and cover lands managed by agencies at various levels of government. Each has a focus on one of 22 specific regions of the United States. Other than the offices of individual LCC coordinators, an LCC may be a virtual organization without a physical presence at a specific location. (See further discussion under the " Fish and Wildlife Service ," including Figure 12 .) Issues for Congress A prominent issue for Congress is one of potential overlap and duplication among DOI agencies and other federal agencies. It appears that DOI agencies have expanded their emphasis on global climate change in recent years per secretarial and presidential guidance, which may raise questions of overlap, duplication, and even gaps in agency science and adaptation portfolios. Others may be concerned that what appears like more attention to climate change science may be simply repackaging of existing efforts. Thus, it is difficult to tell without in-depth analysis what is duplication due to similar names or confusing agency or program histories. Additionally, the relationship among some DOI programs is unclear, as their missions seem similar. Even so, the differing cultures and missions of DOI agencies may lead to differing views on science and data needs. Constraints on reducing any duplication or gaps could be statutory, budgetary, or cultural. Another issue for DOI could be the effectiveness of adaptation measures, considering the uncertainties surrounding climate change and its effects on resources. Reliable metrics for adaptation effectiveness and progress are difficult to develop or obtain. For example, the Fish and Wildlife Service (FWS) notes in its 2015 budget justification that its LCC program has supplied 46 "decision-support tools ... to conservation managers to inform management plans/decisions and [Endangered Species Act] Recovery Plans" in FY2013, and noted 15 "conservation delivery strategies and actions evaluated for effectiveness." The meaning of these descriptions and their metrics is somewhat unclear; further reporting might clarify the results of efforts at adaptation. Thus, an oversight issue may be how best to assess or measure the effectiveness of adaptation programs and activities, given the varying climatic conditions nationwide, and changing conditions at the regional level. Other issues relate to agency budgets and appropriations for climate change adaptation activities. For example, issues may include congressional interest in the related appropriations levels for individual DOI agency activities and programs, efforts to expand or restrict ongoing monitoring programs, or initiatives to alter DOI agency participation in the multitude of cooperative programs related to climate in which DOI agencies participate. For More Information on DOI Department-Wide Efforts [author name scrubbed], Specialist in Natural Resources Policy, [email address scrubbed] , [phone number scrubbed]. [author name scrubbed], Specialist in Natural Resources Policy, [email address scrubbed] , [phone number scrubbed]. Related CRS Reports CRS Report R42346, Federal Land Ownership: Overview and Data , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report R43429, Federal Lands and Natural Resources: Overview and Selected Issues for the 113 th Congress , coordinated by [author name scrubbed]. Bureau of Land Management249 DOI's Bureau of Land Management (BLM) administers more onshore federal lands than any other agency—247.3 million acres. BLM lands are heavily concentrated (99.8%) in 12 western states. Nearly half of the total acreage is in two states—Alaska (29%) and Nevada (19%). BLM lands, officially designated the National System of Public Lands, include grasslands, forests, high mountains, Arctic tundra, and deserts. BLM lands often are intermingled with other federal or private lands, and the agency has authority to acquire, dispose of, and exchange lands under various authorities. BLM generally manages its lands to provide for sustained yields of multiple uses including recreation, grazing, energy and mineral development, timber, watershed, wildlife and fish habitat, and conservation. Some lands are withdrawn (restricted) from one or more uses, or managed for a predominant use. The agency inventories its lands and resources, and develops land use plans for its land units. The public uses BLM lands for their diverse attributes and opportunities. Climate change has been cited by DOI as a contributing factor to changes in western lands and resources. One example is the desertification of public lands, which may result in part from increased temperature and reduced precipitation. This could contribute to a decrease in the productivity of rangelands. Changing climate also may increase the vulnerability of BLM forested lands to damage from insects and disease. As temperatures rise, in some locations there also may be an increase in the size and frequency of wildfires and an expansion of noxious weeds and invasive species. Another potential change is the increased melting of glaciers and permafrost in Alaska, perhaps contributing to erosion and a loss of soil stability. Adaptation-Related Activities BLM is focused on two efforts in part to adapt to climate change: a landscape approach to managing lands and rapid ecoregional assessments (REAs). The goal is to help BLM managers understand land conditions and trends, as well as influences and opportunities for land use, from a broader perspective that may not be apparent when focusing on smaller areas. The landscape approach looks at large, connected geographic areas defined by their similar ecological characteristics, such as the Sonoran Desert or Colorado Plateau. In conducting REAs, BLM uses landscape classification known as "ecoregions." The ecoregions span land ownerships, including both federal and nonfederal land, and they range in size from about 11 million to 160 million acres. The assessments are called "rapid" because they use existing information and generally are to be completed within 18 months. They are prepared in cooperation with other federal and state land management agencies. They seek to synthesize scientific information about natural resource conditions and trends, highlight and map areas of high ecological value, and gauge the potential risks from climate change and other environmental challenges. They also intend to identify areas of high energy development potential and relatively low ecological value. BLM anticipates completing 15 REAs. Several have been completed, with others expected in 2015 and beyond. Figure 11 shows the 15 REA areas, which will cover more than 800 million acres of public and nonpublic lands. The information from the REAs will be used to plan for, and respond to, the effects of climate and other environmental changes to public lands, and will generally help BLM to identify and coordinate resource conservation, rehabilitation, and development priorities over the long term. BLM is working with DOI Climate Science Centers and Landscape Conservation Cooperatives, as well as other partners, to develop management strategies for the ecoregions covered by several REAs. REAs also may be helpful to the various landowners in the region, according to BLM. REAs can be updated as new information becomes available. BLM is completing agency-specific guidance to implement departmental direction on climate change. The agency anticipates completing its guidance in 2015. For More BLM Information [author name scrubbed], Specialist in Natural Resources Policy, [email address scrubbed] or [phone number scrubbed]. Bureau of Reclamation DOI's Bureau of Reclamation (Reclamation) manages water resource projects primarily in 17 western states. Reclamation's mission is to "manage, develop, and protect water and related resources in an environmentally and economically sound manner in the interest of the American public." Reclamation built and manages most of the large federal dams in the West, in addition to hundreds of other dams and diversion projects; it now operates more than 300 storage reservoirs and 58 hydropower plants serving approximately 30 million people. As the nation's largest wholesale distributor of water and the second-largest hydropower producer in the West, Reclamation's considerable infrastructure and mission could be at risk under projected climate change. Key impacts of concerns include changes to soil and air temperature, precipitation, seasonal runoff, long-term stream flow, and extreme events. Since most of the surface water "stored" in the West is stored in snowpack, changes that reduce snowpack or accelerate or change the timing of runoff may result in less effective reservoir storage and major changes in reservoir and river operations. Extreme events—long periods of lower-than-normal precipitation and/or hot weather and mega-storms—pose additional risks. Because much of the West, particularly the Southwest, is naturally semiarid and arid, and has experienced periods of decades-long drought in the past millennia, some observers have noted that if climate change predictions prevail, the Southwest may face a "double-whammy" impact on water supplies due to recurrent mega-drought and climate change. Irrigated agriculture, hydropower production, municipal water deliveries, and aquatic species that rely on the Lower Colorado River and the Rio Grande may especially be at risk. Planning for such potential conditions is difficult, particularly for the Colorado River Basin, which has multiple storage reservoirs across a wide geographic area—some parts of which may see less precipitation, and others the same or more, according to different climate models. Reclamation facility operations are closely intertwined with myriad stakeholders including other federal agencies, states, Indian tribes, local water and irrigation districts, and other nongovernmental organizations. Although Reclamation built, owns, and continues to operate much of its infrastructure, local sponsors play a large role in system operations and maintenance, and are obligated to reimburse the federal government for a portion of construction costs. Thus, many stakeholders are likely to play a role in ensuring Reclamation's facilities continue to provide water, power, and ecosystem services into the future under varying climatic conditions. Adaptation-Related Activities Reclamation is carrying out climate change adaptation-related activities pursuant to DOI's adaptation plan as described in S.O. 3289, and a related DOI secretarial order on the department's WaterSMART program, which is designed to implement the 2009 SECURE Water Act ( P.L. 111-11 , Subtitle F, §§9501-9510). The SECURE Water Act directed Reclamation to undertake numerous climate-related research and adaptation activities. The resultant WaterSMART program focuses on the long-term sustainability of water resources (including the embedded energy use in water supplies). The WaterSMART program includes both adaptation activities and research and development. Key research and adaptation activities include a Basin Studies program, in which Reclamation collaborates with partners to assess water supply and demand imbalances within individual basins, and to develop strategies to adapt to these imbalances. Reclamation also provides funding for WaterSMART grants to develop climate analysis tools and improve water and energy efficiency and systems operations and water treatment options.  The WaterSMART program also now includes among its suite of activities Reclamation's 20-year-old water reuse program, known as Title XVI of P.L. 102-575 . Reclamation's climate change adaptation activities include assessing broad-scale climate change risks on land and water resources through "West-Wide Climate Impact Assessments," identifying climate change water-related research needs of water resource managers, compiling climate data for water managers, and developing adaptation tools for water resource managers. Reclamation has produced numerous reports in these areas, largely since 2009, and works closely to coordinate its adaptation research and actions with other DOI agencies such as USGS and FWS, and other federal agencies such as the U.S. Army Corps of Engineers, NOAA, and DOE. Reclamation also participates in larger DOI-wide and government-wide efforts, including the Landscape Conservation Cooperatives, Climate Science Centers, and various task forces and work groups. For More Reclamation Information [author name scrubbed], Specialist in Natural Resources Policy, [email address scrubbed] , [phone number scrubbed]. [author name scrubbed], Specialist in Natural Resources Policy, [email address scrubbed] , [phone number scrubbed]. National Park Service The 405 units of the National Park System (NPS) face a diverse array of potential impacts from climate change. Warming temperatures, precipitation changes, streamflow changes, sea-level rise, wildfire, invasive species, and wildlife migration, among other changes, all have the potential to significantly alter park resources (depending on their location and vulnerability) and to affect tourism and recreation in the parks. Some natural resource changes have attracted particular public attention, such as ongoing glacial melting in Glacier National Park (MT), rising temperatures that may eventually drive the Joshua trees from Joshua Tree National Park (CA), and sea-level rise that could damage or submerge parts of Everglades and Biscayne National Parks (FL). Attention has also focused on potential impacts of climate-related events to the iconic cultural resources administered by the NPS, such as the Statue of Liberty in New York. NPS is addressing climate change through research, education, and adaptive management, as well as through efforts to reduce its own carbon footprint. Some have suggested that managing the parks for adaptation requires a fundamental rethinking of the NPS mission, from one that has historically focused on preserving lands in an unimpaired state to one that would "steward NPS resources for continuous change that is not yet fully understood." For example, one study discusses Point Reyes National Seashore in California, where preservation of the shoreline and intertidal wetlands are important goals. The study suggests that, in the future, it may be most effective for park managers to facilitate these goals by guiding the inland migration of these features, rather than attempting to resist sea-level rise, as would be called for under traditional management strategies. Adaptation-Related Activities275 NPS released its Climate Change Response Strategy in September 2010, focusing on four types of actions: science, adaptation, mitigation, and communication. It followed this with a Climate Change Action Plan in November 2012, emphasizing the same four response areas and detailing over 50 immediate actions to incorporate climate change considerations into NPS operations. The actions, some of which have been implemented, include training park personnel on climate change issues, assessing park management plans and project plans for climate considerations, partnering with universities to research park-specific climate trends, developing a "risk screening tool" to assess the vulnerability of park facilities to erosion and sea-level rise, creating interpretive exhibits for park visitors on climate effects, and initiating youth outreach programs, among others. The agency sees itself as having a unique role as an "extraordinary educational institution where millions of people learn about the environment." Thus, raising public awareness of climate change and potential responses is a key aspect of NPS's strategy. DOI's Climate Change Adaptation Plan , released in October 2014, identified similar goals for NPS, focusing especially on adaptation planning and communication. It identified NPS's climate adaptation priorities as (1) developing guidance for incorporating climate change science into park and strategic plans, and implementing them at the field level; (2) building workforce capacity to apply climate-smart conservation practices; (3) improving infrastructure resilience and sustainability; (4) communicating climate science, potential impacts, and strategies to 300 million park visitors annually; and (5) implementing a comprehensive risk evaluation approach and prioritizing adaptation actions to protect facilities and cultural and historic resources. Some of NPS's ongoing programs and activities specifically support the agency's climate change strategy . For example, NPS maintains a Climate Change Response Program, and participates in DOI's climate change efforts, including Landscape Conservation Cooperatives and Climate Science Centers. Other agency activities, although not explicitly targeted toward climate change, also play a role in NPS's adaptation efforts—for example, the geographic information systems (GIS) program, exotic plant management teams, the wildlife health team, the acoustic monitoring program, and others. Despite these initiatives at the agency management level, it is not clear to what extent the planning efforts have translated into adaptation actions at individual park units. A 2012 study of climate change adaptation on public lands in Colorado, Utah, and Wyoming found that 78% of surveyed NPS unit managers and staff reported either that no adaptation planning was taking place at their unit, or that they did not know whether such planning was occurring. Staff cited budget constraints, lack of information at a relevant scale, and uncertainty of available information as barriers to adaptation planning. Recent research has aimed to address some of these issues by translating large-scale climate change effects to the individual park level. For More NPS Information Laura Comay, Analyst in Natural Resources Policy, [email address scrubbed] or [phone number scrubbed]. Fish and Wildlife Service The official mission of DOI's Fish and Wildlife Service (FWS) is "working with others to conserve, protect, and enhance fish, wildlife, and plants and their habitats for the continuing benefit of the American people." With this mission, climate change and its effects on wildlife and refuge resources pervades most agency activities and can be difficult to separate from its general programs. As species from oak trees to alligators find habitat in their current range too hot, too dry, too wet, too variable, or otherwise unsuited to their needs, FWS is a leader in determining the nature of the threat and, second, in working with partners at federal, state, tribal, and local levels to develop strategies to address climate impacts on wildlife at local and regional scales and relevant adaptation strategies. FWS administers a wide range of statutes and programs, many of which need to address climate adaptation in some way. These include endangered species, coastal programs, migratory bird management, refuge management, various international programs and grants, fish and hatchery management, construction, land acquisition, grants to states and tribes, and others. FWS Activities Related to Climate Adaptation According to FWS, its climate adaptation goals include (1) participating in the development of a National Fish, Wildlife, and Plants Climate Adaptation Strategy, (2) partnering to create a National Biological Inventory and Monitoring Partnership for sharing monitoring data across a wide variety of sources, and (3) sharing information with many partners through a network of Landscape Conservation Cooperatives (LCCs) to ameliorate the effects of climate change. (See Figure 12 .) The Endangered Species Act of 1973 (ESA; 16 U.S.C. §1531 et seq.) plays a role in FWS activities in climate change adaptation, and—equally important—adaptation plays a role in endangered species conservation. The additional pressure on habitat from climate change, along with other stressors, is likely to lead to more species being listed under the ESA. For listed species, adaptation efforts may include safeguarding corridors linking populations of listed species. FWS also attempts to reduce genetic isolation and inbreeding that may result from loss of habitat due to climate change. As a result of these and similar measures, the strong protections available under the ESA could lead to more environmental protection and thereby indirectly alleviate the effects of climate change on multiple species, including those that are not listed and those that are game species. The ESA's role in federal climate change adaptation may therefore be indirect as well as direct. However, FWS has explicitly avoided any efforts to use the ESA as a means whereby plaintiffs could seek to prevent or control general threats to the global climate system. Because of climate change, managers of the National Wildlife Refuge System (NWRS) and other FWS lands and waters face many decisions daily on a range of practical issues. These include which plants to select in a re-vegetation project, what lands deserve priority for acquisition in the face of rising sea levels, and how to manage a coastal refuge whose land base is slowly disappearing. More frequent fires, heavy precipitation, and storm surges also affect refuge operations. Examples may include repair or replacement of roofs, docks, boats, roads, walkways, and other facilities. Were the frequency of extreme weather events to increase, many coastal refuges would play an increasing role in protecting areas farther inland, while simultaneously being eroded by rising ocean levels. The NWRS is a key player in providing the linkage of natural areas (whether owned by FWS or other federal, state, or local agencies or private parties) to allow species to move more freely to suitable habitats. FWS has also compiled a variety of tools and information resources on climate change for its resource managers. For More FWS Information [author name scrubbed], Specialist in Natural Resources Policy, [email address scrubbed] , [phone number scrubbed]. U.S. Geological Survey The mission of DOI's United States Geological Survey (USGS) is to provide reliable scientific information to describe and understand the geological processes of the Earth; minimize loss of life and property from natural disasters; manage water, biological, energy, and mineral resources; and enhance and protect the nation's quality of life. USGS has eight interdisciplinary program areas that include (1) water resources, (2) climate and land use change, (3) energy and minerals and environmental health, (4) natural hazards, (5) core science systems, (6) ecosystems, (7) administrative and enterprise information, and (8) facilities. Much of the work relevant to climate change adaptation is done through the climate and land use change program area; portions of several other program areas also relate to climate change adaptation. USGS is primarily a science agency. Unlike other DOI agencies, USGS does not manage large tracts of lands, or construct infrastructure or modify waterways or habitat. Further, the agency does not have regulatory authority under any laws. Consequently, USGS addresses climate change adaptation through conducting scientific studies; collecting and analyzing data related to climatic variables; modeling and predicting the effects of climate variability on natural resources, natural processes (e.g., natural hazards), wildlife, and ecosystems; and monitoring resources such as water flows, habitat changes, and wildlife. For example, USGS provides data on natural resources and scientific analysis to support adaptive management strategies implemented by DOI land management agencies (as well as for other federal agencies, state and local governments, and others) that address climate change adaptation. DOI agencies rely on USGS for scientific data and interpretations to inform their land management decisions. Memorandums of understanding (MOUs) and scientific agreements between USGS and other federal and state agencies allow USGS to provide research results on climate change processes and impacts, as well as data for making decisions on specific geographic areas. Climate Change Adaptation-Related Activities USGS is still evaluating the vulnerability and adaptation to the potential effects of climate change on its facilities. USGS evaluates facility projects through a capital planning and investment review process. An Investment Review Board analyzes agreements and the costs and benefits of actions related to facilities. Beyond that effort, USGS is conducting several scientific and monitoring activities that directly and indirectly relate to climate change adaptation. This section provides an overview of some of these activities. National Climate Change and Wildlife Science Center and DOI Climate Science Centers . As noted above, one of the primary functions of the Climate and Land Use Change Program under USGS is the implementation and maintenance of the National Climate Change and Wildlife Science Center (NCCWSC) and its regional entities—referred to as the DOI Climate Science Centers (CSCs). These centers support research, assessment, and synthesis of global change data for use at regional levels. The CSCs aim to evaluate global climate change models to scales that are appropriate for research managers of species and habitats, and facilitate data integration and outreach to collaborators and stakeholders including federal agencies. Climate Change Research and Development . One of the objectives of USGS's climate change research and development is to understand regional responses to climate change and estimate how climate change might affect future scenarios or processes. Two areas of research under this program include understanding the effects of sea-level rise on coastal communities and infrastructure, and studying the long-term effects of drought. Under both lines of research, USGS plans to provide insight into how various stakeholders in the country can adapt to these changes. Biological Carbon Sequestration . USGS is in the process of conducting a quantitative assessment of the carbon released and stored in the ecosystems of the United States. This work is intended to help quantify interactions between carbon storage, land use, and climate change, which can inform land management policies and practices. Data Collection and Monitoring. USGS collects data and monitors natural processes that are relevant to climate change adaptation. For example, The National Streamflow Information Program, along with the Cooperative Water Program, monitors streamgages throughout the country that collect data on stream flow. These data can be analyzed to determine changes in water flows and water quality over time, and can be used in projecting future flows under various climate scenarios. Anticipating how climate change may influence the timing and levels of flows in the future could inform federal land managers, federal infrastructure investments and preparedness, and nonfederal decision making. Collaborative Efforts to Address Adaptation. USGS collaborates with several other agencies to address climate change adaptation. The agency generally provides scientific analysis and data resources for these efforts. For example, USGS participated with the Army Corps of Engineers, Bureau of Reclamation, and NOAA to create a strategy for addressing water management needs in a changing climate. The strategy concluded that several water management or system operational changes may be considered to facilitate adaptive management to address a changing climate. Issues for Congress A potential issue for USGS is how to include climate variability in its scientific studies. For example, efforts to model long-term changes in ecosystems could require an understanding of how climate variability might affect ecosystem processes. Another issue associated with USGS work relevant to climate change adaptation is the potential for duplicating other federal (or nonfederal) activities. To temper this possibility, USGS is attempting to coordinate its climate change adaptation activities with other federal agencies, especially within DOI, as described earlier. Specifically related to the Climate Change Program within USGS, some question whether the CSCs and the NCCWSC are fulfilling their mission of providing natural resource managers with the tools and information they need to develop and execute strategies for successfully adapting to and mitigating the impacts of climate change. Addressing this concern might be difficult, considering the short length of time data have been collected. For More USGS Information [author name scrubbed], Specialist in Natural Resources Policy, [email address scrubbed] , [phone number scrubbed]. Department of State296 The Department of State (DOS) considers climate change to be a threat multiplier that potentially puts at risk not only the department's facilities and personnel but also its mission to "create a more secure, democratic, and prosperous world for the benefit of the American people and the international community." State's 2010 Quadrennial Diplomacy and Development Review (QDDR) highlights climate change as one of six development areas targeted for action. While it accepts that "specific impacts of climate change on conflict, migration, terrorism and complex disasters are still uncertain," the department recognizes that a number of its more than 275 posts worldwide are located in areas vulnerable to potential climate change impacts that could adversely affect its ability to carry out its mission. For example, DOS forecasts that rising temperatures in most regions will impact its energy use and building infrastructures as demand for cooling grows; extreme weather events, such as heavy precipitation events, could damage local infrastructure on which U.S. diplomatic facilities rely; storm surges and rising sea levels could directly impact U.S. facilities in coastal areas; deteriorating air quality could result in increased risks to the health of DOS personnel; and destabilization, in part caused by the effects of climate change, of a country in which the department operates could adversely impact DOS operations. The department's strategy to address these challenges is outlined in its FY2014 Climate Change Adaptation Plan , published in June 2014, as required by E.O. 13514. To address the risks of climate change to both its operations and its mission, the department's Adaptation Plan outlines three broad goals: (1) using reporting, planning, and training to integrate adaptation policies in both domestic and international operations; (2) promoting integration of adaptation policies into "at risk" sectors such as agriculture and disaster risk management, while also implementing policies for adaptation internationally; and (3) encouraging multilateral entities to pursue adaptation strategies. Addressing Operational Challenges The department plans to minimize climate change impacts on its operations overseas through building and maintaining awareness of potential impacts, building relevant expertise among its employees, and in particular educating and advising its facilities managers and engineers on how to identify natural hazard risks in their planning and design of DOS facilities, both domestically and overseas. For example, the Bureau of Administration, which manages all domestic facilities, seeks to minimize the impact of department facilities on the environment, and identify threats to those facilities from extreme weather events. Further, it seeks to better understand and address vulnerabilities to the department's procurement supply chain. The Bureau of Overseas Building Operations (OBO) has also increasingly emphasized sustainable design criteria for new facilities overseas. The annual Greening Activities Inventory, a sustainability survey of posts conducted since 2010, provides an assessment of climate change risks and potential impacts on operations that OBO uses to provide guidance to posts regarding steps to improve resilience to climate change impacts. The department also states that it will, where appropriate, integrate climate change considerations into its Natural Hazards Program. This initiative, launched in 2005, seeks to identify measures that could save lives and reduce damage to diplomatic facilities from naturally occurring events such as tsunamis, floods, hurricanes, or volcanoes, and trains department facilities managers and engineers on climate change considerations. Under the program, posts are encouraged to report potential threats, which may be matched with budgeted mitigation funds. The department reports that while it considers opportunities for climate impact mitigation at its facilities, specific posts are already taking adaptation measures independently, sometimes through "green teams" operating at more than 150 locations. In one example, Embassy Canberra has installed solar panels on government-owned residences in order to reduce energy consumption and provide backup energy supply. Among its longer-term goals, the department reports that it plans to expand training for its foreign service officers on sustainability issues, initially focusing on entry-level personnel but in future years expanding to include mid- and senior-level officers. DOS plans to deepen partnerships with other federal agencies on these issues—for example, through collaboration with EPA to monitor air quality in diplomatic facilities overseas, and by joining DOD-led efforts to develop vulnerability assessment tools based on regional scenarios. By FY2016-2017, the department seeks to develop climate adaptation criteria for evaluating global operational decisions ranging from energy procurement to processes for evaluating relocation priorities of existing facilities. Diplomatic and Programmatic Activities303 As the primary function of the department is diplomatic, the FY2014 Climate Change Adaptation Plan details policies and activities in support of adaptation actions within foreign countries. To this end, DOS and the U.S. Agency for International Development (USAID) issued a Joint Strategic Plan in spring 2014 that set forth a number of priorities for both organizations in the coming years. These include the following: promoting the transition to a low-emission, climate-resilient world while expanding global access to sustainable energy; enhancing U.S. leadership on global climate change; advancing scientific understanding on climate change impacts and adaptation actions; and coordinating with other federal agencies, such as USAID, NOAA, EPA, DOI, USDA, and the Treasury, and partnering with other countries, to advance climate change policy through various multilateral fora such as the United Nations Framework Convention on Climate Change, the Intergovernmental Panel on Climate Change, and the Global Environment Facility, as well as other international financial institutions and organizations that support adaptation activities in developing countries. Under the Obama Administration, international development assistance for adaptation actions has been articulated primarily as the Global Climate Change Initiative (GCCI), a platform within the President's 2010 Policy Directive on Global Development. The GCCI aims to integrate climate change considerations into U.S. foreign assistance through a full range of bilateral, multilateral, and private-sector mechanisms to foster low-carbon growth, reduce emissions from deforestation and land degradation, and promote sustainable and climate-resilient societies in each partner country. The GCCI is implemented through programs at three "core" agencies—the Departments of State, Treasury, and USAID—and related funding is requested by the Administration through its International Affairs activities (Budget Function 150). Adaptation-related programs in the GCCI aim to assist low-income countries with reducing their vulnerability to climate change impacts and building climate resilience. Most adaptation-related activities at USAID are implemented through the agency's bilateral development assistance programs. State and Treasury funding is generally channeled through international organizations (e.g., the United Nations) or multilateral financial institutions (e.g., the World Bank). Multilateral activities aim to leverage international donor and private-sector contributions in order to coordinate and finance large-scale infrastructure projects. Initiatives supported by DOS include the Least Developed Country Fund and the Special Climate Change Fund, which focus on climate resilience and food security provisions in countries with the greatest needs. The department also supports adaptation activities through its contributions to the United Nations Framework Convention on Climate Change (including the work of the Adaptation Task Force) and to the Energy and Climate Partnership of the Americas. Multilateral initiatives supported by the Department of the Treasury include the World Bank's Strategic Climate Fund: Pilot Program for Climate Resilience, which is tasked with coordinating comprehensive strategies in several of the most vulnerable countries to support actions that respond to the potential risks of a changing climate. Issues for Congress Congress plays an important role in authorizing, funding, and overseeing the department's operations. As it considers the challenges of climate change on U.S. diplomatic facilities and personnel, and on the department's ability to carry out its mission (including assistance of U.S. citizens abroad), Congress may consider issues such as the relative priority of climate change adaptation efforts in the department's overseas facility construction and maintenance programs, and mechanisms for the monitoring and evaluation of those programs. Another potential concern may be the effectiveness of interagency coordination between DOS and the dozens of agencies represented abroad—in particular DOD—which is required to understand and respond to climate change, including questions of cost sharing at posts overseas. U.S. reliance on host nations to address climate-related risks to and consequences for U.S. facilities overseas could also be of interest. Further, Congress is responsible for several aspects of foreign development assistance including authorizing periodic appropriations for federal agency programs and multilateral fund contributions, enacting those appropriations, providing guidance to the implementing agencies, and overseeing U.S. interests in the programs and multilateral funds. As Congress considers potential authorizations and/or appropriations for activities administered through the GCCI, it may have questions concerning the cost, purpose, direction, efficiency, and effectiveness of these programs, as well as the GCCI's relationship to U.S. industries, investments, humanitarian efforts, national security, and international leadership. For More Department of State and Foreign Operations Information [author name scrubbed], Analyst in Foreign Affairs, [email address scrubbed] , [phone number scrubbed]. [author name scrubbed], Analyst in Environmental Policy, [email address scrubbed] , [phone number scrubbed]. Related CRS Report CRS Report R41845, The Global Climate Change Initiative (GCCI): Budget Authority and Request, FY2010-FY2016 , by [author name scrubbed].

Though Congress has debated the significance of global climate change and what federal policies, if any, should address them, the Government Accountability Office (GAO) since 2013 has identified the changing climate as one of the 30 most significant risks facing the federal government. President Obama established adaptation as a prominent part of his Climate Action Plan in June 2013. The November 2013 Executive Order 13653, Preparing the United States for the Impacts of Climate Change, directed agencies to undertake vulnerability assessments and planning for adaptation. The Administration aimed efforts at reducing agencies' own risks, taking advantage of "no-regrets" adaptation opportunities, and actions that promote resilience to climate changes. Scope of Report This report reviews current actions (as of January 2015) of selected federal departments and agencies to adapt their own missions, infrastructure, operations, and personnel to projected climate change. (It does not address federal programs meant primarily to assist others to adapt, although the boundary is often hard to delineate.) This synthesis is not comprehensive. It identifies common approaches among agencies, examples of specific actions, and notable barriers the federal government faces. As of December 2014, almost 40 federal departments and agencies had, to varying degrees, produced climate change adaptation plans, climate change vulnerability assessments, adaptation milestones, and/or metrics to evaluate adaptation performance. These efforts have identified wide-ranging vulnerabilities to potential climate changes, as well as some opportunities. Most agencies are in formative stages of their assessments and strategic planning. Some agencies are embarking on more detailed analyses and limited implementation actions. Overall, few examples are apparent of day-to-day agency decisions or actions that are different as a result of their adaptation efforts. Numerous challenges face federal officials in their efforts, including constrained resources, data gaps regarding location-specific climate changes or existing facilities, insufficient personnel training, and—sometimes—low priority among priorities. CRS identified few on-the-ground adaptations and few evaluations, as yet, of the effectiveness and efficiency of alternative adaptation approaches and actions. It may not be possible to tally budgetary resources associated with federal adaptation efforts. While some are reported in the President's budget proposals, many are indivisible from the activities with which they are associated, reflecting more of a change in how efforts are undertaken than a change in level of effort. Role of Congress In light of agencies' risk assessments and adaptation planning, Congress may consider whether agencies have appropriate statutory authorities to take various climate change adaptation actions; how to make data pertinent to adaptation more accessible and usable by federal agencies and the public; the appropriate priority for federal adaptation efforts in the context of agency missions and budgetary constraints; and timeliness of activities. Congress may provide federal agencies direction on how they should organize and fund their adaptation efforts; whether and how to measure and evaluate program performance (e.g., effectiveness at reducing risks to property, lives, and habitats relative to the federal and private investment of an adaptation measure); and desirable reporting and accountability to Congress and the public. Congress also may assess the role, costs, benefits, and timing of adaptation in the context of discussions regarding climate change mitigation and other broad policy fields such as natural disaster, infrastructure, energy, environmental, agricultural, federal lands, defense, health, tax, and budget policies. The President's FY2016 budget request and other related administrative announcements roughly concurrent with its release on February 2, 2015, are not addressed in this report. While the President's FY2016 budget request and other recent announcements (e.g., executive order on flooding and proposed FEMA rules) may mention adaptation (or "resilience") to climate change, most pertain to programs outside the narrow scope of this report: assessments and actions that agencies may be undertaking to address potential risks to their missions, property, operations, and personnel. For further detail or updates on climate change adaptation plans by individual agencies, the report provides contact information for CRS analysts at the end of each agency section in Part II.

Issue Overview Since Israel unilaterally dismantled its settlements and withdrew its troops from the Gaza Strip in August 2005, it has repeatedly expressed concern over the security of the Egypt-Gaza border. Israel claims that ongoing smuggling of sophisticated weaponry into the Gaza Strip could presumably shift the balance of power in Hamas's favor. Israel also asserts that Egypt is not adequately sealing its side of the border, citing the recent breakthrough of hundreds of thousands of Palestinians who rushed into Egypt on January 23, 2008. After Hamas's takeover of the Gaza Strip in June 2007, Israeli officials adamantly asserted that Egypt's security presence along the "Philadelphi Route," an 8.2-mile strip of land in Egypt immediately adjacent to the Gaza Strip, was inadequate and was allowing smugglers to bring advanced weaponry into the Gaza Strip and thereby threaten Israeli national security. Israel has claimed that smuggling tunnels, which have been used for over two decades to bring arms, commercial goods, and people from Egypt into Gaza, are now being used to ship anti-tank weapons, Katyusha rockets, and shoulder-held anti-aircraft missiles, weapons that Lebanese Hezbollah used in what it considers its successful military campaign against Israel in the summer of 2006. Egypt claims that Israel has not only exaggerated the threat posed by weapons smuggling, but is deliberately acting to "sabotage" U.S.-Egyptian relations by demanding that the United States condition its annual $1.3 billion in military assistance on Egypt's efforts to thwart smuggling. Section 690 of P.L. 110-161 , the Consolidated Appropriations Act, 2008, withholds the obligation of $100 million in Foreign Military Financing until the Secretary of State certifies, among other things, that Egypt has taken concrete steps to "detect and destroy the smuggling network and tunnels that lead from Egypt to Gaza." This withholding of FMF represents the first time that Congress has successfully placed conditions on U.S. military assistance to Egypt. The United States, which occasionally is thrust into the middle of disputes between Israel and Egypt, has attempted to broker a solution to the smuggling problem which is amenable to all parties. In the fall of 2007, a Department of Defense delegation toured the Gaza-Egypt border, and the U.S. Army Corps of Engineers drafted a geological assessment of the underground smuggling tunnels. As a result, the U.S. government has offered to allocate $23 million of Egypt's annual Foreign Military Financing (FMF) toward the procurement of more advanced detection equipment, such as censors and remote-controlled robotic devices. It is uncertain when this new equipment will be purchased and delivered. The Smuggling Tunnels: 1982-Present The divided border city of Rafah has been the epicenter of smuggling for decades. Rafah was divided under the terms of the 1979 Israel-Egypt Peace Treaty, which placed the more densely populated Rafah City in the then Israeli-occupied Gaza Strip and a much smaller town in Egyptian controlled territory. In 1982, as Israel was in the midst of its phased withdrawal from the Sinai under the terms of the peace treaty with Egypt, former Israeli Prime Minister and then Defense Minister Ariel Sharon reportedly requested that Egypt make alterations to its international border with Israel to keep Rafah whole and under Israel's control. Sharon asserted that, if divided, Rafah could become a focal point for terrorist infiltration and arms smuggling. Egypt refused. Palestinian families divided by the partition of Rafah in 1982 appear to have been the first to construct underground tunnels linking Gaza and Egypt to foster communication amongst extended family members. Over time, Rafah residents developed an economic rationale for tunneling, as smugglers could resell subsidized Egyptian gasoline at a high profit in Gaza. Other smuggled items included U.S. dollars for money changers, wedding dowries, mail, cartons of cigarettes, drugs (marijuana and heroin), gold, and spare car parts. Israel became aware of the security dimension of smuggling tunnels during the first Palestinian intifadah (uprising), which began in 1987. After a series of attacks by Palestinians along the Gaza-Egypt border in the late 1980s and early 1990s, Israeli officials began to consider that Palestinian militants were using the tunnels to both smuggle weapons and their own fighters out of Gaza to allude capture. With the creation of the Palestinian Authority (PA) in 1994 under the terms of the Oslo peace process, Israeli concerns that PA police, who were responsible for uncovering arms smuggling, were either, at best, ineffective or, at worst, complicit with the tunneling activities of their co-nationalists, became more strident. During the second, more violent, Palestinian intifadah beginning in September 2000, the demand for weapons skyrocketed and tunneling activity increased. Israeli, Egyptian, and PA forces confiscated dozens of rocket-propelled grenade launchers, explosives, thousands of Kalashnikov rifles, and tons of ammunition. Israel also constructed a 25-foot concrete or iron wall along the border that extended 10 feet underground. It used sonar to detect tunnels, occasionally setting off charges in the ground to collapse the tunnels. Nevertheless, the economic and strategic incentives for smuggling grew substantially. According to one report: "The profits are huge. A Kalashnikov sells for $200 on the Egyptian side, but fetches $2,000 on the Gaza black market. A good night's delivery is 1,200 Kalashnikovs—a profit of more than $2 million. Bullets—50 cents in Egypt, $8 wholesale in Gaza—are even more profitable. A standard one-night delivery returns a profit of $750,000." The Mechanics of the Tunnels The mechanics of smuggling arms into Gaza have been documented widely. At any one time, there are between 10 and 30 main tunnel shafts underneath the border. Wealthy families in Rafah, called "snakeheads," finance tunnel openings to these main shafts in either their private homes or rented properties. The "snakeheads" then rent their tunnel openings to independent gunrunners or members of Hamas, Palestinian Islamic Jihad, and Fatah-affiliated militias, who are then responsible for moving guns and goods from Egypt into Gaza. When a tunnel is completed, the primary investor and his/her relatives are entitled to a percentage on every shipment passing through it. Packages of arms and ammunition are pulled by cables and electric motors through the tunnels, which in some places reportedly reach depths of between 50 and 60 feet in order to avoid detection. Although there is no definitive proof as to the origins of the small arms, Egypt and Israel believe that many of the weapons are from Yemen, Sudan (Darfur), Egypt (Sinai), and Israel proper. Israeli Countermeasures Prior to Israel's unilateral withdrawal from Gaza, the Israel Defense Forces (IDF) carried out several operations to stem the flow of weapons. However, due to Rafah's urban terrain, Israeli military operations there drew widespread international and Israeli left-wing condemnation because of the destruction of homes and loss of civilian life. During Operation Rainbow in 2004, in which Israel used Caterpillar D9 armored bulldozers to destroy homes suspected of concealing tunnels, dozens of Palestinian protestors were killed and several hundred homes were demolished. One aim of Operation Rainbow, which was launched after 11 Israeli soldiers were killed in several attacks, was to create a buffer zone adjacent to the Philadelphi Route to protect Israeli soldiers and prevent Palestinians from digging underground tunnels. In 2004, the Israeli army reportedly planned on digging a ditch or moat 49 to 82 feet deep to prevent digging. The moat plan was abandoned due to humanitarian reasons. A water-filled moat could have further contaminated the Gaza water table with seawater. When Israel unilaterally dismantled its settlements and withdrew its troops from the Gaza Strip in August 2005, it negotiated a new security arrangement with Egypt to bolster efforts to secure the Egyptian side of Rafah. After extensive Israeli-Egyptian talks, Egypt deployed 750 border guards to secure the Philadelphi Route. The memorandum of understanding between Israel and Egypt delineated the type of equipment the Egyptians may use (small arms and jeeps, no heavy armor) and the length of the patrol area (14km on the ground and 3 km into the sea). Israeli-Egyptian Tensions Over Smuggling Hamas's subsequent takeover of the Gaza Strip, first through its victory in the 2006 PA legislative election and then through internecine fighting with Fatah, appears to have caused significant tension in Israeli-Egyptian relations. With IDF forces no longer posted on the Gaza side of the border and with the demand for weapons skyrocketing due to both intra-Palestinian fighting and a resumption in Israeli-Palestinian violence, smuggling activity underneath the Gaza-Egypt border is said to have reached an all-time high. The allure of smuggling has been further abetted by rising poverty rates among Gazans due to both the international aid boycott of the Palestinian Authority that followed the formation of a Hamas-led government in 2006 and Israel's 2007 closure of the Gaza Strip following the Hamas takeover. Israel's Accusations Some Israeli lawmakers and intelligence officials blame Egypt for the increased tunnel traffic. In September 2006, the director of the Shin Bet (Israel's counter-intelligence and internal security service), Yuval Diskin, reportedly stated that "the Egyptians know who the smugglers are and don't deal with them.... They received intelligence on this from us and didn't use it." After the 2006 Israel-Hezbollah war, Israel began claiming that Palestinian terrorist groups were smuggling advanced weaponry, such as Katyusha rockets, shoulder-fired antiaircraft missiles, and anti-tank guided missiles, through the tunnels. Miri Eisin, the spokeswoman for Prime Minister Ehud Olmert, was quoted saying "What's happened now is that they're trying to smuggle in more advanced weapons. We mean anti-tank weapons of the sort which were used against us in Lebanon, some of them Russian-made and some of them Iranian-made, and also anti-aircraft weapons, which we've been worried [about] in the past, but now it's much more concrete." One Israeli lawmaker, Yuval Steinitz, a member of the opposition Likud party and a former chairman of the Knesset's Foreign Affairs and Defense Committee, has accused Egypt of, among other things, allowing Hamas to obtain 20,000 rifles, 6,000 anti-tank missiles, 100 tons of explosives and several dozen Katyusha rockets and shoulder-held anti-aircraft missiles. In November 2007, Steinitz wrote letters to Members of Congress asking them to support proposals to freeze U.S. military aid to Egypt. In his letters, Steinitz stated that "It is almost ridiculous for the Egyptians to focus on finding the tunnels, since it would be much easier for them to intercept the smugglers before they get anywhere near the border." Also in November 2007, Israeli Public Security Minister Avi Dichter asserted that "Egypt could deploy to stop the smuggling within an hour.... What we previously perceived as weakness or inability to act may be Egyptian policy." In December 2007, Israeli accusations against Egypt reached a crescendo. Israeli Foreign Minister Tzipi Livni stated in her testimony before a Knesset committee that the Egyptian failure to secure the border with Gaza "is terrible, problematic and damages the ability to make progress in the peace process." Following her statement, the New York Times reported that Israeli officials had sent videotapes to U.S. officials showing Egyptian border guards not only ignoring smuggling, but, in at least one case, aiding it. However, an unnamed Israeli security official stated that the accusations about Egyptian collaboration with arms smuggling were meant to sabotage an upcoming meeting between Israeli Defense Minister Ehud Barak and Egyptian President Hosni Mubarak. Egypt's Reaction Foreign Minister Livni's comments, when coupled with the withholding of U.S. military aid to Egypt in the FY2008 Consolidated Appropriations Act ( P.L. 110-161 ), brought a strong and harsh reaction from Egypt. In one interview, President Hosni Mubarak remarked that "Tzipi Livni crossed a red line with me.... It's very easy to sit in an office and criticize our performance on the ground.... This works to dampen the atmosphere. Relations with Israel are very important to me—do not ruin them....If you disapprove of the way we handle arms smuggling, you're welcome to do the job yourselves." Egyptian leaders also have accused some Israeli officials of using the smuggling issue to sabotage U.S.-Egyptian relations. Egyptian Foreign Minister Ahmed Aboul Gheit warned the Israelis when he stated that "If they continue to push and try to affect Egypt's relationship with the U.S. and harm Egyptian interests, Egypt will certainly respond and will try to damage their interests." Egyptian officials argue that while they are doing the best they can, their border forces lack the adequate resources and manpower to effectively patrol the Gaza/Sinai border. Egypt's 2005 Memorandum of Understanding (MOU) with Israel specifies, in great detail, the precise numbers of troops and equipment that can be deployed on their side of the border. The Egyptian Defense Ministry claims that, at any one time, up to a third of their 750-troop regiment is off-duty or is on leave, leaving fewer troops to protect the border and stop smuggling. Egypt also claims that while Israel has provided it with intelligence on known smugglers, the information is often imprecise and not actionable. Egypt reportedly has asked Israel to renegotiate either the 2005 MOU or the Camp David peace treaty itself to allow for the deployment of additional 1-2 regiments in Rafah. Israeli leaders have responded by insisting that rather than send more Egyptian troops to the border, Egypt should make better use of the soldiers already on patrol. However, on January 31, 2008, the Jerusalem Post reported that Israel and Egypt are in advanced talks over possible deployment of additional Egyptian troops in Sinai in an effort to seal the border with Gaza. Tensions abated somewhat after Israeli Defense Minister Ehud Barak's trip to Egypt in late December 2007. After his meetings, Barak stated that "peace with Egypt is a strategic asset to both sides and as in the past when there have been disputes they had to be worked out." Prime Minister Ehud Olmert followed these conciliatory remarks stating that "Egypt has a peace agreement with us, and I think that with all the difficulties in the relations, they are very satisfied with the agreement and want to preserve it.... That's not to say that everything they don't do, or do, is to our liking; and I imagine they have some criticism of us. But there is a continuing dialogue." U.S. Role In order to diffuse tensions on both sides, the U.S. government sent Deputy Assistant Secretary of State Robert Danin and Deputy Assistant Secretary of Defense Mark Kimmitt to Egypt in November to assess the smuggling problem. According to an Israeli media report, the two U.S. officials recommended that: the United States provide Egypt with sophisticated tunnel-detection and demolition equipment, such as unmanned ground vehicles and acoustic sensors, to improve Egypt's tunnel detection capability; Egypt construct a canal along the border; an idea that Israel had proposed two years earlier; new physical barriers be erected with piles driven deep into the earth, and the United States, Egypt, and Israel establish a trilateral security commission that would deal with all the issues related to the Gaza-Egypt border - weapons smuggling, border crossings by terrorists, and border control. Israel, however, opposes such a commission. A second team from the U.S. Army Corps of Engineers also traveled to Egypt in December 2007 and offered to assist Egypt by providing technical advice and training. According to U.S. Secretary of State Condoleezza Rice, "We think that Egypt has to do more. Those tunnels need to be dealt with.... The Egyptians have said that they want some, perhaps, technical help. We're prepared obviously, to give that, but it's also—you know, the will to do it is very important here." U.S. Representative Steve Israel, who visited Rafah, Egypt in January 2008 reportedly remarked that "With the Army Corps equipment, with the sustained U.S. technical advice, this should make a big difference in closing these tunnels, and take the tunnels off the table in future appropriations debates." The Rafah Terminal Crossing The Rafah crossing point is the only non-Israeli army-controlled access point for Palestinians to leave Gaza. When Israel unilaterally withdrew from the Gaza Strip in 2005, Secretary of State Rice helped broker an agreement ("The Agreement on Movement and Access") between Israel, Egypt, and the Palestinian Authority to provide Gazans access through the Rafah terminal. Israel agreed to allow the European Union to maintain a Border Assistance Mission (EUBAM) to monitor the Rafah crossing. Without a physical presence on the border, Israel monitored the checkpoint using closed-circuit cameras. Most importantly, Israel retained the power to open and close the crossing based on its assessment of the security situation. After Hamas took over the Gaza Strip in June 2007, Egypt worked with Israel to close the Rafah crossing. According to the last EUBAM factsheet, "Since Corporal Gilad Shalit was captured [by Hamas] on 25 June 2006, the Rafah Crossing Point (RCP) has been closed for normal operations and open on an exceptional basis only. Considerable efforts were made to mediate the resumption of normal operations, and to at least ensure that the crossing was open as often as possible. EUBAM efforts resulted in RCP being open for 83 days between 25 June 2006 and 13 June 2007, allowing nearly 165,000 people to cross." There have been some notable exceptions to Rafah's total closure. In January 2008, Egypt allowed approximately 2,200 Palestinians, several of whom were Hamas leaders, to exit and reenter Gaza for the annual Haj pilgrimage to Mecca, Saudi Arabia. Both Israel and Palestinian Authority President Mahmud Abbas had expressed frustration with Egypt's decision, charging that it had undermined the PA's authority. Egypt reportedly permitted about 85 Hamas members and other militants wanted by Israel to enter Gaza via Rafah in October 2007 in exchange for a wanted Al Qaeda militant. Several months earlier, prior to the Hamas takeover of Gaza, Israel and Egypt had permitted 500 Fatah loyalists to cross into Gaza from Egypt, where they reportedly had received U.S. training. January 23 Gaza Breach After a week-long Israeli-imposed total closure of Gaza, which was put in place to compel Hamas to halt its rocket attacks into Israel, Hamas supporters blew several holes in the border fence on the Palestinian side of Rafah allowing perhaps as many as 200,000 Gazans to enter Egypt. Reportedly, the breach had been carefully planned by Hamas for over a month, as militants used blowtorches to weaken the structural integrity of the corrugated-iron fence. Since 2005, there have been several other Hamas-planned breaches of the border. According to initial reports, the outpouring of individuals into Egypt overwhelmed Egypt's forces and, with the exception of some arrests, the Egyptian Border Guard Force did not use force against the crowds. President Mubarak remarked that "I told them to let them come in and eat and buy food and then return them later as long as they were not carrying weapons." Palestinians were seen buying livestock electronics equipment, mattresses, cement bags, motorcycles, generators, gasoline cans, and canned food. Israeli defense officials expressed concern that, in addition to civilians, Palestinian terrorists also crossed the border into Egypt. Questions for Congress Could the Gaza-Egypt border be completely re-sealed? In the days following Hamas's breach of the border, many observers have begun to question whether the Gaza-Egypt border will ever be completely re-sealed. While as of late January 2008, the flow of Palestinians streaming into the Sinai Peninsula had been considerably reduced, nevertheless thousands of Palestinians remained in Egypt proper and two border crossings remained open. Egypt has deployed thousands of police in the Sinai Peninsula to keep Palestinian from reaching Cairo and other areas further inside Egypt. On January 30, 2008, one senior Israeli security official remarked that "There has been dramatic progress made with the Egyptians with regards to sealing the open border in Rafah." In an ironic twist of fate, smugglers have been quoted in the press indicating that the open border has cut into their profits. One smuggler interviewed by Reuters stated that "People bought all they needed by crossing the border in daylight and for free. We have had no business for a week.... If Rafah crossing would open properly for trade, I may quit tunnelling." The Egyptian government is seeking to restore the Palestinian Authority's presence (along with European Union monitors) along the border. So far, Hamas has appeared unwilling to relinquish its presence there. Many analysts believe that even if the PA were to regulate the border, Hamas's control of the Gaza Strip would allow it to retain influence along the border. An Israeli newspaper featured a quote from one senior Israeli political source stating that "Anyone who thought that an addition of 750 Egyptian Border Policemen would solve the problem now realizes that this will not help. A much broader solution is needed, and Israel has to formulate a new strategy." Are advanced weapons being smuggled through the tunnels? Israel claims that anti-tank weapons, Katyusha rockets, and shoulder-held anti-aircraft missiles are being smuggled into Gaza. On January 3, 2008, Hamas or Palestinian Islamic Jihad (PIJ) fired a standard Russian-made 122-mm Grad-series 'Katyusha' into Israel. The rocket achieved a range of 10.8 miles. Qassam rockets, which are manufactured in Gazan metal shops, have a maximum range of 6 miles. According to Jane ' s Defence Weekly , Israeli intelligence had warned in 2005 that the PIJ had received a shipment of 20 Grad-series rockets, which were smuggled into the Gaza Strip from Egypt. However, the Israeli newspaper Yediot Aharonot quoted an unnamed Israeli security official who claimed that the rocket fired on January 3 was produced in Iran and had been smuggled into Gaza from Egypt by sea. Overall, while most experts agree that advanced weapons could easily find their way to Palestinian terrorist groups in the Gaza Strip, there is no real consensus concerning the scale of smuggled advanced weaponry. In addition, many analysts believe that Egypt has under-reported the amount of arms coming into Gaza, while Israel has exaggerated the threat these arms pose to its overall security. Some observers state that Hamas's arsenal is not as sophisticated as Hezbollah's in Lebanon. Nevertheless, Israeli military officials appear to have concluded that Hamas is gradually adopting Hezbollah's military doctrine. One report suggests that Hamas has "organized along the lines of a conventional army, with companies and battalions assigned to defense of specific sectors, a fixed chain of command, and teams attempting to stage ambushes of Israeli forces as they enter and leave the Strip." Is Egypt's physical presence on the border sufficient? Israel and Egypt differ fundamentally over the size of Egypt's Border Guard Force. Egypt has repeatedly requested that Israel amend their agreement to allow for an additional regiment to deploy in Rafah, raising the total number of soldiers to 1,500. Israel has responded that Egypt lacks the political will to stop smuggling or stop Palestinians from breaching the border. However, as previously mentioned, Israel may now be seriously considering an Egyptian proposal to allow the deployment of additional forces along the Egyptian Gaza border. While the smuggling issue has worsened in recent years, at no time has any one government, Israeli, Egyptian, or Palestinian (PA), been able to fully stop the movement of goods and arms under the border. While Egypt has uncovered numerous tunnel openings on its side of the border, it reportedly lacked the capacity or the will to destroy the tunnel shafts that remain open even when an entrance is sealed. Furthermore, as long as tunnels remain open on the Palestinian side, the Egyptians have not been able to fully destroy them. With the recent U.S. pledge to reallocate $23 million in FMF for new equipment and training, Egypt's record on destroying tunnels may improve. Moreover, the Border Guard Force's rules of engagement against Palestinians crossing the border are deliberately ambiguous. Due to domestic popular sensitivities in Egypt, its leaders seek to avoid the appearance of harming Palestinian civilians. Based on the events of January 23 rd , Egypt is clearly not going to shoot either Hamas members or civilians who breach the border fence unless it is in self-defense. Hamas deftly exploits this situation to the detriment of Egypt's military. According to Mouin Rabbani, an analyst at the International Crisis Group think tank in Jordan, "Egypt is confronted with what for them is a nasty dilemma—put in the position of being co-jailer of Gaza Palestinians." Is the conflict over the border damaging Israeli-Egyptian relations? Although both Israel and Egypt have, at times, tried to downplay recent tensions over the border, there is some concern that Hamas's takeover of Gaza will have negative long term repercussions for the Israeli-Egyptian relationship, a relationship that has been largely considered a success for U.S. Middle Eastern diplomacy for over three decades. While many experts agree that ultimately both sides are committed to upholding the Camp David agreement, further public disagreements over managing the Gaza border run the risk of poisoning relations and negatively affecting cooperation on issues of critical importance to U.S. national security, such as countering Islamist extremism and fostering Israeli-Palestinian peace. Indeed, at a time when the Administration has committed itself to reaching a peace deal by the end of 2008, the current Israeli-Egyptian dispute could prove to be an unwelcome distraction to follow-up negotiations after the Annapolis peace conference. Looking ahead, Israeli-Egyptian tensions over border security are likely to continue. One day after the border breach, Israeli Deputy Defense Minister Matan Vilnai stated that "We need to understand that when Gaza is open to the other side we lose responsibility for it.... So we want to disconnect from it." Hamas itself has expressed a desire to see the border reopened and managed by the Palestinian Authority. Ironically, both of these positions pose challenges for Egypt, which wants to keep Hamas isolated, but not be held solely responsible for failing to do so by either Israel or the United States. Nevertheless, as violence between Israel and Hamas and other Palestinian factions in the Gaza Strip continues, these issues will continue to fester. With Hamas showing no indication that it is ready to renounce its stated goal of Israel's destruction, all parties would appear to be a long way from seeing the Gaza-Egypt-Israeli region at peace.

Since Israel unilaterally dismantled its settlements and withdrew its troops from the Gaza Strip in August 2005, it has repeatedly expressed concern over the security of the Egypt-Gaza border. Israel claims that ongoing smuggling of sophisticated weaponry into the Gaza Strip could dramatically strengthen the military capabilities of Hamas, which seized control of the Gaza Strip in 2007. Israel also charges that Egypt is not adequately sealing its side of the border, citing the recent breakthrough of hundreds of thousands of Palestinians who rushed into Egypt on January 23, 2008 and remained for several days. Egypt claims that Israel has not only exaggerated the threat posed by weapons smuggling, but is deliberately acting to "sabotage" U.S.-Egyptian relations by demanding that the United States condition its annual $1.3 billion in military assistance on Egypt's efforts to thwart smuggling. Section 690 of P.L. 110-161, the Consolidated Appropriations Act, 2008, withholds the obligation of $100 million in Foreign Military Financing for Egypt until the Secretary of State certifies, among other things, that Egypt has taken concrete steps to "detect and destroy the smuggling network and tunnels that lead from Egypt to Gaza." The United States, which occasionally is thrust into the middle of disputes between Israel and Egypt, has attempted to broker a solution to the smuggling problem which is amenable to all parties. The U.S. government has offered to allocate $23 million of Egypt's annual military aid toward the procurement of more advanced detection equipment, such as censors and remote-controlled robotic devices. Although both Israel and Egypt have, at times, tried to downplay recent tensions over the border, there is some concern that Hamas's takeover of Gaza will have negative long-term repercussions for the Israeli-Egyptian relationship, a relationship that has been largely considered a success for U.S. Middle Eastern diplomacy for over three decades. This report will be updated as events warrant. For more information on Israel, Egypt, and Hamas, see CRS Report RL33476, Israel: Background and Relations with the United States; CRS Report RL33530, Israeli-Arab Negotiations: Background, Conflicts, and U.S. Policy; and CRS Report RL33003, Egypt: Background and U.S. Relations.

Introduction This report explains the process for filling positions to which the President makes appointments with the advice and consent of the Senate (PAS positions). It also identifies, for the 110 th Congress, all nominations to full-time positions requiring Senate confirmation in 39 organizations in the executive branch (26 independent agencies, 6 agencies in the Executive Office of the President (EOP), and 7 multilateral banking organizations) and 4 agencies in the legislative branch. It excludes appointments to executive departments and to regulatory and other boards and commissions, which are covered in other reports. A profile of each agency tracks the agency's nominations, providing information on Senate activity (confirmations, rejections, returns to the President, and elapsed time between nomination and confirmation) as well as further related presidential activity (including withdrawals and recess appointments). The profiles also identify, for each agency, positions requiring Senate confirmation, the incumbents in those positions as of the end of the 110 th Congress, and the pay levels of those officials. The Appointments Process The Constitution (Article II, Section 2) empowers the President to nominate and, by and with the advice and consent of the Senate, to appoint the principal officers of the United States, as well as some subordinate officers. Officers of the United States are those individuals serving in high-ranking positions that have been established by Congress and "exercising significant authority pursuant to the laws of the United States" (emphasis added). Three distinct stages mark the appointment process: selection and nomination, confirmation, and appointment. Selection, Clearance, and Nomination In the first stage, the White House selects and clears a prospective appointee before sending a formal nomination to the Senate. There are a number of steps in this stage of the process for most Senate-confirmed positions. First, with the assistance of, and preliminary vetting by, the White House Office of Presidential Personnel, the President selects a candidate for the position. Members of Congress and interest groups sometimes recommend candidates for specific PAS positions. They may offer their suggestions by letter, for example, or by contact with a White House liaison. In general, the White House is under no obligation to follow such recommendations. In the case of the Senate, however, it has been argued that Senators are constitutionally entitled, by virtue of the advice and consent clause noted above, to provide advice to the President regarding his selection; the extent of this entitlement is a matter of some debate. As a practical matter, in instances where Senators perceive insufficient pre-nomination consultation has occurred, they have sometimes exercised their procedural prerogatives to delay or even effectively block consideration of a nomination. During the clearance process, the candidate prepares and submits several forms, including the "Public Financial Disclosure Report" (Standard Form (SF) 278), the "Questionnaire for National Security Positions" (SF 86), and the White House "Personal Data Statement Questionnaire." The Office of the Counsel to the President oversees the clearance process, which often includes background investigations conducted by the Federal Bureau of Investigation (FBI), Internal Revenue Service (IRS), Office of Government Ethics (OGE), and an ethics official for the agency to which the candidate is to be appointed. If conflicts of interest are found during the background investigation, OGE and the agency ethics officer may work with the candidate to mitigate the conflicts. Once the Office of the Counsel to the President has cleared the candidate, the nomination is ready to be submitted to the Senate. The selection and clearance stage has often been the longest part of the appointment process. There have been, at times, lengthy delays, particularly when many candidates have been processed simultaneously, such as at the beginning of an Administration, or where conflicts needed to be resolved. Candidates for higher-level positions have often been accorded priority in this process. At the end of 2004, in an effort to reduce the elapsed time between a new President's inauguration and the appointment of his or her national security team, Congress enacted amendments to the Presidential Transition Act of 1963. These amendments encourage a President-elect to submit, for security clearance, potential nominees to high-level national security positions as soon as possible after the election. A separate provision of law, enacted as part of the Federal Vacancies Reform Act of 1998, lengthens, during presidential transitions, the potential duration of a temporary appointment by 90 days. Although this provision might give some additional flexibility to an incoming President, it might also lengthen the appointment process for some positions by, in effect, extending the deadline by which a permanent appointment must be completed. For positions located within a state (U.S. attorney, U.S. marshal, and U.S. district judge), the President, by custom, normally nominates an individual recommended by one or both Senators (if they are from the same party as the President) from that state. If neither Senator is from the President's party, he usually defers to the recommendations of party leaders from the state. Occasionally, the President solicits recommendations from Senators of the opposition party because of their positions in the Senate. Before making a nomination to a federal position at the state or national level, the President would likely consider how it will fare in the confirmation process. If circumstances permit and conditions are met, the President could give the nominee a recess appointment to the position (see section entitled " Recess Appointments " below). Recess appointments have sometimes had political consequences, however, particularly where Senators perceived that such an appointment was an effort to circumvent their constitutional role. Some Senate-confirmed positions may also be temporarily filled under the Vacancies Act. A nominee has no legal authority to assume the duties and responsibilities of the position; a nominee who is hired by the agency as a consultant while awaiting confirmation may serve only in an advisory capacity. Authority to act comes once there is Senate confirmation and presidential appointment, or if another method of appointment, such as a recess appointment or a temporary appointment, is utilized. (For further information on these methods, see section entitled " Recess Appointments " and " Temporary Appointments " below.) Senate Consideration In the second stage, the Senate alone determines whether or not to confirm a nomination. The Senate's scrutiny of a nomination has depended largely on the importance of the position involved, existing political circumstances, and policy implications. Generally, the Senate has shown particular interest in the nominee's views and how they are likely to affect public policy. Two other factors have sometimes affected the examination of a nominee's personal and professional qualities: whether the President's party controlled the Senate, and the degree to which the President became involved in supporting the nomination. Much of the Senate confirmation process occurs at the committee level. Administratively, nominations are received by the Senate executive clerk, who arranges for the referral of the nominations to committee, according to the Senate rules and precedents. Committee nomination activity has generally included investigation, hearing, and reporting stages. As part of investigatory work, committees have drawn on information provided by the White House, as well as information they themselves have collected. Some committees have held hearings on nearly all nominations; others have held hearings for only some. Hearings provide a public forum to discuss a nomination and any issues related to the program or agency for which the nominee would be responsible. Even where confirmation has been thought by most to be a virtual certainty, hearings have provided Senators and the nominee with opportunities to go on the record with particular views or commitments. Senators have used hearings to explore nominees' qualifications, articulate policy perspectives, or raise related oversight issues. A committee may decline to act on a nomination at any point—upon referral, after investigation, or after a hearing. If the committee votes to report a nomination to the full Senate, it has three options: it may report the nomination favorably, unfavorably, or without recommendation. A failure to obtain a majority on the motion to report means the nomination will not be reported to the Senate. If the committee declines to report a nomination, the Senate may, under certain circumstances, discharge the committee from further consideration of the nomination in order to bring it to the floor. The Senate historically has confirmed most, but not all, executive nominations. Rarely, however, has a vote to confirm a nomination failed on the Senate floor. Usually, unsuccessful nominations fail to be reported or discharged from committee. Failure of a nomination to make it out of committee has occurred for a variety of reasons, including opposition to the nomination, inadequate amount of time for consideration of the nomination, or factors that may not be directly related to the merits of the nomination. Senate rules provide that "[n]ominations neither confirmed nor rejected during the session at which they are made shall not be acted upon at any succeeding session without being again made to the Senate by the President." In practice, such pending nominations have been returned to the President at the end of the session or Congress. Pending nominations also may be returned automatically to the President at the beginning of a recess of more than 30 days, but the Senate rule providing for this return is often waived. Appointment In the final stage, the confirmed nominee is given a commission, which bears the Great Seal of the United States and is signed by the President, and is sworn into office. The President may sign the commission at any time after confirmation, at which point the appointment becomes official. Once the appointee is given the commission and sworn in, he or she has full authority to carry out the responsibilities of the office. Recess Appointments The Constitution also empowers the President to make a limited-term appointment without Senate confirmation when the Senate is in recess, either during a session (intrasession recess appointment) or between sessions (intersession recess appointment). Recess appointments expire at the end of the following session of Congress. Appendix D provides a table showing the dates of the Senate recesses for the 110 th Congress and the number of recess appointments during each recess. Presidents have occasionally used the recess appointment power to circumvent the confirmation process. In response, Congress has enacted provisions that restrict the pay of recess appointees under certain circumstances. Because most potential appointees to full-time positions cannot serve without a salary, the President has an incentive to use his recess appointment authority in ways that allow them to be paid. Under the provisions, if the position falls vacant while the Senate is in session and the President fills it by recess appointment, the appointee may not be paid from the Treasury until he or she is confirmed by the Senate. However, the salary prohibition does not apply (1) if the vacancy arose within 30 days before the end of the session of the Senate; (2) if, at the end of the session, a nomination for the office, other than the nomination of an individual appointed during the preceding recess of the Senate, was pending before the Senate for its advice and consent; or (3) if a nomination for the office was rejected by the Senate within 30 days before the end of the session and an individual other than the one whose nomination was rejected thereafter receives a recess appointment. A recess appointment falling under any one of these three exceptions must be followed by a nomination to the position not later than 40 days after the beginning of the next session of the Senate. For this reason, when a recess appointment is made, the President generally submits a new nomination for the nominee even when an old nomination is pending. These provisions have been interpreted by the Department of Justice to preclude payment of an appointee who is given successive recess appointments to the same position. Although recess appointees whose nominations to a full term are subsequently rejected by the Senate may continue to serve until the end of their recess appointment, a provision of the FY2008 Financial Services and General Government Appropriations Act that is still in effect today may prevent them from being paid after their rejection. The provision reads, "Hereafter, no part of any appropriation contained in this or any other Act shall be paid to any person for the filling of any position for which he or she has been nominated after the Senate has voted not to approve the nomination of said person." Prior to this provision, similar wording was included in annual funding measures for most or all of the previous 50 years. Another recent congressional response to the President's use of recess appointments was the decision, during the latter part of the first session of the 110 th Congress, to restructure the Senate's longer recesses into a series of shorter recesses divided by pro forma sessions. Premised on the notion that the President can be restricted from making recess appointments during a recess that is no more than three days, the Senate sought to prevent recess appointments by holding pro forma sessions approximately every three days. Beginning in November 2007, the Senate agreed to regularly scheduled pro forma sessions during periods that would have otherwise been recesses of duration of a week or longer. The Senate recessed on November 16, and pro forma meetings were convened on November 20, 23, 27, and 29, with no business conducted. The Senate reconvened and conducted business beginning on December 3, 2007. Similar procedures were followed for the remainder of the 110 th Congress during other periods that would otherwise have been Senate recesses of at least a week in duration. During the remainder of his presidency, President Bush made no additional recess appointments. Temporary Appointments Congress has provided limited statutory authority for the temporary filling of vacant positions requiring Senate confirmation. Under the Federal Vacancies Reform Act of 1998, when an executive agency position requiring confirmation becomes vacant, it may be filled temporarily in one of three ways: (1) the first assistant to such a position may automatically assume the functions and duties of the office; (2) the President may direct an officer in any agency who is occupying a position requiring Senate confirmation to perform those tasks; or (3) the President may select any officer or employee of the subject agency who is occupying a position for which the rate of pay is equal to or greater than the minimum rate of pay at the GS-15 level and who has been with the agency for at least 90 of the preceding 365 days. The temporary appointment is for 210 days, but the time restriction is suspended if a first or second nomination for the position is pending. In addition, during a presidential transition, the 210-day restriction period does not begin until either 90 days after the President assumes office, or 90 days after the vacancy occurs, if it is within the 90-day inauguration period. The act does not apply to positions on multi-headed regulatory boards and commissions or to certain other specific positions which may be filled temporarily under other statutory provisions. Appointments During the 110th Congress During the 110 th Congress, President George W. Bush submitted to the Senate 52 nominations to full-time positions in independent and other agencies. Of these nominations, 27 were confirmed, 16 were returned to the President, and 9 were withdrawn. The President made two recess appointments during this period to positions in organizations covered in this report. Each recess appointment was followed by a nomination which is included in the total of 52 nominations. These recess appointments expired at the end of the second session of the 110 th Congress. Table 1 summarizes the appointment activity. Average Time to Confirm a Nomination The length of time a given nomination may be pending in the Senate varies widely. Some nominations are confirmed within a few days, others may not be confirmed for several months, and some are never confirmed. This report provides, for each independent agency nomination confirmed in the 110 th Congress, the number of days between nomination and confirmation ("days to confirm"). The mean (average) number of days taken by the Senate to confirm a nomination to a position covered by this report was 110. The median number of days taken by the Senate was 113. The methodology used in this report to count the length of time between nomination and confirmation differs from that which was used in previous similar CRS reports. The statistics presented here include the days during which the Senate was adjourned for its summer recesses and between sessions of Congress. The methodological change reduces the direct comparability of statistics in this report with those of the earlier research. Reasons for the change include the conversion of traditionally long recesses into a series of short recesses punctuated by pro forma sessions during the 110 th Congress; the fact that although committees may not be taking direct action on nominations in the form of hearings or votes, they are likely still considering and processing nominations during recesses; and a desire to be consistent with the methodology used by many political scientists, as well as CRS research on judicial nominations. In addition, an argument could be made that the decision to extend Senate consideration of nominees over the course of a recess is intentional, and the choice to extend this length of time is better represented by including all days, including long recesses. A more detailed explanation of this methodological change is located in Appendix E . Organization of This Report Agency Profiles The agency profiles provide data on presidential nominations and appointments to full-time positions requiring Senate confirmation, and Senate action on the nominations. Data on appointment actions during the 110 th Congress appear in two tables for each agency, "Full-time PAS Positions, as of the End of the 110 th Congress" and "Nomination Action During 110 th Congress." As noted, some agencies had no nomination activity during this period of time. The first of these two tables identifies, as of the end of the 110 th Congress, each full-time PAS position in the department, its incumbent, and its pay level. For most presidentially appointed positions requiring Senate confirmation, the pay levels fall under the Executive Schedule, which, as of January 2009, ranged from level I ($196,700) for Cabinet-level offices to level V ($143,500) for the lowest-ranked positions. An incumbent's name followed by "(A)" indicates an official who was, at that time, serving in an acting capacity. Vacancies are also noted in the first table. The nomination action table provides, in chronological order, information concerning each nomination. It shows the name of the nominee, position involved, date of nomination, date of confirmation, and number of days between receipt of a nomination and confirmation. As discussed earlier (see " Average Time to Confirm a Nomination ," above), the numbers of days shown in the tables in this report include days during the longer recesses around August and between sessions of Congress. Some nominees identified in this report were nominated more than once for the same position. This may have been because a nomination was returned to the President and he submitted a new nomination, or because he submitted a nomination following a recess appointment. The nomination action tables also provide information about recess appointments. When a nominee is awaiting Senate action and he or she is given a recess appointment, a follow-up nomination is usually submitted to comply with the requirements of 5 U.S.C. § 5503(b) (see section entitled " Recess Appointments ," above). The nomination tables that have more than one nominee to a position also give statistics on the length of time between nomination and confirmation. Each nomination action table provides the average "days to confirm" in two ways: mean and median. Both are presented because the mean can be influenced by outliers in the data, while the median does not tend to be influenced by outliers. In other words, a nomination that took an extraordinarily long time might cause a significant change in the mean, but the median would be unaffected. Presenting both numbers is a better way to look at the central tendency of the data. Additional Appointment Information Appendix A presents a table of all nominations and recess appointments to positions in independent and other agencies, organized alphabetically by last name and following a similar format to that of the nomination action tables. It identifies the agency involved and the dates of nomination. The table indicates if and when a nomination was confirmed, withdrawn, or returned. The mean and median numbers of days taken to confirm a nomination are also provided. Appendix B provides a table with summary information on appointments and nominations by four agency categories: independent executive agencies, agencies in the Executive Office of the President (EOP), multilateral banking organizations, and agencies in the legislative branch. For each of these categories, the table provides the number of positions, nominations, individual nominees, confirmations, nominations returned, and nominations withdrawn. The table also provides, for each of the four categories, the mean and median number of days to confirm a nomination. Appendix C provides a list of department abbreviations. Information on the Senate's recesses and when recess appointments occurred can be found in Appendix D . As noted above, this report employs certain methods that differ from reports tracking appointments during previous Congresses. These methodological changes are explained in detail in Appendix E . Nominations and Incumbents: Full-Time Positions in Independent Agencies Appalachian Regional Commission (ARC) No ARC Nomination Action During the 110th Congress Broadcasting Board of Governors (BBG) No BBG Nomination Action for Full-time Positions During the 110th Congress Central Intelligence Agency (CIA) Corporation for National and Community Service (CNCS) No CNCS Nomination Action During the 110th Congress Court Services and Offender Supervision Agency to the District of Columbia (CSOSA) Delta Regional Authority (DRA) No DRA Nomination Action During the 110th Congress Environmental Protection Agency (EPA) Federal Mediation and Conciliation Service (FMCS) No FMCS Nomination Action During the 110th Congress General Services Administration (GSA) Millennium Challenge Corporation (MCC) No MCC Nomination Action During the 110th Congress National Aeronautics and Space Administration (NASA) National Archives and Records Administration (NARA) No NARA Nomination Action During the 110th Congress National Foundation on the Arts and Humanities (NFAH) No NFAH Nomination Action for Full-time Positions During the 110th Congress National Science Foundation (NSF) No NSF Nomination Action for Full-time Positions During the 110th Congress Office of the Director of National Intelligence (ODNI) Office of Government Ethics (OGE) No OGE Nomination Action During the 110th Congress Office of Navajo and Hopi Indian Relocation (ONHIR) No ONHIR Nomination Action During the 110th Congress Office of Personnel Management (OPM) Office of Special Counsel (OSC) No OSC Nomination Action During the 110th Congress Overseas Private Investment Corporation (OPIC) Peace Corps (PC) No PC Nomination Action During the 110th Congress Selective Service System (SSS) No SSS Nomination Action During the 110th Congress Small Business Administration (SBA) Social Security Administration (SSA) Trade and Development Agency (TDA) U.S. Agency for International Development (USAID) Nominations and Incumbents: Full-Time Positions in the Executive Office of the President Council of Economic Advisers (CEA) Council on Environmental Quality (CEQ) No CEQ Nomination Action During the 110th Congress Office of Management and Budget (OMB) Office of National Drug Control Policy (ONDCP) Office of Science and Technology Policy (OSTP) No OSTP Nomination Action During the 110th Congress Office of the U.S. Trade Representative (OUSTR) Nominations and Incumbents: Full-Time Positions in Multilateral Organizations African Development Bank (AfDB) Asian Development Bank (AsDB) European Bank for Reconstruction and Development (EBRD) Inter-American Development Bank (IADB) International Bank for Reconstruction and Development (World Bank) (IBRD) International Joint Commission, U.S. and Canada (IJC) International Monetary Fund (IMF) Nominations and Incumbents: Full-Time Positions in Legislative Branch Agencies Architect of the Capitol (AOC) No AOC Nomination Action During the 110th Congress Government Accountability Office (GAO) No GAO Nomination Action During the 110th Congress Government Printing Office (GPO) Library of Congress (LOC) No LOC Nomination Action During the 110th Congress Appendix A. Summary of All Nominations and Appointments to Independent and Other Agencies Appendix B. Nomination Action by Agency Type, 110 th Congress Appendix C. Agency Abbreviations Independent Agencies ARC—Appalachian Regional Commission BBG—Broadcasting Board of Governors CIA—Central Intelligence Agency CNCS—Corporation for National and Community Service CSOSA—Court Services and Offender Supervision Agency for the District of Columbia DRA—Delta Regional Authority EPA—Environmental Protection Agency FMCS—Federal Mediation and Conciliation Service GSA—General Services Administration MCC—Millennium Challenge Corporation NARA—National Archives and Records Administration NASA—National Aeronautics and Space Administration NFAH—National Foundation on the Arts and Humanities NSF—National Science Foundation ODNI—Office of the Director of National Intelligence OGE—Office of Government Ethics ONHIR—Office of Navajo and Hopi Indian Relocation OPIC—Overseas Private Investment Corporation OPM—Office of Personnel Management OSC—Office of Special Counsel PC—Peace Corps SBA—Small Business Administration SSA—Social Security Administration SSS—Selective Service System TDA—Trade Development Agency USAID—United States Agency for International Development Executive Office of the President (EOP) CEA—Council of Economic Advisers CEQ—Council on Environmental Quality OMB—Office of Management and Budget ONDCP—Office of National Drug Control Policy OSTP—Office of Science and Technology Policy OUSTR—Office of U.S. Trade Representative Multilateral Banking Organizations AfDB—African Development Bank AsDB—Asian Development Bank EBRD—European Bank for Reconstruction and Development IADB—Inter-American Development Bank IBRD—International Bank for Reconstruction and Development IJC—International Joint Commission, U.S. and Canada IMF—International Monetary Fund Legislative Branch Agencies AC—Architect of the Capitol GAO—Government Accountability Office GPO—Government Printing Office LC—Library of Congress Appendix D. Senate Intersession Recesses and Intrasession Recesses of Four or More Days, 110 th Congress Appendix E. Change in Methodology from Previous Tracking Reports The calculations of nomination-to-confirmation intervals provided in this report counted all the days within the interval, including those during summer recesses and between sessions of the Senate. The inclusion of all days differs from the methodology used in similar CRS reports for previous Congresses. In these earlier reports, days during August and intersession recesses were not included in calculations of nomination-to-confirmation intervals. The rationale for the earlier methodology was that the Senate was unlikely to continue consideration of nominations during these periods; committee hearings and votes, among other activities, typically do not occur during these times. The exclusion of days during only certain periods of adjournment—intersession recesses and August recesses, which are usually longer than 30 days—is suggested by Senate rules regarding when nominations are to be returned to the President. These provide: Nominations neither confirmed nor rejected during the session at which they are made shall not be acted upon at any succeeding session without being again made to the Senate by the President; and if the Senate shall adjourn or take recess for more than thirty days, all nominations pending and not finally acted upon at the time of taking such adjournment or recess shall be returned by the Secretary to the President. This earlier methodology was also consistent with the approach of some political scientists who study executive branch appointments. The methodology for this report is different from that which was used in previous similar reports for several reasons. First, as discussed above in the section on recess appointments, from the latter part of the first session through the end of the 110 th Congress, the Senate chose to break up what would otherwise have been longer recesses into shorter recesses separated by pro forma sessions. This introduced two options for this report with regard to the calculation of nomination-to-confirmation intervals. The first option would have been to treat each series of short recesses created in this fashion as one long recess and to subtract these days from the nomination-to-confirmation interval. The second option would have been to treat each recess in the series of short recesses created in this fashion as a short recess, and not to subtract these days from the nomination-to-confirmation interval. Arguably, the Senate and President actions were consistent with the latter construction—short recesses as short recesses. Otherwise, Senate rules would have required the return of pending nominations (or the waiver of that rule) and the President could have made recess appointments. The Senate and the President did not take these actions. As a result, short recesses created by pro forma sessions are treated as short recesses in the count of the length of time to confirmation. It should be noted, however, that the inclusion of these days reduces the comparability of statistics provided in this report with statistics in previous similar tracking reports, since the intervals calculated in this report include days that, in previous reports, were part of longer recesses and therefore were subtracted from the length of the interval. Although the phenomenon underlying this methodological problem first arose during the 110 th Congress, it could arise again in future Congresses. Other reasons for the methodological change are not unique to the 110 th Congress. First, in some cases, committee or floor action on a nomination that could have been completed before a recess has been, instead, deferred until after the recess. For such a nomination, the period of Senate consideration arguably has been intentionally extended. Counting all days, including those during a long recess, in calculations of elapsed time reflects that extension of Senate consideration. Second, it is unlikely that all work pertaining to nominations stops over a recess, and the inclusion of recess days is a reflection of the fact that the nominee is still under consideration, even during recess. Member and committee staffs may still be considering nominations at that time, even though they may not take direct action in the form of hearings or votes on the nominees. Ongoing activities may include investigatory work and interviews with nominees. Finally, although, as mentioned above, some political scientists who study nominations do subtract recess days during calculations of nomination-to-confirmation intervals, many others do not. In addition, the calculation of nomination-to-confirmation intervals in CRS research concerning judicial nominations does not exclude days that fall during recesses. By using methodology that is more similar to the work of other political scientists and to CRS judicial nominations research, the research presented here could be more easily compared and combined with related work. For all of these reasons, in this report, we employ a new methodology for calculating nomination-to-confirmation intervals.

The appointment process for advice and consent positions consists of three main stages. The first stage is selection, clearance, and nomination by the President. This step includes preliminary vetting, background checks, and ethics checks of potential nominees. At this stage, the President may also consult with Senators who are from the same party if the position is located in a state. The second stage of the process is consideration of the nomination in the Senate, most of which takes place in committee. Finally, if a nomination is approved by the full Senate, the nominee is given a commission signed by the President and sworn into office. During the 110th Congress, President George W. Bush submitted to the Senate 52 nominations to independent and other agencies for full-time positions. Of these 52 nominations, 27 were confirmed, 9 were withdrawn, and 16 were returned to him in accordance with Senate rules. For those nominations that were confirmed, an average of 110 days elapsed between nomination and confirmation. The President made two recess appointments to full-time positions in independent agencies during the 110th Congress. Each recess appointment was followed by a nomination which is included in the total of 52 nominations. The methodology used in this report to count the length of time between nomination and confirmation differs from that which was used in previous similar CRS reports. The statistics presented here include the days during which the Senate was adjourned for its summer recesses and between sessions of Congress. The methodological change, which may reduce the comparability of statistics in this report with those of the earlier research, is discussed in the text of this report, as well as in Appendix E. Reasons for the change include the Senate's conversion of traditionally long recesses into a series of short recesses punctuated by pro forma sessions during the 110th Congress; the fact that although committees may not be taking direct action on nominations in the form of hearings or votes, they are likely still considering and processing nominations during recesses; and a desire to be consistent with the methodology used by many political scientists as well as CRS research on judicial nominations. In addition, an argument could be made that the decision to extend Senate consideration of nominees over the course of a recess is intentional, and the choice to extend this length of time is better represented by including all days, including long recesses. Information for this report was compiled from data from the Senate nominations database of the Legislative Information System at http://www.congress.gov/nomis/, the Congressional Record (daily edition), the Weekly Compilation of Presidential Documents, telephone discussions with agency officials, agency websites, the United States Code, and the 2008 "Plum Book" (United States Government Policy and Supporting Positions). This report will not be updated.

Introduction Even as Congress finalized legislation creating the FEC in 1974, some Members of the House and Senate disagreed over how the agency should be constituted, what powers it should have, and how broad its enforcement authority should be. Perhaps unsurprisingly, almost immediately, the FEC's enforcement activities generated controversy. Fo r some, they were too vigorous; for others, too lax. Partially due to enforcement controversies, Congress has occasionally considered restructuring the agency. In the 114 th Congress, H.R. 2931 would replace the current six-member body with a five-member commission, including a chairperson with enhanced enforcement powers. Recent Congresses have also engaged in oversight concerning the FEC's enforcement practices and transparency. The controversy surrounding the FEC's enforcement of campaign finance law and regulation continues. During 2015, as the FEC marked its 40 th anniversary, prominent media accounts and opinion pieces chronicled tense relations among commissioners and stalemates over new regulations and enforcement. In recent years, commissioners have sparred at open meetings and in the media about whether the agency's enforcement activities are inadequate or overzealous. The debate over enforcement is not merely about internal agency disagreements. Rather, it represents broader controversies about what the FEC does and what it should do, and what federal campaign finance policy is and should be. Some also contend that enforcement establishes the boundaries of permissible campaign behavior. This report is not about the FEC's individual enforcement controversies, but, rather, about why controversies surrounding the enforcement process might matter to Congress as it provides the agency with overall direction and shapes campaign finance policy generally. Scope of the Report This report highlights examples of FEC or congressional attention to enforcement topics, but it is not intended to provide comprehensive discussion of particular enforcement matters. Rather, it discusses selected major issues that appear to be most consequential for Congress. Other topics might be relevant for practitioners or agency officials but are generally not addressed here. Unless otherwise noted, the report does not address criminal enforcement handled by the Justice Department or activities regulated by agencies such as the Internal Revenue Service (IRS). The report is not a legal analysis of commission activity. Other CRS products cited throughout this report provide additional information about related topics. In particular, another CRS product provides an overview of the FEC. Finally, the report does not provide compliance guidance to those regulated by FECA or FEC rules. A Note on Terminology This report uses the terms "FEC," "commission," and "agency" interchangeably. Some discussions of the FEC's authority, which are generally beyond the scope of this report, use the term "commission" to denote members of the FEC as opposed to agency staff. This distinction is not central to this report but is relevant for some material in the " Transparency and the Enforcement Process " section. Why Campaign Finance Enforcement Might Matter to Congress Members of Congress have a dual stake in campaign finance policy: as regulators and as the regulated. By enacting legislation, appropriating funds, and conducting oversight, Congress establishes the rules that campaigns—including their own—must follow and provides resources for ensuring compliance. More generally, enforcement is one of the most prominent topics in federal campaign finance policy. Policy debates often characterize enforcement as an indicator of other issues, such as the health of the FEC or the extent of government regulation of political speech. Enforcement can also indicate to what extent emerging campaign practices will be permitted, as the FEC considers how existing law and regulation might apply to new circumstances. Proposals to restructure the FEC typically have enforcement implications. For all these reasons, even a basic understanding of enforcement can enhance familiarity with campaign finance policy overall. As noted elsewhere in this report, Congress has regularly considered legislation and held hearings that could affect the FEC's enforcement duties. Latest Congressional Activity Congress has considered various campaign finance legislation, and conducted FEC oversight, for decades. Much of that activity has addressed campaign finance policy generally rather than FEC enforcement specifically. The same is true of more current legislation and hearings. Recent developments particularly relevant for enforcement include the following. In the 114 th Congress, H.R. 2931 would replace the current six-member FEC with a five-member commission, including a chairperson with enhanced enforcement powers. The 113 th Congress extended until 2018 operating authority for the FEC's Administrative Fine Program (AFP). The legislation also expanded the program to cover late reports filed by non-candidate committees and for independent expenditures. During the 113 th Congress, a Senate Judiciary Committee subcommittee held a hearing on criminal enforcement of campaign finance law. The hearing included witnesses from the Department of Justice, Internal Revenue Service, and interest groups, but did not focus on the FEC. During the 112 th Congress, the Committee on House Administration, Subcommittee on Elections, examined FEC enforcement through an oversight hearing. Subsequently, the FEC released additional information about its enforcement activities. The FEC: A Brief Overview The FEC is a six-member independent regulatory agency. Commissioners are appointed by the President and subject to Senate confirmation. The Senate most recently confirmed commissioners in 2013 (the 113 th Congress), as shown in Table 1 . Another CRS report provides additional detail about the commission. The Enforcement Process in Brief Three major enforcement options are at the commission's disposal: (1) what the agency has termed the "general enforcement process" established in FECA; (2) the Alternative Dispute Resolution (ADR) Program; and (3) the Administrative Fine Program (AFP). The first category includes the most complex and sometimes controversial matters that the commission might handle, designated as "Matters Under Review" (MURs). They may entail lengthy investigations or audits, protracted negotiations between the commission and H.R. 3487 respondents, substantial civil penalties, or litigation—although the pace can vary depending on individual circumstances. By contrast, matters handled under the AFP and ADR programs typically are simpler and less controversial. ADR cases can involve various issues; the program is designed to facilitate negotiation that leads to relatively speedy resolution of fairly simple matters. AFP cases are limited to straightforward matters involving late filings. A five-year statute of limitations applies to campaign finance enforcement matters. Overview and Initial Steps The enforcement process typically begins when one of four entities files a complaint or makes an internal referral to the FEC. These include the following: a complaint from an individual or other group (e.g., an opposing campaign); a referral from another government agency (e.g., Department of Justice); a referral from the FEC Audit Division or Reports Analysis Division (RAD); or a violation that is self-reported by a political committee or other regulated entity (a sua sponte submission). Timing and Votes The details of processing and resolving complaints vary based on whether the matter is handled through the MUR, ADR, or AFP methods. In general, once complaints or referrals are complete, the commission notifies the respondent (the subject of the complaint or referral) of the receipt or referral; the respondent has an opportunity to reply to the complaint and may choose to be represented by an attorney; and the commission determines which enforcement method, if any, to pursue: the MUR, ADR, or AFP processes. Regardless of the enforcement mechanism, FECA dictates much of how the process must unfold and how long it takes. In particular, FECA specifies how complaints must be filed and, except for AFP cases, that the commission must seek voluntary compliance before imposing a penalty. FECA also requires commissioners to vote on key enforcement decisions throughout the process. In particular, affirmative votes from at least four commissioners are required to find "reason to believe" (RTB) that a violation has occurred or is about to occur, which commences additional action (e.g., an investigation); find probable cause that a violation has occurred or is about to occur; resolve a matter (e.g., through a conciliation agreement, penalties, etc.); and authorize filing a lawsuit if a matter cannot otherwise be resolved. Without an affirmative vote from at least four commissioners in each of these instances, substantive action stops. The " Deadlocked Votes " section contains additional detail. Table 2 below lists the major steps and potential timelines required for cases routed through the MUR process, typically the most complex and consequential enforcement cases. The table excludes optional steps, such as hearings or presentation of legal questions to the commission, which require additional time. Selected Major Topics of Debate in Enforcement Transparency and the Enforcement Process At least two transparency issues are central to the enforcement process. First, FECA bars the FEC or its personnel from releasing any information about individual enforcement matters until after cases are closed. This confidentiality requirement was designed to prevent competing campaigns from using complaints as political weapons. Nonetheless, campaigns and other political actors routinely publicize complaints they have filed, even if the commission cannot comment. Second, Congress has dedicated some recent oversight activities to agency transparency concerning enforcement. Apparently both on its own initiative and in response to congressional interest, in recent years, the FEC has reexamined how it provides enforcement information to the public or those regulated by campaign finance law and commission rules. Highlights appear below. Recent Congressional Oversight and FEC Enforcement Processes As noted previously, in November 2011, during the 112 th Congress, the Committee on House Administration, Subcommittee on Elections, held an FEC oversight hearing. Much of that hearing emphasized transparency surrounding the FEC's enforcement process. After the November 2011 hearing, negotiations between the committee and commission appear to have resulted in the ongoing effort to approve and publicly release a new FEC enforcement manual. In May 2012, the FEC released on its website more than 1,200 pages of documents concerning its enforcement and audit procedures. During the summer of 2013, controversy developed concerning an Office of General Counsel (OGC) draft of the enforcement manual and proposed revisions to that draft from some commissioners. A major source of controversy appeared to be the extent to which OGC staff should be restricted from sharing information with other agencies (particularly the Justice Department), or from conducting research that might constitute an "investigation" as contemplated in FECA, without specific commission authorization. Although the manual was scheduled for consideration at FEC open meetings at least as early as June 2013, it was held over due to disagreements among commissioners about whether a vote should occur, and if so, when. Debate over the matter continued at the FEC, sometimes including acrimonious public meetings among commissioners. In a June 17, 2013, memorandum to the commission, then-FEC General Counsel Anthony Herman called aspects of a proposal to restrict staff interactions with other agencies without commissioners' approval "troubling" and "unprecedented." He suggested that proposed additional requirements for subpoenas or commissioner approval for information-sharing could "increase administrative burden and legal risk for the Commission" and "would expose the Commission to allegations that politics and partisanship motivate its case-by-case decisions." Then-Vice Chairman Donald McGahn disputed Herman's characterization and contended that FECA vested relevant decisionmaking authority only in the commissioners and that, in some cases, "staff viewed the Commission as an obstacle to be overcome, and not the deliberative body vested with decision-making authority that [FECA] contemplates." Amid apparent stalemate among commissioners, Herman resigned as general counsel effective July 5, 2013. Proposed changes to information-sharing policies reportedly remain under consideration. The general counsel position remained vacant for more than two years. As noted elsewhere in this report, in August 2015 the FEC appointed an acting general counsel. Relationships with Other Agencies The FEC's relationships with other federal agencies that might share enforcement interests appear to have varied over time. The current state of those relationships does not appear to be a major component of the public record. In July 2011, the FEC submitted written responses to questions from the Committee on House Administration, Subcommittee on Elections, explaining that the agency's memorandum of understanding (MOU) with the Justice Department became "somewhat outdated" after Congress enacted the 2002 Bipartisan Campaign Reform Act (BCRA). The commission noted that "[a]lthough several draft proposals were exchanged" between the FEC and DOJ, "those negotiations did not ultimately lead to a revised MOU, and those discussions have not yet been revived." One 2015 media account reported that the MOU had not been updated and that commission referrals to DOJ for alleged "knowing and willful" FECA violations were rare. Enforcement Outreach and FEC Processes The FEC appears to have interpreted its confidentiality obligations differently over time. In brief, areas of debate have concerned which documents the commission releases and, in particular, whether documents that informed the commission's consideration but were not final (such as interim OGC reports) should be released. Litigation, which is beyond the scope of this report, has shaped some of the agency's disclosure policies. As of this writing, activity at recent FEC open meetings suggests that commissioners are attempting to negotiate mutually agreeable revisions to Directive 68, the agency's internal policy regarding how and when respondents and the commission receive status reports on pending cases. In 2007, the FEC established probable cause hearings permitting respondents to address findings in certain OGC briefs. The FEC established a pilot program for conducting audit hearings in 2009. The FEC held hearings on its enforcement procedures in 2003 and 2009. The agency also solicited public comments in 2013. The FEC has substantially revised its website in recent years to include a variety of additional information about the agency's processes and campaign finance data, including some enforcement information. Since 2013, the FEC has permitted those with "a material dispute on a question of law" arising during Audit Division and Reports Analysis Division referrals to ask the commission to consider the disputed legal question before proceeding with an enforcement matter. Deadlocked Votes Throughout its history, the commission has been criticized for failing to reach consensus on some key policy and enforcement issues, resulting in what are commonly termed "deadlocked" votes. Affirmative votes from at least four commissioners are required to authorize most consequential agency activity, including making, amending, or repealing rules; issuing advisory opinions (AOs); and approving enforcement actions and audits. Unlike matters that a majority of the commission has definitively approved or rejected, actions without at least four votes for or against can have the effect of leaving questions of law, regulation, or enforcement unresolved. In these cases, deadlocked votes essentially halt substantive commission action on the matters in question. The FEC does not regularly compile and release summary deadlocks data. Most recently, the commission appears not to have produced an official, publicly available statistical summary since 2009. Using those data, CRS found that in 2008-2009, the FEC deadlocked on approximately 13% of closed MURs. A CRS analysis of more recent FEC vote tallies found that in calendar year 2014, commissioners deadlocked on 24.4% of closed MURs. Results from other analyses vary based on methodology, time period, and the types of votes studied. Deadlocks in some recent matters have fostered debate about what split votes suggest about agency enforcement. For some, deadlocks represent a failure to enforce campaign finance law. For others, they signal that the commission is carefully considering what the law permits and prohibits. Overall, deadlocked votes might or might not reflect the overall functioning of the enforcement process. In particular, even MURs without deadlocks can be controversial, while those with deadlocks can include agreement on some questions. In one 2014 example, MUR 6660, the commission avoided deadlock, but commissioners released competing statements explaining the implications of their votes. Similarly, in two other MURs closed in 2014 (6722 and 6723), the commission considered allegations of impermissible coordination between political committees. On February 25, 2014, the commission voted unanimously that there was "no reason to believe" that impermissible coordination had occurred. In explaining their votes, however, three commissioners stated that "[S]ome activity that is plainly 'coordination' under the statute is not squarely covered by the Commission's coordination communications regulation," suggesting that substantive differences remained despite the agreeing votes. Finally, particularly when votes occur on multiple motions affecting a MUR, substantive decisions can occur on some issues even when deadlocks preclude decisions on others. Congress appears to have anticipated that the commission might be unable to reach consensus in some controversial cases, and perhaps intended for deadlocks to occur. According to one analysis, "In order to ensure that the Commission would not become a vehicle for partisan purposes, the Congress created an unusual conflict within the FEC" through the six-member structure. Commenting on the four-vote requirement, former Commissioner Scott E. Thomas and his executive assistant, Jeffrey H. Bowman, continued, "These provisions were specifically designed to ensure that formal action on a matter before the commission could go forward only on the affirmative vote of a mixed majority of Commission members." In addition, deadlocks might be viewed positively if enforcement actions being considered are perceived as unwarranted or excessive. Nonetheless, deadlocks mean that the commission has been unable to reach consensus about some element of law or regulation. As a result, at least in specific circumstances, deadlocks prevent campaign finance law from being enforced or preclude those seeking guidance from clearly knowing whether their planned activities will run afoul of the law. Another CRS report contains additional analysis of deadlocks generally. Timing and Penalties As Table 2 above shows, at minimum, resolving a MUR enforcement case could take months. In practice, resolution often takes longer. In some cases, the commission may be unable to resolve an enforcement action before the five-year statute of limitation expires. In March 2015, citing FEC data, one account reported that the FEC had "a backlog of 191 serious enforcement cases, with more than a quarter of these still unresolved more than two years after allegations of campaign finance violations were first filed." Some protracted enforcement cases appear to be the result of disagreement among commissioners—including on whether pending enforcement matters constitute a "backlog" or necessary deliberation. In other instances, factors such as the complexity of the issues in question, the need for comprehensive audits, replies from and negotiations with respondents, and other factors explain timing. Recently, some commissioners have proposed that the FEC revise its policies concerning how quickly cases are handled and when the commission or the public is informed about enforcement progress. Some commissioners have also proposed meeting more frequently to address enforcement matters. The FEC has noted that, except for AFP matters, the agency "does not impose fines," but instead "seeks the payment of civil penalties through voluntary settlements (called 'conciliation agreements') with respondents." Those amounts are typically modest, as shown in Figure 1 below. In 2014, for example, the commission assessed less than $600,000 in penalties in all closed enforcement cases—the smallest amount since before FY2000. Financial penalties peaked in the mid-2000s, likely the result of large assessments on some organizations that operated under Section 527 of the Internal Revenue Code (IRC) in the early 2000s while taking the position that they were not political committees subject to FECA. The decline in penalties since that time has generated controversy, with some advocates claiming that lower amounts reflect lax enforcement, a scenario that is possible. It is also possible that decreased penalty amounts reflect better compliance. Particularly amid recent debate about whether the commission should publicize a penalty schedule, commissioners have debated whether existing penalties are sufficient and whether providing more information about how penalties are calculated would essentially publicize a "cost of doing business" for violating law or regulation. In addition, although monetary penalties are the most prominent component of FEC enforcement tools, the commission also could assess other forms of corrective action, such as requiring violators to attend training seminars. Vacancies Among Senior Enforcement Staff As noted in Figure 2 below, high-profile vacancies have occurred in some FEC senior staff positions. As of this writing, these include vacancies or acting appointments in the general counsel position, as well as the associate general counsel for enforcement. Amid a reported stalemate over how to fill the position, and reportedly reflecting other commissioners' divisions over enforcement, the general counsel position was vacant for more than two years between July 2013 and August 2015. The commission appointed FEC attorney Daniel Petalas acting general counsel in August 2015. Potential Considerations for Congress and Concluding Comments Enforcement is important not only for encouraging compliance with law and regulation or correcting non-compliance, but also for what it represents about the state of campaign finance policy overall. For some, the FEC's enforcement process is unnecessarily complex and insufficiently transparent. For others, it is too lax to be effective. Whether observers prefer more vigorous, more limited, or unchanged campaign finance enforcement, there is general consensus that a clear, consistent enforcement process matters. Without transparent and consistent enforcement, political actors lack guidance about what they can and cannot do, when, and how. If Congress wants to provide more direction surrounding enforcement, it could pursue legislation to clarify those issues on which policy stalemates have occurred. Nonetheless, pursuing legislative clarity on controversial issues might not be practically attainable in all circumstances. In addition, legislating individual policy issues would not necessarily address the fact that the commission routinely deadlocks on a variety of issues, which suggests that structural reform could be a more expedient route to curtailing split votes. As such, some contend that more vigorous enforcement of campaign finance law requires restructuring the FEC. Most prominently, critiques typically propose eliminating the even-number commissioner structure to make deadlocks less likely. For some, in choosing the current bipartisan structure, Congress intentionally made the FEC "weak" with the agency being "designed to promote deadlock along party lines on issues that really mattered." Other observers warn that an odd number of commissioners could invite politicized enforcement. As one analysis explains, "The FEC's bipartisan design ... allows its regulations to carry weight. If not for this bipartisan design, every FEC action would be tinged with politics and viewed by some as illegitimate." Several questions could be relevant as the House and Senate examine how they want the FEC to enforce campaign finance law and regulation—if they choose to make any change at all. Potential questions include the following: How does Congress want the FEC to prioritize enforcement compared with other duties, such as disclosure? What relationships does Congress want the FEC to have with other enforcement agencies, and for which areas of law and regulation should the FEC be responsible? Does the commission have a unified understanding of what the agency's enforcement priorities are and should be? Does Congress want to clarify its expectations in these areas through oversight, legislation, or both? Does the commission have adequate appropriations to carry out enforcement duties? Does the commission have adequate personnel to carry out enforcement duties? Does the commission have adequate statutory authority to carry out enforcement duties? To what extent should the commission wait for relevant pending litigation to resolve before reaching a determination in enforcement cases? Does Congress want to leave that determination to the commission or to specify a standard? If so, what? Do FECA's civil-enforcement requirements sufficiently reflect current needs? For example: Do prohibitions on sharing information about open enforcement matters limit the potential for filing frivolous complaints for publicity; do they limit the commission from informing the public about its enforcement activities; or neither or both? Do the required time frames (e.g., as shown in Table 2 ) allow for sufficient consideration by the commission and are they reasonable for respondents? Do those time frames, commission practices, or both or neither affect what is sometimes regarded as long delay in pending enforcement matters? Does the requirement that the commission attempt to negotiate compliance undermine enforcement? Does Congress want to clarify which investigation and enforcement activities FEC staff can initiate versus those that require commissioner actions? Specifically, does Congress want to revisit the authorities of the commission versus those of the OGC or other enforcement staff? Does Congress want to reestablish the FEC's authority to conduct random audits? Does Congress want to amend FECA (or enact another statute) to provide either greater flexibility or limitations in the enforcement process? The FEC can determine how to prioritize enforcement activities, fill relevant staff vacancies, and whether or not commissioners can agree on enforcement actions. Much of the enforcement process, however, is set in statute and therefore beyond the agency's control. As long as campaign finance policy remains controversial, history suggests that so, too, will be enforcement.

The Federal Election Commission (FEC) is responsible for civil enforcement of the Federal Election Campaign Act (FECA) and other campaign finance statutes. Enforcement, one of the FEC's principal functions, is perhaps the most controversial thing the agency does. Enforcement matters not only for encouraging compliance with law and regulation, but also for what it represents about the state of campaign finance policy overall. Some agency critics argue that modest fines, protracted processes, and deadlocked commission votes demonstrate that the FEC cannot effectively enforce campaign finance law. Others contend that Congress designed the FEC, which includes six commissioners who typically represent the two major political parties, to be deliberate and driven by consensus so that enforcement would not be politicized. Enforcement has drawn attention inside and outside the agency. In recent years, commissioners have sparred at open meetings and in the media about whether the agency's enforcement activities are inadequate or overzealous. The commission has struggled to staff some senior enforcement positions. Through oversight hearings, recent Congresses have monitored the FEC's enforcement activities and, in some cases, criticized the transparency surrounding those processes. Congress occasionally has considered legislation to restructure the agency, particularly to change the number of commissioners, thereby reducing possibilities for deadlocked votes. H.R. 2931 in the 114th Congress is the latest such proposal. This report provides Congress with a resource for understanding the FEC's enforcement process and context for why enforcement is consequential. Enforcement represents broader debates about what the FEC does and what it should do, and what federal campaign finance policy is and should be. The FEC can determine how to prioritize enforcement activities and can manage its response to ongoing campaign finance policy disagreements. The agency has less or no control over other aspects of its environment, such as the enforcement process mandated in FECA. CRS Report R44318, The Federal Election Commission: Overview and Selected Issues for Congress, by [author name scrubbed] provides an overview of the FEC generally, including attention to organizational and administrative matters that are related to but distinct from the enforcement topics discussed here. This report will be updated occasionally as events warrant.

Introduction The European Union (EU) is one of the United States' chief agricultural trading partners and also a major competitor in world food markets. Both the United States and the EU provide significant government support for their agricultural sectors. In the United States, a large share of support is concentrated on wheat, feed grains, cotton, oilseeds, sugar, and dairy. The EU provides more extensive support to a broader range of farm and food products, including grains, cotton, rice, oilseeds, peanuts, dairy, sugar, fresh and processed fruits and vegetables, and livestock products. According to the Organization for Economic Cooperation and Development (OECD), the EU and the United States together account for more than 60% of all government support to agriculture among the major developed economies. Although many in Congress have historically defended U.S. farm support programs as a means to ensure that the United States has continued access to the "most abundant, safest, and cheapest food supplies in the world," long-standing criticisms and continued debate have challenged the extent of and need for government support of farm programs. Some argue that the failure of the United States and EU to reform their respective farm support programs has contributed to delays in the Doha Round of multilateral trade negotiations within the World Trade Organization (WTO). In response to these criticisms, both the United States and the EU have modified their farm programs in part by expanding various types of "non-commodity" support, such as farmland conservation (or so-called "agri-environment") programs and rural development programs, among other programs. To date, however, non-commodity support still constitutes a very small share of total farm-level support, compared to farm production support, for both the United States and the EU. Information comparing the EU and U.S. farm support programs will continue to be of interest to Congress as the Doha negotiations move forward. This report compares farm support in the United States and the EU, given available quantitative data and information for these two economies. Three general sources of information include (1) the OECD's annual Producer Support Estimate (PSE); (2) estimates of the Aggregate Measurement of Support (AMS) for agricultural programs, as notified by the United States and the EU to the WTO as part of their member country obligations; and (3) annual EU and U.S. budget expenditures for agricultural programs. Overview of U.S. and EU Farm Programs The OECD reports that the EU accounts for the majority—about one-half—of all government support to agriculture among the major developed economies. Total EU agricultural support generally is much higher than in the United States. However, direct spending comparisons are complicated by significant structural differences between the U.S. and EU farm sectors. The United States has roughly twice the farmland base of the European Union, while the EU has six to seven times the number of farm operators spread across each of its 27 member countries. The EU program also supports a broader range of farm commodities as compared to the United States. Consequently, EU and U.S. farm program support differs in both size and scope, as well as in the manner this support is provided. U.S. Agricultural Policy In the United States, federal farm support, food assistance, agricultural trade, marketing, and rural development policies are governed by a variety of separate laws. Although many of these policies can be and sometimes are modified through freestanding authorizing legislation, or as part of other laws, the omnibus, multi-year farm bill provides an opportunity for policymakers to address agricultural and food issues more comprehensively. The most recent omnibus farm bill ( P.L. 110-246 , the Food, Conservation, and Energy Act of 2008) covers a range of areas, including commodity crops, horticulture and livestock, conservation, nutrition, trade and food aid, agricultural research, farm credit, rural development, energy, forestry, and other programs. U.S. farm support consists of programs that provide both direct and indirect support to producers and consumers and to the agricultural sector in general. The core programs provide price and income support for selected commodities, including corn, wheat, cotton, rice, soybeans, dairy, and sugar. Grains, cotton, oilseeds, dairy, and peanuts generally are eligible for both fixed "decoupled" payments (payments not tied to production or crop yields) and "counter-cyclical assistance" payments (payments tied to per-bushel or per-pound target prices); the total producer subsidy is based on past production. Producers of these and other commodities also are eligible for crop loans and loan-related subsidies that provide further support. Dairy and sugar are supported through various minimum pricing systems, and some commodities are subject to quotas to limit imports. The Congressional Budget Office (CBO) estimates that the average cost of the commodity programs will be about $8.3 billion per year under the 2008 farm bill (FY2008-FY2012). Farmers may also be eligible for crop insurance and disaster assistance payments. Starting with the 1985 farm bill, Congress introduced programs intended to help producers adopt farming practices that preserve or enhance the environment. Conservation programs administered by USDA can be broadly grouped into land retirement and easement programs and so-called "working lands" programs. In general, land retirement and easement programs take land out of crop production and provide for program rental payments and cost-sharing to establish longer-term conservation coverage to convert the land back into forests, grasslands, or wetlands. Working lands programs provide technical and financial assistance to assist agricultural producers in improving natural resource conservation and management practices on their productive lands. In addition, aside from some long-standing rural business and community programs, the 1996 and 2002 farm bills, as amended, included several new rural development programs intended for infrastructure improvements, community services, and business development. The 2008 farm bill also expanded upon these overall program areas by creating new farm conservation and rural development programs. CBO estimates that the average cost of the mandatory conservation and rural development programs will be about $4.8 billion per year under the 2008 farm bill. EU Agricultural Policy The Common Agricultural Policy (CAP) governs agricultural policies and programs for the EU's the 27 member countries. Established in 1962, the CAP's objectives are to: increase agricultural productivity, ensure fair living standards for farmers, stabilize markets, ensure the availability of food, and provide food at reasonable prices. These aims were achieved primarily by the EU intervening in commodity markets to buy farm output when market prices fell below agreed target prices. To prevent imports from undercutting the high internal prices that resulted from the operation of the intervention buying system, the EU levied variable tariffs on imported agricultural products. Export subsidies were used eliminate the surpluses of agricultural products that resulted from the high internal prices of the intervention buying system. Among the unintended consequences of the CAP were high prices for consumers and high budget expenditures. During the 1970s and 1980s, the CAP accounted for as much as 70% of the total EU budget. The CAP was also criticized by EU trading partners for distorting world markets and interfering with global agricultural trade. Since 1992, the EU has implemented policy changes that move the CAP toward support that is more market-oriented and decoupled from current production and prices; the changes also reduce the budgetary costs of the CAP and bring EU agricultural policy in line with World Trade Organization (WTO) rules and restrictions. More recently, the evolution of the CAP has been influenced by other objectives (than those mentioned in the Treaty of Rome) such as maintaining the quality of rural life, improving the environment, and protecting animal welfare. Reforms in 1992 (the MacSharry Reforms) and 1999 (Agenda 2000) reduced EU commodity support prices toward market levels and required that some farmland be taken out of production. Budget disciplines designed to reduce the growth in community spending on the CAP were established in 2002. In addition, the receipt of farm income support is contingent upon the farmer meeting an extensive array of agricultural and environmental norms that were introduced in 2003 (the Midterm Review). Direct aid to farmers and commodity market support constitute the first pillar of the CAP. Rural development measures, added to the CAP starting in mid-1995, are the second pillar. Total reported spending for the EU's farm programs—including direct aid and support for conservation and rural development—is estimated at nearly $68 billion (€54 billion) for 2008, and accounts for more than 40% of the EU budget annually. The major component of the first pillar of the CAP (direct aid and market support) is the single farm payment (SFP). Introduced in 2003, the SFP replaced payments made under various commodity-specific common market organizations (CMOs) and largely decoupled support from current prices or production. EU member countries could opt to maintain a limited link between payments and production ("partial decoupling"), but most chose to move to full decoupling. The recently completed Health Check will eliminate partial decoupling for all but a few (livestock) commodities by 2012. Reported spending for "direct aids," covering SFP, is estimated at about $50 billion (€37 billion) for 2008. In order to receive the SFP, a farmer must comply with certain environmental and agricultural measures. Cross-compliance entails keeping farmland in good agricultural and environmental condition and observing mandatory management requirements. The requirements are included in regulations established for groundwater protection, water pollution from nitrates, pesticide use, and the protection of habitats for flora and fauna. These agricultural and environmental practices, often referred to as "good agricultural practices" or GAPs, are listed below ( Table 1 ). Non-compliance is sanctioned by reductions in direct payments. The reduction may not exceed 5% for one instance of non-compliance, but may increase to 20% in the case of repeated non-compliance. If non-compliance is intentional, the reduction will not be less than 20% and could result in total denial of the SFP for one or more years. Rural development policy (pillar two) focuses on three identified areas: competitiveness for farming and forestry; environment and countryside; and quality of life and diversification of the rural economy. Activities under the second pillar are designed and co-financed by member countries. Within member states, the EU funds 75% of the cost of rural development activities, and 90% in poorer areas. Increased spending on rural development is financed by reducing the direct payments to larger farmers. From 2007 onward, direct payments to individual farmers of €5,000 and higher are reduced by 5% to finance rural development. The EU refers to this reduction in direct payments and transfer of funds from the first to the second pillar as "modulation." Spending on the EU's "rural development" programs, which include agri-environmental programs, is estimated at about $14 billion (€10 billion) for 2007 and about $19 billion (€13 billion) for 2008. Overall, CAP spending for rural development represents about 20% or more of all EU farm spending. Direct farm spending, including the SFP, accounts for about 70% of the CAP. The remaining budget is spent on other farm programs and administration. CAP spending is subject to a financial discipline mechanism designed to keep spending on direct aid and market support (pillar one) in line with budget ceilings agreed to in 2002. If overspending on direct aids is forecast, then direct aids are reduced to ensure that the budget is not exceeded. Comparing Support Across Countries Three general sources of quantitative data and information compare agricultural program support between the United States and the European Union: 1. the annual Producer Support Estimate (PSE) for agricultural programs by country, as calculated and compiled by the OECD; 2. annual estimates of the Aggregate Measurement of Support (AMS) for agricultural programs, as calculated and compiled by individual World Trade Organization (WTO) member countries and notified to the WTO as part of their membership obligations; and 3. annual budget expenditures for agricultural programs, as reported by individual countries. Each of these information sources provides estimates of support for agricultural commodities. These sources also provide, although to a more limited extent, estimates of support for non-commodity programs, such as agricultural conservation programs, rural development, agro-forestry, bioenergy, and related farm programs. Each of these sources is useful for comparing farm program support across countries, but they also have certain limitations, particularly in the area of non-commodity programs, such as agricultural conservation. The PSE and AMS data are more inclusive across all program areas and more comprehensive overall than reported budgetary information. None of these information sources reflect the most recent reforms to the EU's Common Agricultural Policy (CAP) agreed to by the EU agriculture ministers in late 2008. These information sources also highlight differences between the United States and the European Union, not only in terms of their respective policy priorities, but also in terms of farm sector differences. For example, the United States' commodity program focuses its support on a few major commodities (mostly corn, wheat, rice, soybeans, cotton, dairy, and sugar), whereas the EU farm program provides commodity support for a much wider range of products, including grains, cotton, rice, oilseeds, peanuts, dairy, sugar, fresh and processed fruits and vegetables, and livestock products. Farm structures and organization are also vastly different: the United States has roughly twice the farmland base of the European Union, with fewer but significantly larger farms than the EU. The EU has less total land in farming, but as many as six to seven times the number of farm operators. Such differences can affect how the available data and information may be interpreted, and caution is needed when comparing any available data translated into a per-unit basis, such as expenditures per acre or per farm, between these countries. Putting aside limitations of the data, these information sources are useful in comparing farm program support across countries. The data indicate that, since the mid-1980s, total farm support in the United States and EU has declined as a share of total gross farm receipts. In general, support for commodity programs has decreased, whereas the support for non-commodity programs, such a farmland conservation and certain types of rural development programs, has increased. However, support for non-commodity programs still accounts for a small share (less than 1%) of farm receipts. As a share of overall farm receipts, support for such programs is slightly greater in the United States, where support for non-commodity programs accounts for less than 0.7% of receipts, than in the EU, where it accounts for less than 0.3% of receipts annually. However, in terms of total spending, the data show that the EU provides more support, in aggregate, than the United States for both production-based programs and non-commodity programs, such a farmland conservation and agri-environmental programs. OECD's Producer Support Estimates A widely referenced source of data and information used to compare farm program support is the OECD's long-standing annual publication Agricultural Policies in OECD Countries , which describes and evaluates agricultural policies in each of the OECD countries. Data Description The measure used by OECD for its cross-country comparison is the Producer Support Estimate (PSE). The PSE reflects farm support expressed as a percentage of the value of gross output or farm receipts. OECD defines the PSE as "an indicator of the annual monetary value of gross transfers from consumers and taxpayers to support agricultural producers, measured at farm gate level, arising from policy measures, regardless of their nature, objectives or impacts on farm production or income." This measure is broken down into seven identified farm support categories, including six categories of production-based support (commodity production, input use, payments based on various criteria including area planted, animal numbers, receipts, and income) and a single non-production category (so-called "non-commodity criteria" or "non-commodity outputs"). The definition of "non-commodity outputs" is closely related to the concept of "multifunctionality," which is widely acknowledged in the EU and builds on the idea that agriculture has many functions in addition to producing food and fiber. These positive attributes include environmental protection, landscape preservation, biodiversity, rural viability and employment, animal welfare, food safety and quality, and food security. Typically, non-commodity outputs of agriculture satisfy two conditions: they are jointly produced with commodity outputs, and they provide social value (and impose social costs) not reflected in markets. Because non-commodity outputs still account for a very small portion of total gross farm receipts, the OECD report does not always allow for a thorough analysis of changes in government support for non-commodity programs, such as agri-environmental services. Advantages/Disadvantages The OECD's report includes extensive statistical and historical data broken down by type of support in aggregate and by major commodity. The analysis is comprehensive and accounts for many of the underlying structural issues that would otherwise complicate a comparison of farm programs across countries, such as differences in program priorities, reporting differences, and fluctuations in commodity prices and exchange rates. For commodities, the OECD's reported information is inclusive across all program areas and includes support for all commodities, even those that are supported through price supports and administered prices (such as dairy and sugar in the United States). This allows for a direct comparison of agricultural support between the United States and the EU. Also, for the EU, the OECD report provides information across several levels of EU accession: EU12 (1986-1994, including parts of eastern Europe from 1990); EU15 (1995-2003); EU25 (2004-2006) and EU27 (since 2007). Moreover, the OECD's historical perspective, extending back through the mid-1980s, allows for a complete comparison of the effects of policy reforms over time. One shortcoming of the PSE is that because it is expressed as a percentage of the value of gross farm receipts and is best suited to reflect general policy trends, it does not readily allow for a direct comparison in terms of budget spending. Within the aggregate category for non-commodity outputs, the PSE does not allow for a direct and detailed comparison of differences in specific programs, such as agricultural conservation. Non-commodity outputs are measured broadly and expressed in terms of long-term resource retirements, along with other specific and non-specific non-commodity criteria as reflected in each country's overall portfolio of agricultural conservation, forestry, and rural development programs. More specific program breakouts within this category are not available. What the Data Indicate With respect to developed countries, the 2009 OECD report highlights the following general conclusions, among others: producer farm support is at its lowest level since the 1980s; there is a continued shift away from most market-distorting supports; there is a continued shift toward new policy measures to strengthen the viability of rural areas and improve environmental performance, among other societal concerns; and reforms in the area of farm policy are uneven across countries. Figure 1 and Figure 2 compare available PSE estimates since the mid-1980s by level and by support categories for the United States and the EU. As shown, total farm support in the United States has declined from an estimated 24% of gross farm receipts in 1986 to about 7% of receipts in 2008 ( Figure 1 ). Of this total, the share of total farm support for commodity programs dropped from 24% to 6% of overall farm receipts; support for non-commodity programs increased but still accounts for less than 1% of receipts. Comparable estimates for the EU show that total farm support has also declined from an estimated 42% of farm receipts in 1986 to about 25% in 2008, including a decrease in the share of total farm support for commodity programs ( Figure 2 ). Support for non-commodity criteria has increased, but still accounts for less than 1%. This trend is also reflected by data showing decreases in total support payments for commodity programs in both the United States and the EU during the time period. The data are based on breakouts of production-based support, grouped according to commodity production; input use; payments based on various criteria including area planted, animal numbers, receipts, and income; and miscellaneous. Non-commodity outputs are measured broadly and do not allow for more specific breakouts to isolate, for example, support for agricultural conservation. WTO-Reported Aggregate Measurement of Support Another source of information that allows for a comparison of farm program support across countries is the annual country compilations of the so-called "Aggregate Measurement of Support" or AMS for a country's agriculture sectors. Countries periodically provide ("notify") these compilations to the WTO, as part of each country's WTO obligations agreed to at the time of the Uruguay Round Agreement on Agriculture. Although these data allow for comparisons across countries, their primary purpose is to monitor how countries are doing in terms of meeting their WTO commitments to reduce domestic support for their agricultural sectors. Data Description The AMS reflects the monetary value of domestic or "internal" publicly funded farm support, and is generally grouped into three colored boxes and two "de minimis" exclusion categories: 1. Green box programs are payments that are only minimally trade-distorting. Examples are research programs, direct payments to farmers that are not contingent on production, environmental program payments, or disaster assistance. Green box payments do not require WTO disciplines or reductions, and do not count against the country's subsidy ceiling. 2. Blue box programs are direct payments made under a production-limiting program. Examples are EU direct payments to producers based on fixed areas or yields or a fixed number of livestock. There are currently no U.S. blue box programs. Blue box programs are not subject to WTO disciplines or reductions. 3. Amber box programs are contingent on participation in agricultural production. Examples are U.S. price supports for dairy and sugar; U.S. loan deficiency payments or marketing loans for grain, oilseed, and cotton producers; and EU intervention purchases of farm products at administratively maintained prices above market prices. Such payments are considered market-distorting and are subject to WTO reduction commitments. 4. De m inimis exemptions pertain to "small" levels of domestic support, no matter what their nature, that are deemed sufficiently benign (i.e., not likely to distort trade) to be excluded from the AMS calculation. They include commodity-specific support (i.e., support that applies to a specific product such as wheat, sugar, etc.) and non-product-specific support (e.g., irrigation). If total non-product-specific subsidies are below 5% (10% for developing countries) of the value of a developed country's total agricultural production, then they do not have to be included in the AMS calculation. Advantages/Disadvantages The AMS data provide a comprehensive accounting of farm programs, grouped together by major categories, and originally were reported by each country in its local currency. The OECD's reported information is inclusive across all program areas and includes support for all commodities, even those that are supported through price supports and administered prices (such as for dairy and sugar in the United States). However, these data reflect annual conditions and are therefore subject to year-to-year fluctuations in commodity markets. Once these data are converted to a common currency value, such as U.S. dollars, for comparison purposes, these annual data also may be affected by fluctuations in foreign exchange rates. An advantage of the AMS data is that they are aggregated across all commodities to reflect the monetary value of domestic agricultural support, even for those programs that do not receive annual budgetary outlays. For example, the U.S. dairy and sugar programs do not receive commodity support payments, but are instead covered through other support mechanisms, such as government purchases (dairy) and marketing quotas and import barriers (sugar). Yet the AMS captures this support as part of its overall estimate. As reported in the U.S. notification, dairy and sugar programs accounted for 40% and 9% of the U.S. "Current Total Aggregate Measurement of Support" in 2005, along with corn (35%) and cotton (13%). In contrast, the most recent EU notification reports that total fresh and processed fruits and vegetables represented about one-third of EU "Current Total Aggregate Measurement of Support" in 2005/2006, along with another roughly 50% for dairy products, sugar, and most grain products. The principal limitation of the AMS data is its substantial reporting lag. The most recent U.S. notification reflects agricultural support through the 2007 marketing year. The most recent EU notification covers marketing year 2005. Accordingly, the only period available to compare data on the United States and the European Union is 1995 through 2005. A more recent EU submission is reportedly delayed because of accounting issues surrounding EU country accession. The available AMS data are also limited because of differences in policy priorities, as well as reporting and accounting differences in farm programs between the United States and the EU. For example, the United States "green box" payments differ from the EU's in that the U.S. includes "domestic food aid," which includes food stamps, and other domestic food and child nutrition programs ( Table 1 ). In addition, internal shifts among categories between reporting periods also complicate a direct or historical comparison. For example, in recent years the U.S. notification has classified the farmland long-term retirement program, the Conservation Reserve Program (CRP), as an "environmental payment," whereas previously it was classified under "resource retirement programs." This type of change can distort historical trends and period averaging of the available data, understating U.S. spending on conservation programs, as further described in the next section. What the Data Indicate Available AMS information for the United States and the EU, averaged over the 1995-2005 period, indicate that the United States provides less support than the EU for both production-based "amber box" programs and environmental programs under the "green box," but substantially more for domestic food aid and decoupled direct payments ( Table 2 ). These data suggest that the bulk (about 77%) of U.S. farm payments are green box (i.e., not subject to WTO disciplines), while about 27% of EU payments are green box. However, these data are not directly comparable across all reported categories and, in some cases, do not reflect current conditions. For example, the U.S. notification classifies "domestic food aid" as a sizable part of its green box support ($38.3 billion), whereas the EU does not. In addition, in the United States, direct payments are notified as decoupled, total roughly $5 billion per year, and have ranged from about 25% to 44% of total commodity payments in recent years. The U.S. classifies these farm payments as "green box" when reporting agricultural subsidies to the WTO; thus these payments do not count against their subsidy ceiling. The EU data reflect changes since the 2003 CAP reforms. As part of these reforms, EU farm production payments were largely decoupled with the establishment of "single farm payments" (SFP). Comparing available AMS data ( Table 2 ) on environmental payments also requires additional clarification. As already discussed, the recent U.S. notification reclassified the CRP as an "environmental payment" whereas previously it was classified under "resource retirement programs." Given that these data are averaged over the 1995-2005 period, this indicates that average environmental payments in the United States ($1.2 billion) are substantially lower than in the European Union ($5.3 billion) ( Table 2 ). However, U.S. payments for "resource retirement programs"($1.0 billion), reflecting the inclusion of CRP in earlier years, are more than twice similar payments in the European Union ($0.5 billion). Although total environmental payments under the "green box" classification are generally higher in the EU than in the United States, more recent data show this difference is less stark: U.S. environmental payments were $3.8 billion in 2007, compared to the EU's $5.6 billion in 2005. Table 2 also shows that EU payments for rural development programs are much greater than in the United States (for example, compare "payments under regional assistance programs," and "investment aids"), whereas U.S. payments are higher for USDA research, regulatory, and technical services ("general services"). Budget Expenditures Annual budget expenditures/outlays for agricultural programs, reported by the United States and the EU, provide another source of comparative data. Data presented here are for the 2006 (execution or actual) and 2007 (budget) period. Data Description Annual data are reported by each country in its local currency. Because of general reporting differences among countries, the data originate from a variety of sources. Budget data for the United States are generally from USDA, derived from information from the Commodity Credit Corporation (CCC), USDA's 2008 Budget Summary and Annual Performance Plan , and other data and information from USDA's Office of Budget & Program Analysis and other USDA agencies. The EU budget data are from European Commission (EC) agricultural reports and statistics. Advantages/Disadvantages The main advantage of annual budget data is that they are more timely and more readily understood than other available information sources. As with other monetary data, annual budget data reflect annual conditions and are therefore subject to year-to-year fluctuations in commodity prices. Once these data are converted to a common currency value, such as U.S. dollars for comparison purposes, these annual data may also be affected by fluctuations in foreign exchange rates. These data are also limited for use in comparing historical changes, given recent reforms and country accession to the European Union. Perhaps the main shortcoming of available budget data is that they are not always comprehensive and inclusive of all support areas. Budget data only reflect support for those programs that receive annual budgetary outlays. As a result, budget data do not reflect support for the U.S. dairy and sugar programs, since these programs do not receive commodity support payments, but are instead covered through government purchases (dairy) and marketing quotas and import barriers (sugar). The OECD and AMS data account for all program areas. Major differences in the scope of supported farm commodities between the United States and EU also complicate a direct comparison. As a result, U.S. budget data cover mostly five crops—corn, wheat, cotton, rice, and soybeans—since these commodities account for over 90% of government program payments to farmers. Many products, including meat and livestock products, and fruits and vegetables, do not receive farm support payments. In contrast, the EU farm program provides commodity support for a much wider range of products, including these same grain products, dairy, sugar, fruits and vegetables, and livestock products. Most (about 70%) of the EU's budget outlays for commodity production are in the form of direct aid (i.e., decoupled farm payments). Available budget data are also limited by reporting and accounting differences between the United States and the EU. Although annual budget data provide more updated information on farm program spending, they are not grouped into similar categories, as are the OECD and AMS data. In most cases, aggregated budget data are not directly comparable. This makes it difficult to directly compare values across different countries, without first closely examining each of the budget categories line by line, and combining and/or removing various budget subcategories. What the Data Indicate Despite the aforementioned difficulties in making direct comparisons, Table 3 shows available budget data for the United States and the EU compiled into two main groupings: commodity and non-commodity support. Non-commodity support includes selected agricultural conservation, rural development, and forestry programs. These groupings include Commodity supportEuropean Union: Available EU budget data reflect reported budget outlays for two categories: "Interventions in agricultural market" (budget item 05 02) and "Direct aids" (budget item 05 03, including decoupled direct aids). United States: Available U.S. data reflect the total of commodity payments and crop insurance (premium subsidy and net indemnity payments). Non-commodity supportEuropean Union: Available EU budget data are reported across an aggregate category, "Rural development" (budget item 05 04), and there is limited information providing a detailed breakout of current budget outlays for individual conservation, rural development, and forestry activities across all EU27 countries. United States: Available U.S. data are compiled building up from comparable subcategories and excluding some categories. Included are reported budget outlays for all U.S. conservation programs administered by both USDA's Natural Resources Conservation Service (NRCS) and the Farm Service Agency (FSA), select rural development programs (rural utilities loans and grants) and forestry programs (research, and state/private forest lands funding). Excluded are some programs listed under total U.S. rural development and forestry programs, including wildfire activities, the National Forest Service system, and rural housing. These subcategories do not appear to have comparable budget lines as part of the EU farm accounting. Compiled in this manner, Table 3 shows available U.S. and EU budget data for select farm program areas, with total expenditures broken out by farm commodities and selected rural development, conservation, and forestry programs. These data show that between 2006 and 2007, EU spending for non-commodity support increased. Budget data for farm commodity support are less straightforward, since commodity prices were generally low in 2007, which complicates a comparison of the trends in overall commodity program spending. Limited information is available within the EU's aggregate "rural development" budget category to estimate the EU's so-called agri-environmental payments. Other available budget data for the EU15 countries indicate that, on average, agri-environmental payments have accounted for about 75% of the total rural development budget item (2000-2006). EU outlays for agri-environmental programs are currently estimated at roughly $11-$12 billion per year. This compares to an average of about $5 billion in outlays for U.S. conservation programs during the same period, or less than one-half of total spending in the European Union. The EU requires its farmers to meet certain conditions related to environmental protection, food safety, and animal welfare before receiving these direct payments, whereas there are limited similar requirements of U.S. farmers regarding conservation payments. Per-Unit Budget Estimates Caution is needed when comparing these data as translated to a per-unit basis, such as per-acre or per-farm. Previously, the OECD reported its compiled data on a per-unit basis, but it stopped presenting data this way because it was considered too misleading, given underlying differences in farm structures. Comparing data on a per-acre or per-farm basis is complicated by the significant structural differences between the U.S. and EU farm sectors: namely, the United States has roughly twice the farmland base of the EU but less than 15% of the total number of farms. These reported land-use values reflect all farmland, including working lands and retired farm lands, as well as lands that produce crops and animals that are not supported by, for example, the U.S. commodity programs. Comparing budget data on a per-unit basis affects a simple inter-country comparison and may result in vastly different interpretations of the data. As an example, when expressed on a per-acre basis, the budget data show that farm expenditures are roughly five to six times greater in the EU than in the United States. When these same data are expressed on a per-farm basis, the outcome is reversed, indicating that U.S. expenditures per farm are about two to three times greater than in the EU ( Table 3 ). Conclusions and Policy Implications The EU is one of the United States' chief agricultural trading partners and also a major competitor in world food markets. Both the EU and the United States heavily support their agricultural sectors. Although many in Congress have historically defended U.S. farm support programs as a means to ensure that the United States has continued access to the "most abundant, safest, and cheapest food supplies in the world," long-standing criticisms and continued debate have challenged the extent of and need for government support of farm programs. In response to these criticisms, both the United States and the EU have modified their farm programs in part by expanding various types of "non-commodity" support, such as farmland conservation and rural development programs, among other programs. To date, however, non-commodity support still constitutes a very small share of total farm-level support, compared to farm production support. Some argue that the failure of the United States and EU to reform their respective farm support programs has contributed to delays in the Doha Round of multilateral trade negotiations within the World Trade Organization (WTO). Information comparing the EU and U.S. farm support programs will continue to be of interest to Congress as the Doha negotiations continue to move forward.

The European Union (EU) is one of the United States' chief agricultural trading partners and also a major competitor in world food markets. Both the United States and the EU provide significant government support for their agricultural sectors. In the United States, a large share of support is concentrated on wheat, feed grains, cotton, oilseeds, sugar, and dairy. The EU provides more extensive support to a broader range of farm and food products, including grains, cotton, rice, oilseeds, peanuts, dairy, and sugar, but also fresh and processed fruits and vegetables, and livestock products. In addition, starting in the 1980s, both the United States and the EU introduced policies and programs expanding the type and amount of support for agricultural conservation and so-called "agri-environment" practices on-farm. Compared to support for commodity production, however, support for agricultural conservation still constitutes a very small share of total farm-level support within both the EU and the United States. According to the Organization for Economic Cooperation and Development (OECD), the EU and the United States together account for more than 60% of all government support to agriculture among the major developed economies. In terms of total spending, EU agricultural support generally is much higher than in the United States, and the EU alone accounts for 50% of the OECD's total estimate. However, comparisons are complicated by significant structural differences between the U.S. and EU farm sectors. The United States has roughly twice the farmland base of the European Union, while the EU has six to seven times the number of farm operators spread across each of its 27 member countries. The EU program also supports a broader range of farm commodities as compared to the United States. Three general sources of quantitative data and information compare agricultural program support between the United States and the European Union. These include (1) the OECD's annual Producer Support Estimate (PSE); (2) estimates of the Aggregate Measurement of Support (AMS) for agricultural programs, as compiled by individual World Trade Organization (WTO) member countries and notified to the WTO as part of their membership obligations; and (3) annual budget expenditures for agricultural programs, as reported by individual countries. These data sources are useful in comparing farm program support across countries. The data indicate that, since the mid-1980s, total farm support in the United States and EU has declined as a share of total gross farm receipts. In general, support for commodity programs has decreased, whereas the support for non-commodity programs, such as farmland conservation and certain types of rural development programs, has increased. However, support for non-commodity programs still accounts for a small share (less than 1%) of farm receipts. As a share of overall farm receipts, support for such programs is slightly greater in the United States, where support for non-commodity programs accounts for less than 0.7% of receipts, than in the EU, where it accounts for less than 0.3% of receipts annually. In terms of total spending, however, the data show that the EU provides more support, in aggregate, than does the United States for both production-based programs and non-commodity programs, such as farmland conservation and agri-environmental programs.

Introduction Recent events have renewed long-standing congressional interest in safe management of spent nuclear fuel (SNF) and other high-level nuclear waste. These issues have been examined and debated for decades, sometimes renewed by world events like the 9/11 terrorist attacks. The incident at the Fukushima Dai-ichi nuclear reactor complex in Japan, combined with the termination of the Yucca Mountain geologic repository project, have contributed to the increased interest. This report focuses on the current situation with spent nuclear fuel storage in the United States. It does not address all of the issues associated with permanent disposal of SNF, but rather focuses on the SNF storage situation, primarily at current and former reactor facilities and former reactor sites for the potentially foreseeable future (i.e., a total of 300 years). Although no nation has yet established a permanent disposal repository for SNF and other forms of high-level radioactive waste (HLW), there is broad consensus that a geological repository is the preferred method for these wastes. In the United States, the disposal repository location has been debated for decades. The proposed repository in Nevada at Yucca Mountain was terminated in 2009, although the project continues to be debated and litigated. Whether the current situation with the Yucca Mountain project is merely a temporary hiatus or becomes a permanent shutdown, extended storage for longer than previously anticipated is virtually assured. There is also no clear consensus on interim storage of SNF. The SNF storage issues most widely debated include What strategies should be employed for SNF storage, pending disposal; Where should SNF be stored on an interim basis; and What SNF management structure should be used? A focus of this renewed broader debate is the recently completed report by the Blue Ribbon Commission on America's Nuclear Future (BRC), which released its final report on January 29, 2012. This final report modified a July 2011 draft, which followed nearly more than a year of effort, including extensive public testimony and several subcommittee reports after the Commission was chartered by the Secretary of Energy in early 2010. Some, including the U.S. Nuclear Regulatory Commission (NRC), view the current situation as providing adequate safety. Others, including the National Academy of Sciences, have observed that safety may be improved by wider use of dry storage methods. Some analysts, including the BRC, have considered issues beyond safety—including cost and impact on investments—and urge construction of an interim centralized storage at a "volunteer" location after sufficient cooling has occurred. Some have recommended a more limited approach to consolidation of interim SNF storage using a smaller number of existing operational reactor sites, away from the original generating reactor, for SNF located where there is no operating reactor generating additional SNF or if repository delays result in greater stranded SNF and higher financial liabilities. The two primary technologies being employed in the United States are wet pool storage and dry cask storage (see " How Is Spent Fuel Stored Now? "). Senator Dianne Feinstein, chair of the Senate Subcommittee on Energy and Water Development Appropriations, with jurisdiction over NRC and the U.S. Department of Energy (DOE), stated at a hearing in March 2011: Most significantly, I believe we must rethink how we manage spent fuel. Spent fuel must remain in pools for at least five to seven years, at which time it can be moved to safer dry cask storage. However, these pools often become de facto long-term storage, with fuel assemblies "re-racked" thus increasing the heat load of the pools. In California, for instance, fuel removed from reactors in 1984 is still cooling in wet spent fuel pools.... Reports out of Japan indicate there were no problems with the dry casks at Dai-ichi. To me, that suggests we should at least consider a policy that would encourage quicker movement of spent fuel to dry cask storage. Senator Feinstein followed up this hearing statement with a formal letter to the NRC chairman asking NRC "to seriously consider regulatory policies that would encourage the movement of nuclear fuel, once sufficiently cool, out of spent fuel pools and into dry cask storage systems." Citing the 2006 study by the National Academy of Sciences (NAS) National Research Council ( Safety and Security of Commercial Spent Nuclear Fuel Storage ), Senator Feinstein specifically asked the "NRC to initiate a rulemaking process to immediately require a more rapid shift of spent fuel to dry casks." Senator Feinstein indicated her concern about spent fuel management in evaluating proposals for funding small modular reactors. NRC subsequently considered SNF storage needs a part of its Near-Term Task Force on the Fukushima Dai-ichi incident. A House Appropriations Subcommittee report recently expressed concern about current spent fuel storage, indicating that "[c]onsolidation of this material in a single site that provides enhanced safety and security will improve public comfort with nuclear power, reduce potential safety and security risk, and fulfill the federal government's obligation under the Nuclear Waste Policy Act of 1982 to assume responsibility of spent fuel." Although consolidated interim storage of SNF has received widespread support as a general concept for many years, proposals for SNF storage at specific locations have been vigorously opposed. The issue of SNF storage is inextricably linked to related longer-term issues like nuclear power plant operations and construction, SNF reprocessing, and establishment of a permanent repository. This report is focused on SNF storage, and does not provide a detailed examination of these related issues. Worldwide, there are 436 operational nuclear power reactors in 32 countries and 122 permanently shut-down nuclear power reactors, including several in countries where SNF continues to be stored after the reactor fleet has been shut down. No country, including the United States, has yet established an operating permanent disposal site for SNF or other forms of high-level nuclear waste. All nations rely—to varying degrees—on long-term SNF storage. Although the United States has not fully addressed its nuclear waste issues, DOE has, since 1999, operated a permanent geological repository for plutonium-contaminated transuranic (i.e., mainly plutonium-contaminated) waste from nuclear weapons operations in New Mexico. Known as the Waste Isolation Pilot Plant (WIPP), this waste disposal repository was constructed and began operations following decades of detailed technical and institutional planning, active state and community involvement, and compliance work to meet various federal and state environmental review and permitting requirements. The WIPP site is explicitly prohibited by law from receiving SNF or high-level waste, but is widely regarded as a model for other waste facility—both disposal and storage—siting efforts. A recent survey of spent fuel storage in the 10 countries with significant nuclear operations found that all countries store substantial amounts of SNF in pools or dry cask facilities, regardless of their policy on reprocessing. Although much of the congressional attention has focused on the issues of the permanent geological repository proposed for Yucca Mountain in Nevada, there are a number of reasons to also consider SNF storage issues. First, under any scenario for waste acceptance into a permanent repository or an interim consolidated storage site, long-term storage of SNF will be required for a considerable time. Notwithstanding the mandate in the Nuclear Waste Policy Act (NWPA) and various contracts that DOE begin accepting SNF for disposal in 1998, no disposal repository has been completed or licensed. The 2009 termination of the Yucca Mountain disposal project continues the ongoing delay in opening a permanent geologic repository. Hence, the disposal delay prolongs storage needs. Even if a disposal repository were to begin operation quickly, the time required to ship SNF would require an extended period of storage. In its most recent estimate, prior to termination of the Yucca Mountain repository program, DOE projected that, if waste acceptance were to begin in 2020, there would be a need for commercial interim storage until at least 2056, given this projected shipment rate and the continued generation of new SNF. Also, current law—the NWPA—sets a limit on how much waste can be put in the first repository, and the U.S. inventory of SNF and other high-level waste requiring disposal has already exceeded this limit. The NWPA "prohibit[s] the emplacement in the first repository of a quantity of spent fuel containing in excess of 70,000 metric tons of uranium (MTU) or a quantity of solidified high-level radioactive waste resulting from the reprocessing of such a quantity of spent fuel until such time as a second repository is in operation." Of this 70,000 MTU limit set by Congress on the first repository in the NWPA, approximately 90% (63,000 MTU) of the capacity is allocated to commercial spent nuclear fuel and high-level radioactive waste from reprocessing. The remaining 10% capacity would be used for about 2,455 MTU of DOE spent nuclear fuel (including naval spent nuclear fuel) and the equivalent of 4,667 MTU of DOE high-level radioactive waste. Hence, the current quantity of SNF (i.e., 67,450 MTU of civilian SNF and 2,458 MTU of DOE-owned SNF) and high-level waste being stored would fill the proposed Yucca Mountain repository beyond the limit imposed by Congress in the NWPA, necessitating a need to build a second repository or change the legal limit. DOE has evaluated the capacity of the proposed Yucca Mountain repository and concluded that Yucca Mountain could hold more than the legal limit of 70,000 MTU and "has the physical capability to allow disposal of a much larger inventory." If waste were accepted at a consolidated nuclear waste storage site, rather than a disposal repository, the need for interim storage technologies could continue for a longer period. Hence, the issues related to safe long-term SNF storage—regardless of the current debate about a permanent geologic repository—warrant consideration. A recent study by the Massachusetts Institute of Technology (MIT) concluded that "planning for the long term interim storage of spent nuclear fuel—for about a century—should be part of fuel cycle design." The issues and options associated with current national policies are discussed below. The recent change in the Yucca Mountain repository program is not the first time that concern about the path forward of a permanent geologic repository has caused increased attention to long-term, possibly consolidated, storage of SNF. After the failure of the salt dome waste repository program near Lyons, KS, the Atomic Energy Commission proposed in 1972 a program for long-term (100-year) retrievable surface storage. In 1987, the same amendments to the Nuclear Waste Policy Act (NWPA) that identified the Yucca Mountain site also established the Monitored Retrievable Storage Commission (ended in 1989) and a position of the "Nuclear Waste Negotiator," which was eliminated in 1995 after several years of unsuccessful attempts to find a voluntary host community for a repository or monitored retrievable storage facility for nuclear waste. During the 1990s, Congress tried, unsuccessfully, to enact legislation to help establish a temporary consolidated storage site for commercial spent nuclear fuel near the Yucca Mountain site. A number of analysts have found that interim on-site storage or SDNF using dry casks is a viable option, and some have recommended that interim storage of spent fuel be implemented deliberately for a period of at least 100 years. Second, SNF stored outside of a reactor comprises a source of radioactivity requiring durable protection. Although radioactive decay reduces the amount of radioactivity in SNF, dropping sharply soon after discharge from a reactor, SNF provides a significant and long-term radioactivity source term for risk analyses. While the nuclear fuel in an operating reactor typically contains a larger amount of radioactivity, in terms of curie content, than stored SNF, much of this curie content is composed of relatively short-lived fission products, and includes more volatile constituents, compared to SNF. Although there have been some releases of radioactivity from stored SNF (see " Hazards and Potential Risks Associated with SNF Storage " below), there is no evidence of any consequent significant public exposures or health impacts. Nonetheless, significant concerns have been raised about the potential for releases from stored SNF. These concerns have been heightened in the wake of the incident at the Fukushima Dai-ichi reactors in Japan, about which there have been conflicting accounts and some uncertainty regarding the condition of the stored SNF. Extended storage has also raised concerns about long-term site safety. For example, in the wake of general concern about the risks from extreme weather and sea level rise from climate change, as well as specific concerns about SNF stored near flood-prone rivers (e.g., along the Missouri River), some have expressed urgency about the need to relocate SNF storage. NRC, however, found that sea level rise was not a credible threat to existing and planned on-site nuclear waste storage for the next several decades: "Based on the models discussed in the [National Academy of Sciences/National Research Council study], none of the U.S. [Nuclear Power Plants] (operational or decommissioned) will be under water or threatened by water levels by 2050." Third, the federal government faces a significant and growing liability to pay claims resulting from its failure to begin accepting waste from commercial utilities under the 1987 NWPA. The U.S. government has paid approximately $1 billion to pay a series of claims by utilities that DOE had, at least partially, breached its contracts to accept SNF. The federal government has been paying claims for commercial utility costs for SNF storage since 2000. These claims arise from the 76 standard contracts DOE signed in 1983, largely with commercial utilities, of which 74 have filed claims against DOE for damages arising from failure to accept the SNF by 1998. The future estimated costs for storage of commercial SNF are approximately $500 million per year. Fourth, some have argued that the uncertainty and concerns about nuclear waste management have contributed to the lack of investment in new nuclear power plants, resulting in a failure of the industry to expand, along with relatively high capital costs. An American Physical Society Panel chaired by a former NRC chairman, and including another former NRC chairman and a former Under Secretary of Energy, concluded, in part, "there is a concern that the buildup of spent fuel at reactor sites and lack of progress on final disposition could be serious constraints on the growth of the domestic nuclear power industry by discouraging investment in new nuclear power plants and enhancing the difficulty of siting new nuclear power plants." A recent article by long-time nuclear waste observers and former officials argued that "solid public acceptance of nuclear energy ... may well turn on a credible promise of a geologic repository becoming available within the next few decades." Another longtime observer of the nuclear industry indicated, "[e]ven if the public were otherwise prepared to go along with a major expansion of nuclear power, much less reprocessing, it is unlikely to do so without a new, credible regime for disposing of our existing and future nuclear power wastes." The recent report by the BRC also implicated the current "impasse" in the U.S. nuclear waste program as a hindrance to expansion of nuclear power, among other impacts: Put simply, this nation's failure to come to grips with the nuclear waste issue has already proved damaging and costly and it will be more damaging and more costly the longer it continues: damaging to prospects for maintaining a potentially important energy supply option for the future, damaging to state-federal relations and public confidence in the federal government's competence, and damaging to America's standing in the world—not only as a source of nuclear technology and policy expertise but as a leader on global issues of nuclear safety, non-proliferation, and security. States have imposed their own controls on SNF management and related nuclear power plant operations. Specifically, some state laws prohibit construction of any new nuclear power plants until the current backlog of spent fuel is addressed. According to the National Conference of State Legislatures, "Thirteen states have laws prohibiting energy utilities from even considering adding new nuclear reactors until the waste problem has been solved." State authority, however, is limited under the Atomic Energy Act. This report cannot resolve these issues, but it does provide some vital background to help support an informed debate on the issues of SNF storage. What Is Spent (Used) Fuel? In many cases, discussions of "nuclear waste" are, in fact, referring to SNF. The "fuel" in commercial nuclear fuel is uranium oxide formed into solid cylindrical ceramic pellets, contained in zirconium alloy tubes supported in a rigid metal framework, or "assembly" (see Figure 1 ). These fuel assemblies are composed of individual rods of approximately half an inch in diameter and 12 to 15 feet long, with each assembly approximately 5 inches to 9 inches on a side. The fuel assemblies for a boiling water reactor (BWR) are about half the mass (about 0.18 MTU/assembly) of a typical pressurized water reactor (PWR), which are about 0.44 MTU/assembly. The difference in design of BWR and PWR reactors is significant in how SNF is stored, which is discussed below. Both types of reactors are "light water reactors" because they use ordinary ("light") water for cooling and reducing neutron energy. All current U.S. commercial reactors are light water reactors. The production of electricity through nuclear fission in a light water reactor uses low-enriched uranium (3%-5% U-235) pellets that undergo a nuclear fission process inside the reactor. The fission process heats water to generate steam that turns the turbine generator, thereby generating electricity. In general, the fuel rods are productive for approximately 54 months. Roughly every 18 months, utilities generally conduct a refueling outage in which approximately one-third of the fuel assemblies are replaced with new assemblies. A replaced fuel assembly becomes spent (or "used") nuclear fuel when it has been irradiated and removed from a nuclear reactor after it is no longer cost-effective to generate power. This reduced power output is caused by the accumulation of radionuclides generated by the fission (splitting) of the uranium atoms and the relative reduction in fissile isotopes. These fission products effectively "poison" the nuclear chain reaction by interfering with the otherwise self-sustaining fission process. The SNF assemblies must be removed to maintain the necessary power production level to generate electricity. A typical commercial nuclear power plant fuel rod assembly operates in a reactor for approximately 4½ years before being removed for storage and eventual disposal. Once removed from the reactor core, SNF continues to generate heat and radiation, and, although is rapidly attenuated, requires careful management for thousands of years. Commercial reactors in the United States generate about 2,000 MT of SNF annually. The variety of SNF types is as diverse as the range of reactors and their functions, which is dominated by, but not limited to, commercial nuclear power plants designed to produce electric power. This report is focused on commercial SNF, in contrast to smaller quantities of other types of SNF, which include SNF with different designs and characteristics from other sources: DOE production reactors used for producing nuclear materials, such as Pu-239 (weapons-grade plutonium) and Pu-238 (for deep space missions and other applications requiring durable power sources); reactors used for research, analysis of materials, basic science experiments, and training; and naval propulsion reactors used for submarines and aircraft carriers. The Naval Nuclear Propulsion Program (i.e., nuclear submarines, aircraft carriers, and Navy prototype and training reactors) has generated about 27 MTU of SNF, which is stored at the Idaho National Laboratory. Virtually all of this SNF is DOE-owned and comprises less than 4% of the amount of commercial SNF stored in the United States (2,458 MTU vs. 67,450 MTU). These noncommercial SNF types include a wide range of designs and sizes, which differ significantly from commercial reactor fuel, but share the same basic radioactivity hazard and need for long-term isolation. Many of the technical issues associated with long-term storage of commercial SNF also apply to these fuel types. This inventory of DOE-owned SNF does not include the millions of gallons of liquid high-level waste stored in underground tanks or the canisters of vitrified high-level waste resulting from reprocessing SNF at DOE sites. How Is Spent Fuel Stored Now? There are essentially two modes of SNF storage in the United States: wet pools and dry casks. Wet storage pools are the most common method for storing SNF in the United States, accounting for about 73% (49,338 MTU) of the current commercial SNF inventory. The remaining 27% (18,112 MTU) of commercial SNF is stored in dry casks on concrete pads or horizontal bunkers. Operating commercial nuclear power plants must store SNF at least a year (often five years or more) in "spent fuel pools" to allow for some initial cooling after discharge from the reactor. Because of limited wet storage capacity for SNF, most sites employ a combination of wet pool and dry cask storage. NRC regulates both wet fuel pools and dry cask installations and regards both as adequately protective (see " Options for Storing Spent Nuclear Fuel " below). Wet storage pools are constructed of reinforced concrete walls several feet thick, with stainless steel liners. The water is typically about 40 feet deep, and serves both to shield workers from radiation and cool the SNF assemblies. Storage pools vary somewhat in size, but are generally large enough to store fuel rods vertically, with ample depth to provide space above the SNF storage racks for unloading and loading SNF transfer casks with SNF that is approximately 12 to 15 feet long. The cooling water chemistry is generally carefully controlled to minimize corrosion. Just as the fuel assemblies' designs differ among different reactor types, described above, the designs of the pool storage basins differ significantly among different reactor designs, often unique to each plant. Currently, commercial nuclear reactors in the United States are light water reactors, of which there are two basic designs: boiling water reactors (BWRs; see Figure 2 ), and pressurized water reactors (PWRs; see Figure 3 ), the former being the type of reactor built at the Fukushima Dai-ichi site in Japan. Some SNF being stored in the United States, however, was generated by other reactor types not currently used in this country, such as high temperature gas-cooled reactors and liquid sodium reactors. The design of storage pools has been highlighted recently for the GE Mark I BWR, which has been used at dozens of nuclear power plants worldwide, including the Fukushima Dai-ichi plant, as well as 20 reactors operating in the United States. The SNF storage pool for the GE Mark I reactor is approximately 35 feet wide, 40 feet long, and 39 feet deep (10.7 meters wide, 12.2 meters long, and 11.9 meters deep), with a water capacity of almost 400,000 gallons (1.51 million liters). Another feature of the GE Mark I BWR is that the SNF storage pool is located inside the same secondary containment structure as the reactor and many critical control systems. Finally, the SNF storage pools in the BWR Mark I reactors are located several stories above ground level. The potential safety considerations of these design features are discussed below in " Hazards and Potential Risks Associated with SNF Storage ." The SNF storage capacities using wet storage pools at U.S. commercial power reactors generally range from approximately 2,000 assemblies to 5,000 assemblies (averaging approximately 3,000 SNF fuel assemblies). Typically, U.S. spent fuel pools are filled with spent fuel assemblies up to approximately three-quarters of their capacity to allow space for at least one full reactor core load of fuel to be stored as needed. In contrast, the wet storage pool building located nearby but separate from the reactors at the Fukushima Dai-ichi site contains about 6,000 spent fuel assemblies, which was about half of the SNF at the site. U.S. reactor facilities do not typically have an additional spent fuel wet storage building for on-site SNF consolidation like that at Fukushima Dai-ichi. A critical feature of wet pools is the need for power to provide makeup water and circulate the water to keep it from boiling off and uncovering the fuel, especially for recently discharged SNF that is still thermally and radioactively hot. The SNF loses much of its heat in the first few weeks after discharge, and after five years produces relatively little thermal energy. Nonetheless, without circulation pumps helping remove the accumulated heat, the heat emitted from SNF can be sufficient to boil away the cooling water. Dry casks are typically constructed in a cylindrical shape with an inner steel canister directly storing the SNF assemblies that is bolted or welded closed, in an outer concrete cask (see Figure 4 ). After loading with SNF, dry casks are stored outside vertically on a purpose-built concrete pad, or horizontally in a concrete storage bunker. An individual SNF storage cask can weigh more than 100 MT (220,000 pounds) and be more than 15 feet long and 6 feet outside diameter. One regularly used SNF storage container (the "NUHOMS 61BT") weighs 22 tons empty and 44 tons loaded with SNF. The largest dry casks licensed for use in the United States can hold up to 40 PWR spent fuel assemblies or 68 BWR spent fuel assemblies. The Transportation, Aging, and Disposal (TAD) Canister System proposed by DOE can hold up to 21 PWR or 44 BWR spent fuel assemblies. The storage capacity of a dry cask depends not only on size but also on the burn-up and age of the SNF fuel to be stored. There are more than 50 different types of dry casks produced by about a dozen manufacturers approved by NRC for general use in the United States. NRC regulates dry cask storage systems at 10 C.F.R. 72, and with various guidance documents (e.g., NUREG-1536). The key feature of dry storage units is that, once constructed, filled, and sealed, they require no power for circulation of cooling water and are generally regarded as "passively safe." Natural convection of air through the outer concrete shell of the storage system is sufficient to cool the steel containment canister inside without reliance on power for pumps or fans. By contrast, a wet storage pool system typically requires power for recirculation and/or makeup of cooling water. Loss of power for a wet pool storage system for more than a few days or weeks could cause water levels to drop to levels resulting in potential risks (e.g., inadequate shielding or exposure of SNF). The robustness of dry cask storage was illustrated recently by the results of an August 2011 earthquake centered in Mineral, VA, near the North Anna nuclear power plant. According to NRC, the earthquake caused movement of the SNF dry storage casks, weighing more than 100 tons, of approximately 1 to 4½ inches, and had no significant impact on the casks or the SNF. NRC issues both general licenses and site-specific licenses for dry storage facilities. A general license allows licensees to avoid repeating certain evaluations (e.g., National Environmental Policy Act or seismic review), if they have already been conducted pursuant to the plant operating licensing process. Part 72 contains NRC's regulations for the dry storage of power reactor spent fuel on or off a reactor site and for pool storage away from a reactor site. The NRC regulations have been adopted consistent with the International Convention on Nuclear Waste (see inset box). The first commercial dry SNF storage system in the United States was established at the North Anna nuclear power plant site in Virginia in 1986, and employs both vertical casks and horizontal modules. Since then, an increasing number of storage locations have employed dry casks at an increasingly rapid rate. The amount of SNF transferred to dry cask storage in 2010 (8,606 assemblies) was nearly four times the average amount transferred since the use of dry cask storage began in 1986 (2,309 assemblies/year), and was more than 50% greater than the assemblies transferred to dry casks in 2009. The amount of SNF stored in wet pools compared to dry systems dropped from 91% (44,712 MTU/49,401 MTU) in 2002 to 73% (49,338 MTU/67,450 MTU) in 2011. The amount of SNF stored in wet pools increased by about 10%, from 44,712 MTU in 2002 to 49,338 in December 2011, at an average annual rate of 437 MTU/year (1% average annual increase). The amount of SNF stored in dry systems increased during the same period by 286%, from 4,689 MTU to 18,112 MTU. The rate change in the amount of stored SNF reflected an average annual increase of total stored SNF of 1,579 MTU/year (3.2% average annual increase) and average increase in dry system storage of 1,124 MTU/year (24%/year average annual increase)—that is, storage of SNF in dry systems increased, on average, 24 times faster than storage in wet pools. Regardless of government policies and requirements about SNF storage, it is likely that the trend toward more dry cask storage will continue because of the need for storage and the changing economic value, and extended pay-off period, of these investments given the long-term uncertainty about SNF disposal. Where Is Spent Nuclear Fuel Located Now in the United States? Spent nuclear fuel is stored at 77 different sites in the United States, including 63 sites with licensed operating commercial nuclear power reactors, 4 DOE-operated sites, 9 former operating nuclear reactor sites, and the Morris, IL, proposed reprocessing plant. Generally, the storage sites include facilities at the 104 licensed operating nuclear power reactor locations where it was generated (see Table 1 and Figure 5 ), as well as 10 "stranded" commercial sites where no reactors operate (including the Morris, IL), and 4 DOE-operated facilities. In fact, virtually every site that has ever hosted a commercial nuclear reactor is currently also a storage site for SNF. As discussed above, because of practical, technical, and logistical limitations and other issues, SNF is likely to stay at existing sites for a significant period, regardless of decisions on a permanent geologic repository. NRC has proposed plans that would consider SNF storage for up to 300 years, in the case of the oldest SNF now in storage. Of the 67,450 MTU of commercial SNF stored in the United States, approximately three-quarters of it (49,338 MTU) is being stored in wet pools at the reactor sites. Of the 74 different sites (some with multiple storage facilities) where commercial spent fuel is stored in the United States, 55 locations employ dry cask storage for at least part of the storage for commercial SNF. There are 27 sites with 36 wet pool storage "facilities" (i.e., in some cases there are multiple wet pool storage "facilities" co-located at individual sites) where wet pool storage is the only technology being used at the site. Sixty-three SNF storage sites also have operating commercial nuclear power reactors. At 10 commercial sites and an additional four DOE-operated sites, SNF is being stored where there is no operating reactor. At these "stranded" SNF storage sites, the nuclear reactors that generated the SNF have been shut down and at least partly decommissioned. Virtually none of the SNF at these reactors has been moved from where it was generated to another site. In some cases, where reactors have been shut down and decommissioned, the SNF has been moved to another reactor site for storage. Most SNF storage is located in or near the operating nuclear reactor (or sister reactors) that originally generated the SNF (see Table 1 ). The SNF storage at nine commercial sites where reactors have been shut down has warranted special attention by some in the nuclear industry, plant operators, utilities, and public service commissions monitoring costs. These stranded sites represent roughly half of the sites where reactors have shut down, but where SNF continues to be stored. Because these stranded sites do not share overhead costs (e.g., security, maintenance and utilities) with a larger operating reactor complex, the incremental storage costs are higher than at operating reactor sites. At several other commercial sites (e.g., Millstone 1, CT; Dresden 1, IL; Indian Point 1, NY; and San Onofre, CA), SNF is stored at facilities where a reactor has ceased operating but other reactors at the same site continue operating. In addition, SNF is stored at three DOE-owned sites where the reactors ceased operating. At one commercial site in Colorado (Fort St. Vrain), the DOE operates an SNF storage facility from a reactor that shut down in 1989. More than 90% of the stranded commercial SNF is located at five sites. Where SNF remains stored in dry cask storage but no wet storage pool exists, there is some concern that this could make it difficult to repackage the SNF if the need arises because SNF transfers are generally done under water. The Blue Ribbon Commission (BRC) concluded that the need to address this stranded SNF was one of "several compelling reasons to move as quickly as possible to develop safe, consolidated storage capacity on a regional or national basis," which it argued was "[t]he fundamental policy question for spent fuel storage." Figure 5 shows generally that most of the SNF storage in the United States is located in the Midwest and on the East Coast. Specifically, measured by mass, more than 80% (54,092 MTU vs. 13,358 MTU) of SNF is stored at sites east of the Mississippi River. Measured by number of SNF assemblies, however, nearly 84% (197,002 assemblies) of the SNF is stored in eastern sites compared to approximately 17% (40,051 assemblies) stored in western sites. The fact that BWR fuel assemblies are, individually, about half the mass of PWR fuel assemblies, combined with the fact that there are a disproportionate number of BWRs in the East compared with the overall number nationally, helps explain why there is a greater share of SNF counted by assemblies, compared to the SNF mass (MTU), in the East. Measured by mass of SNF, there is a slightly higher percentage (83%) of SNF stored in wet pools (40,260 out of 54,092 MTU) at eastern sites compared to the national share of SNF in wet storage (73%, or 49,338 out of 67,450 MTU). The corollary is that there is a somewhat disproportionate amount of SNF stored in dry casks at western sites (32%, or 4,280 out of 13,358 MTU) compared to the national distribution of about 27%. Measured by number of assemblies, the disproportionate number of assemblies (86%, or 172,443 out of 237,053 assemblies) stored in wet pools in the East is greater than the share of wet pool storage at the western sites (15%, or 25,009 out of 40,051 assemblies), and greater than the national distribution (73%, or 172,443 out of 237,053 assemblies). It is not clear what accounts for this disproportionate share of SNF in dry cask storage at the western sites other than operator preference. Given the smaller size of BWR elements and the disproportionate share of BWRs located at eastern sites, however, it is predictable that the same disproportionate share of SNF by mass is amplified when measured by number of assemblies. Measured by metric tons of heavy metal content (MTU), the five states with the largest total amount of SNF stored are Illinois (8,691 MTU), Pennsylvania (6,065 MTU), South Carolina (4,044 MTU; 4,073MTU with DOE SNF), New York (3,577 MTU), and North Carolina (3,562 MTU). The top five states with the largest amount (by MTU) of SNF stored in wet pools are Illinois (6,900 MTU), Pennsylvania (4,606 MTU), New York (3,082 MTU), North Carolina (3,018 MTU), and Alabama (2,647 MTU). The top five states with the largest amount (by MTU) of SNF in dry storage systems are South Carolina (1,808 MTU), Illinois (1,791 MTU), Virginia (1,477 MTU), Pennsylvania (1,459 MTU), and California (916 MTU). The rankings change somewhat if measured by the number of SNF assemblies depending on the portion of different types of reactors in each state (i.e., states with more BWRs have more assemblies per MTU than states with more PWRs). Measured by number of SNF assemblies, the five states with the largest total amount of SNF stored are Illinois (37,867 assemblies), Pennsylvania (29,322 assemblies), New York (14,286 assemblies), Alabama (13,158 assemblies), and North Carolina (12,092 assemblies). The top five states with the largest amount (by assemblies) of SNF stored in wet pools are Illinois (28,242 assemblies), Pennsylvania (20,898 assemblies), New York (12,466 assemblies), Alabama (10,978 assemblies), and North Carolina (10,612 assemblies). The top five states with the largest amount (by assemblies) of SNF in dry storage systems are Illinois (9,625 assemblies), Pennsylvania (8,424 assemblies), South Carolina (3,896 assemblies), Georgia (3,264 assemblies), and Virginia (3,229 assemblies). Generally, the total amount of SNF in storage increases by approximately 2,000 MTU per year in the United States, assuming current operation of about 104 commercial U.S. power reactors. The amount of SNF stored in dry casks versus wet pools reflects more year-to-year changes depending on decisions made by individual plant operators. Historically, DOE and its predecessor agencies accepted for storage and reprocessing significant amounts of spent nuclear fuel from commercial nuclear power plants. For example, DOE took possession of the spent fuel and debris from the 1979 Three Mile Island plant incident, and shipped it to a DOE facility in Idaho as part of a "research and development" project. In addition, SNF was shipped to New York (West Valley) and Illinois (Morris), where the Atomic Energy Commission, a predecessor to DOE, was involved in reprocessing efforts. In the 1970s a relatively small amount (248.7 MTU) of commercial SNF was shipped from commercial reactors, including utilities in Michigan and New York, to the West Valley site in New York, which reprocessed SNF for about six years (1966 to 1972). The resulting high-level waste and contaminated facilities remain at the site. DOE has estimated that decommissioning and environmental remediation of the contamination at the West Valley site will continue until at least 2020, cost $3.7 billion, and require indefinite long-term stewardship thereafter. The DOE sites in South Carolina and Idaho have also accepted relatively small amounts of SNF from research reactor SNF, some of which contains high-enriched uranium. This report does not attempt to estimate the storage capacity of the existing facilities or sites. To do so would require judgments and determinations about the potential for and safety of re-racking SNF in more dense configurations that are beyond the scope of the analysis. SNF Management by the U.S. Department of Energy The U.S. Department of Energy (DOE) has direct responsibility for storage of SNF and other reactor-irradiated nuclear materials at four sites: Fort St. Vrain (CO), Idaho National Laboratory (ID), Savannah River Site (SC), and Hanford Reservation (WA). Because much of the DOE inventory includes material that is fundamentally different from commercial SNF (e.g., enrichment level/U-235 concentration, cladding, size, condition), it is not appropriate to list and sum these materials with commercial SNF. A detailed description of this DOE-owned inventory is beyond the scope of this report, which is focused on commercial SNF stored at commercial sites. A brief summary, however, helps explain why it is accounted for separately in analyzing storage status issues and options. DOE and its predecessor agencies operated a number of nuclear reactors for weapons material production and research. Although DOE ceased operating its large production reactors in the late 1980s and early 1990s, it continues to produce and accept SNF from research reactors. Much of the SNF from these reactors was reprocessed to extract certain nuclear materials (e.g., plutonium), which generated liquid high-level waste, which is intended, after processing, to be disposed of in a permanent geological repository with SNF. Some of DOE's SNF has not been reprocessed and remains stored as solid SNF. In the case of the Savannah River Site (SRS), for example, there is a wide range of irradiated nuclear materials, including aluminum-based nuclear fuel, "higher actinide targets," and non- aluminum based fuel that DOE has characterized as "assemblies/items." Like the SRS, the SNF at DOE's Hanford site was largely surplus material from reactors used to produce materials (e.g., plutonium) for nuclear warheads, which was extracted using reprocessing facilities at the sites. The design of these fuel elements intended to be reprocessed for weapons material was different from commercial fuel elements (e.g., thin cladding). The Idaho inventory includes SNF from the Naval Nuclear Propulsion program (i.e., submarines and aircraft carriers), which is different from commercial SNF in multiple ways, including enrichment level and design. From about 1952 to 1992 this Navy SNF was reprocessed in Idaho to extract high-enriched uranium for use in driver rods at weapons material production reactors elsewhere. The Idaho site is also home to the SNF debris from the partial meltdown of the Three Mile Island (PA) reactor in 1979. The DOE sites also store a variety of research reactor SNF—both foreign and domestic—that is often much smaller (e.g., 3 to 4 feet long vs. 12 to 15 feet long for commercial power reactor fuel) and more highly enriched than commercial reactor SNF. Some SNF stored at DOE sites came from commercially related activities, including commercial power reactors (e.g., Three Mile Island), test reactors used for academic research (e.g., at 24 U.S. universities), medical isotopes, and commercial power reactor research. By the late 1980s, some of the SNF at DOE sites had become severely corroded or was stored in technically inadequate conditions. After 1993, DOE undertook a "Spent Fuels Vulnerabilities Assessment" and developed detailed "Materials in Inventory" plans to secure this material through packaging and processing, which have been partially implemented generally in conformance with recommendations of the Defense Nuclear Facilities Safety Board. DOE-owned spent fuel includes some production reactor fuel, which has a fundamentally different design and construction from commercial spent fuel. This DOE-owned production reactor fuel generally has very thin cladding intended to facilitate reprocessing to recover plutonium or other nuclear materials. DOE, with recommendations of the Defense Nuclear Facilities Safety Board, has had a long-term plan to stabilize the relatively thin-walled DOE-owned SNF because it is less robust than commercial SNF, which has thicker and more corrosion-resistant cladding. The total amount of DOE-owned SNF and other reactor-irradiated material is about 198 MT, of which about half is stored in wet storage pools and the other half in various dry storage configurations. All of the SNF at the Hanford and Fort St. Vrain sites has been transferred to dry casks, while all of the material at the SRS is stored in wet storage pools. The Idaho site employs both methods. In addition to the different types of SNF and other reactor-irradiated material at DOE sites, DOE is also responsible for high-level waste (HLW) resulting from reprocessing of SNF. Hence, it could be misleading to simply sum the SNF at the DOE-owned sites with the SNF stored at commercial sites, possibly implying a total inventory of HLW intended for extended storage and eventual repository disposal. The SNF inventories at DOE sites must be accounted for separately from commercial sites to compile a meaningful assessment of the total inventory of HLW in the United States. At the Hanford site, the HLW remains stored in underground tanks (many of which have leaked into the ground) awaiting treatment. At the West Valley site in upstate New York, the HLW from SNF reprocessing has largely been vitrified into a borosolicate glass inside stainless steel canisters and awaits disposal. Some of the HLW at the SRS has been similarly treated on a larger scale. At the Idaho sites, the HLW from reprocessing of SNF is being stored in both a liquid form and a solid calcine form awaiting treatment to prepare for disposal. The details of HLW storage, treatment facility construction and operations, "waste incidental to reprocessing," glass log disposition, tank closure, and costs are beyond the scope of this report. Moreover, the exact inventory of SNF and irradiated materials at DOE sites is more variable than commercial SNF. In some cases DOE may use the SRS reprocessing "H-canyon," for which DOE is required by law to "maintain a high state of readiness" to reprocess materials for recovery of nuclear materials or to stabilize materials for safety reasons. DOE recently announced its intention to use the H-canyon to process plutonium non-pit scrap. Although the exact inventory is difficult to compare because of qualitative differences, such as the non-pit scrap, it is useful to put in context the total SNF inventory at DOE sites to the overall totals. The 29 MTU of SNF at the Savannah River Site comprise about 1.2% of the DOE-owned SNF, and about 0.04% of the total SNF stored in the United States. After reprocessing, the SNF would be converted to a relatively small amount of fissile material, and a larger volume of liquid acidic radioactive waste containing much of the fission products. This liquid radioactive waste would be pumped into underground tanks and (minus any "Waste Incidental to Reprocessing") ultimately processed into borosilicate glass logs inside stainless steel canisters destined for disposal in a permanent geological repository. The path forward for this material is beyond the scope of this report. Hazards and Potential Risks Associated with SNF Storage Evaluating hazards and risks accurately and with sufficient precision is essential to making decisions about SNF management and regulation. The primary near-term hazard from SNF derives from the radioactivity from the decay of mixed fission products (e.g., cesium-137, strontium-90), and long-term hazards from plutonium and uranium. Hence, spent nuclear fuel generally poses a significant hazard but it may not pose a significant risk, depending on how it is managed. The distinction between "hazard" and "risk" is fundamental to analyzing the need for and benefits of various SNF management options. In classic risk assessment and toxicology, a hazard is the inherent potential of something to cause harm, whereas a risk is generally the product of a probability and the severity of an event (e.g., health, environmental, or financial impact). Whether a hazardous substance poses a risk depends on a variety of factors, including containment and exposure. For example, to the extent that spent fuel is effectively contained, the hazard can remain extremely high, but the risk may be low because there is no pathway for exposure. Regulation of SNF storage requires a consideration of risk, which involves characterizing the probability and consequence of potential threats. Regulation also requires a policy judgment about what level of assurance is warranted. Some would argue that the hazard, or consequence from the event, is so high that it demands a commensurately high level of protection, using any available technology, against threats to prevent any significant risks to human health and the environment. Others, including a former NRC commissioner, have argued that the mandate of NRC is to "provide reasonable assurance of adequate protection, not absolute assurance of perfect protection." Although the thermal heat and radiation from SNF begins to drop as soon as the fission process ceases upon reactor shutdown, SNF assemblies continue to require cooling and shielding during storage after discharge from a reactor. Generally, SNF requires three to five years of wet pool storage before it has cooled enough for transfer to dry cask storage. While NRC has authorized transfer as early as three years, the industry norm is about 10 years. Some analysts and observers have expressed concern about the safety of current spent nuclear fuel management practices, at least for long-term storage methods. Until the recently proposed termination of the Yucca Mountain repository project, however, these SNF storage methods were not generally considered "long-term." NRC and others have viewed SNF storage as a relatively safe operation, if reasonable precautions are exercised and normal conditions prevail. The inherent hazards of SNF, however, can result in a variety of risks under other conditions. A variety of forces or "threats" acting on spent fuel could result in containment being breached, resulting in potential exposures and risks, generally: (1) loss of power for water supply, circulation, or cooling, which can have significant consequences for SNF in wet pool storage; (2) external threats, like hydrogen explosions from adjacent reactors, or an airplane crashing onto an SNF storage facility; (3) long-term degradation of SNF through chronic corrosion of cladding (e.g., hydride corrosion); and (4) leakage of contaminated water from wet pools to groundwater. After the earthquake and tsunami in Japan, the first two of these concerns appeared to be occurring at the Fukushima Dai-ichi facility. In testimony on March 16, 2011, before a joint subcommittee hearing of the House Energy and Commerce Committee, NRC chairman Greg Jaczko stated that, following the hydrogen explosion at reactor #4 at the Fukushima Dai-ichi plant, there was an uncovering of the fuel in the pool and there was "no water in the pool." A November 2011 report by the Institute for Nuclear Power Operations concluded that "[S]ubsequent analyses and inspections determined that the spent fuel pool water levels never dropped below the top of fuel in any spent fuel pool and that no significant fuel damage had occurred. Current investigation results indicate that any potential fuel damage may have been caused by debris from the reactor building explosions." Less than a week after the earthquake and tsunami, and two days after this testimony, NRC published a nonregulatory information notice to reactor operators to "review the information for applicability to their facilities and consider actions, as appropriate, to avoid similar problems." This information notice reiterated NRC's process for adopting earlier Interim Compensatory Measures, which dealt with spent fuel storage safety, among other issues. This initial NRC notice summarized the circumstances, indicating that "Units 3 and 4 have low spent fuel pool (SFP) water levels." A recent study by the Massachusetts Institute of Technology (MIT), soon after the Fukushima Dai-ichi incident, recommended that NRC and the nuclear power industry reexamine safety systems, operating procedures, regulatory oversight, emergency response plans, design basis threats, and spent fuel management protocols for operating U.S. reactors. Some of these issues were addressed in the aftermath of the TMI-2 accident and the September 11 World Trade Center attacks, resulting both in hardening of U.S. nuclear plants against a number of accident scenarios and in improved emergency response preparations. The Government Accountability Office has recommended DOE "[a]ssess the condition of existing storage facilities and identify any gaps and actions that might be needed to address long-term storage requirements." In the wake of the Fukushima Dai-ichi incident, NRC dispatched inspectors to each U.S. reactor and SNF storage site. The results of these inspections varied with different sites, with NRC inspections revealing no significant vulnerabilities for most sites. For sites with the oldest SNF (e.g., at the GE-Hitachi Morris storage site in Illinois), the predicted impact of an extended loss of power to the site would be minimal because of the extent of the radioactive decay during the decades of storage. NRC predicted that, "in the unlikely event that the [spent fuel wet storage basin] is completely drained of water, fuel melt would not occur given the limited fuel decay heat load." The Fukushima Dai-ichi incident raised concerns about possible risks to SNF storage, including physical damage and loss of power. Although details remain unclear, the dramatic gas explosions that caused some of the overhead containment structure to collapse down into the pool appeared to have caused little or no damage to the SNF in the pools. Also, despite the loss of power over an extended period and some loss of cooling water, the SNF in the storage pools appeared to have remained covered in water largely undamaged. Notwithstanding these initial results on the SNF condition at the Fukushima Dai-ichi site, some analysts are concerned that, under some circumstances, SNF zirconium cladding can catch fire if left uncovered in wet storage pools. The National Academies/National Research Council concluded, based primarily on review of NRC studies, "that a loss-of-pool-coolant event could trigger a zirconium cladding fire in the exposed spent fuel," but considered "such an accident ... so unlikely that no specific action was warranted." NRC has issued a series of orders and letters to licensees to implement additional mitigation measures to address the issue. NRC and others, including the nuclear industry, believe these actions provide reasonable assurance of adequate protection. Others disagree, including a long-time nuclear critic who has argued that the large inventory of radioactive material in wet pools poses a significant risk if the SNF pools were drained of water, the SNF were uncovered, and there was a release from an incident such as a fire or deliberate attack. The locations of SNF wet pool storage in relation to the associated nuclear reactor may present potential risks associated with those designs. For example, most boiling water reactors (BWRs) in the United States, including the GE Mark I, are designed with the SNF storage pool located inside the same secondary containment structure as the reactor and many critical control systems, and located well above ground level. Many have expressed concern that this design may pose safety risks because any problems with the reactor can affect the SNF storage pools, and vice versa. For example, in a loss of off-site power situation, such as occurred at the GE Mark I reactors in Fukushima, Japan, the SNF pool may also lose power, affecting the cooling water and monitoring systems. In the case of the incident in Japan, elevated radiation near the reactor hindered personnel from mitigating problems or monitoring the SNF storage pools. In addition, the height of the SNF pools in many BWRs (more than 100 feet above ground level) could also pose safety risks because of the elevated access challenge and potential for a loss of coolant in a structural failure, compared to reactors with the SNF storage pools at or below ground level. Prior to the Fukushima Dai-ichi incident, the biggest change in the risk profile for SNF storage occurred in the wake of the September 11, 2001, terrorist attacks, after which a congressionally mandated National Academy of Sciences report concluded that "attacks with civilian aircraft remain a credible threat." NAS indicated that terrorists might choose to attack spent nuclear fuel pools because they are "less well protected structurally than reactor cores" and "typically contain inventories of medium- and long-lived radionuclides that are several times greater than those contained in reactor cores." In response, NRC issued a series of orders and letters to licensees, the contents of which are confidential. NRC also conducted site-specific evaluations to review individual site risks and readiness, resulting in site modifications, the details of which are also confidential. Although the reviews, orders, and letters resulted in numerous incremental improvements to SNF storage facilities and operations, such as improved backup power supply reliability, there was no large-scale shift of SNF out of wet pools and into dry casks, nor was there a mandate to move SNF into hardened storage facilities. By contrast, Germany explicitly requires protection against risks, including "external events" such as an attack on SNF storage, and this has resulted in construction of hardened storage buildings for dry cask storage of SNF. The Germans have also moved to establish consolidated central SNF storage facilities in the wake of a 2005 decision to cease reprocessing, and the lack of a geological repository. Another potential threat to SNF storage safety is degradation of the cladding and fuel elements. The potential for degradation of SNF cladding has been well known for decades, and the water chemistry of SNF storage pools is carefully controlled in part to protect against it. The potential vulnerability of SNF varies with the particular type of fuel rod. Generally, however, the rate of corrosion and embrittlement of typical U.S. light water reactor zircalloy-clad commercial fuel rods is less than the rate for the British Magnox fuel rods, or DOE nuclear materials production reactor fuel elements, which are intended for shorter periods inside the reactor. Hence, although some have expressed concern that U.S. nuclear fuel was not designed for long-term storage, U.S. power reactor fuel has generally proven more durable than other fuel forms. NRC concluded in its initial 1984 waste confidence rule "that the cladding which encases spent fuel is highly resistant to failure under pool storage conditions," and that "[c]corrosion studies of irradiated fuel at 20 reactor pools in the United States suggest that there is no detectable degradation of zircalloy cladding." Nonetheless, BRC and NAS, among others, have recommended long-term research projects to evaluate the integrity of stored SNF, such as ongoing work by the Electric Power Research Institute (EPRI). NRC has concluded that dry cask storage provides additional confidence in long-term storage of SNF: As long as the canister or cask has been properly dried and inerted, and the fuel temperature is kept within the limits of [NRC] guidance, there should be no active degradation mechanisms. The dryness is assured by following the proper drying procedure. No monitoring of the dryness is conducted. The canister is backfilled with an inert gas such as helium. The integrity of the closure seals is actively monitored. If there is indication that the closure seal is compromised, remedial action is taken. The issue of cladding integrity is being reevaluated as part of our extended storage and transportation review and all potential mechanisms for cladding and fuel degradation, even those analyzed to be inactive in the short term, are being reanalyzed for the potential to be active in the longer term. Finally, NRC has identified releases of tritium-contaminated water to groundwater at 38 sites, and determined that, in some cases, SNF storage pools had contributed to groundwater contamination. In addition to these commercial sites, tritium contamination was found in groundwater from spent fuel storage pools at DOE sites, including the Brookhaven National Laboratory in New York, Hanford in Washington State, and the Savannah River Site in South Carolina. Evidence of groundwater contamination from leaking spent fuel storage pools was among the concerns cited by New York State in its objection to NRC's December 2010 Waste Confidence Rule. Tritium is inherently difficult to remediate, once released, because it is simply a radioactive form of hydrogen that substitutes freely with hydrogen in water and decays at a rate of about 5% per year (12.32 year half life). To address this issue, NRC in March 2010 established a Tritium Contamination Task Force. Notwithstanding these documented releases of radioactivity from stored SNF, there is no evidence of any resulting significant public exposures or health impacts. Nonetheless, concerns about contamination of groundwater from leaking SNF storage pools were among the issues raised by petitioners challenging NRC's "Waste Confidence Rule." In the wake of these findings, and NRC's own reviews, NRC has issued instructions to licensees and established releases to groundwater as a significant performance indicator, in addition to industry guidance on release prevention and reporting. NRC has argued that these issues presented no public health or environmental risks, and that subsequent "Regulatory Guides," together with inspections, review of license applications, and industry forums and initiatives, will help prevent recurrence. The litigation is ongoing. NRC's "Waste Confidence Rule" arose from an effort to address the variety of concerns about spent fuel storage in a systematic and explicit manner, and to prevent them from being raised on a site-by-site basis as an issue during individual reactor licensing proceedings. Partly in response to a legal challenge and subsequent remand, NRC issued in 1984 the first of three "Waste Confidence Decisions" that included a series of specific findings, indicating generally that SNF could be stored safely at least until an expected geologic repository began operation to accept wastes. In the first two waste confidence rules, NRC identified a specific date by which a permanent repository would be available and until which SNF could be safely stored. NRC's most recent revision of the rule, however, "removed a date when a repository would be expected to be available for long-term disposal of spent fuel." NRC indicated that SNF could be stored for at least 60 years beyond the end of the reactor operating life: The [NRC] has made a generic determination that, if necessary, spent fuel generated in any reactor can be stored safely and without significant environmental impacts for at least 60 years beyond the licensed life for operation (which may include the term of a revised or renewed license) of that reactor in a combination of storage in its spent fuel storage basin and at either onsite or offsite independent spent fuel storage installations. The nuclear power industry has indicated it "is confident that existing dry cask storage technology, coupled with aging management programs already in place, is sufficient to sustain dry cask storage for at least 100 years at reactors and central interim storage." Aside from the general assurance by NRC about the safety of the SNF storage, one of the implications of the waste confidence determination is no discussion of any environmental impact of spent fuel storage in reactor facility storage pools or independent spent fuel storage installations (ISFSI) for the period following the term of the reactor operating license or amendment, reactor combined license or amendment, or initial ISFSI license or amendment for which application is made, is required in any environmental report, environmental impact statement, environmental assessment, or other analysis prepared in connection with the issuance or amendment of an operating license for a nuclear power reactor. The states of New York, Vermont, and Connecticut (later joined by New Jersey) petitioned in February 2011 to challenge NRC's rule, while NEI and Entergy intervened in support of NRC's rule. NRC has indicated plans to consider the need for updating to the Waste Confidence Rule in 2019, after preparing an Environmental Impact Statement. Recognizing the elevated role of extended SNF storage, NRC has shifted resources for FY2012 to its "Spent Fuel Storage and Transportation Business Line" to "evaluate extended long-term storage of radioactive material," including plans for a generic environmental impact statement. In the wake of DOE's termination of the Yucca Mountain repository program, NRC is undertaking a number of efforts related to the safety of extended SNF storage. U.S. NRC Chairman Greg Jaczko stated: I have no doubt that we are up to the challenge of addressing the significant policy issues ahead of us. One such issue concerns our approach towards regulating interim and extended spent fuel storage. As part of our Waste Confidence decision, the Commission initiated a comprehensive review of this regulatory framework. This multi-year effort will (1) identify near-term regulatory improvements to current licensing, inspection, and enforcement programs; (2) enhance the technical and regulatory basis for extended storage and transportation; and (3) identify long-term policy changes needed to ensure safe extended storage and transportation. As the question of permanent disposal is for the Congress or the courts to decide, the Commission has been clear that it was neither assuming nor endorsing indefinite, onsite storage by ordering these actions. Among these NRC efforts is an analysis, as part of its review of the waste confidence rule and associated planning for "Extended Storage and Transportation," that will include a time frame for SNF storage until approximately 2250, which would comprise a total storage period (wet and dry) of approximately 300 years for the oldest SNF now in storage. Options for Storing Spent Nuclear Fuel The Administration's FY2012 budget request included no funding for Yucca Mountain repository operations or licensing activities. The House-passed Energy and Water Development Appropriations bill for FY2012 proposed to restore funding to the Yucca Mountain project, with $25 million for DOE and $20 million for NRC. The final FY2012 appropriations, however, did not include funding for Yucca Mountain activities. The Administration's FY2013 request again includes no funding the Yucca Mountain repository, but instead proposes a variety of general repository studies and fuel cycle research. The House Appropriations Committee has again proposed to add funding for NRC and DOE for Yucca Mountain activities. The recent budget shifts at DOE and NRC will likely be analyzed and debated for years to come. Moreover, the recent incident at the Fukushima Dai-ichi reactor complex in Japan has spurred reexamination of SNF storage options. Accordingly, reviewing the possible options for SNF storage seems prudent. Although a complete understanding of the events and their causes at the Fukushima Dai-ichi reactors and spent fuel pools remains incomplete, identification of some basic similarities and differences with U.S. spent fuel storage is possible. NRC established a task force to examine and report to the commission within 90 days on "the agency's regulatory requirements, programs, processes, and implementation in light of information from the Fukushima Dai-ichi site in Japan." This Near-Term Task Force delivered its 90-day report and recommendations to the commission in July 2011, which outlined 12 recommendations for consideration by the commission. They include a number of specific recommendations related to SNF storage safety, largely focused on backup power reliability and monitoring capabilities. The NRC staff identified seven recommendations for near-term action, and offered this overall assessment: "To date the Task Force has not identified any issues that undermine our confidence in the continued safety and emergency planning of U.S. plants … Task Force review is likely to recommend actions to enhance safety and preparedness." Options for SNF storage include not only how and where it is stored, but also what management and oversight structure is used. Each of these three issues is addressed below. A threshold question, however, is what should be the basis for determining the scope of reasonable options for SNF storage? Identifying the reasonable options, and selecting from among them, will depend on certain assumptions and policy choices. Perhaps most importantly, the options and choices depend on the length of time until a permanent geologic repository is available. For decades, virtually every policy analysis has drawn its conclusions and recommendations based on certain assumptions about the opening date for the disposal repository. If that date is delayed indefinitely, it opens many of these earlier assumptions, analyses, and conclusions to reevaluation. As discussed above, uncertainty about the prospects for a permanent disposal repository highlights the need for long-term SNF storage. This report does not make any projections about the timing or path forward for the proposed repository. Several other assumptions and variables could affect the options for SNF storage, including the amount of SNF generated as a result of reactor license renewal (or denial), the number and frequency of new reactor starts, potential impacts of climate change (sea level rise and more frequent and extreme weather events), or new technical developments; such factors are beyond the scope this report but warrant consideration in a more comprehensive analysis. Options for How to Store SNF To consider how SNF is stored, there are essentially two options available: wet storage pools and dry cask. Few debate that dry cask storage provides greater safety than wet storage pools. The questions on which there are diverse views include (1) whether wet storage pools provide "adequate" safety, (2) whether the added safety of dry casks is worth the added short-term costs and the potential safety risks during the transfer process, and (3) whether either technology provides adequate safety under extended storage periods (more than 100 years) and under previously unforeseen occurrences. To some extent, a simple comparison of the two SNF technologies is not appropriate because they are intended to perform somewhat different functions. Wet storage pools provide certain capabilities that dry casks cannot, such as radiological shielding and cooling necessary for intensely radioactive SNF immediately after discharge from reactors. Dry casks, on the other hand, provide adequate shielding and cooling for SNF that has been discharged from reactors at least one to five years. In addition, dry cask storage includes SNF preparation that is a step toward transportation to a repository or a consolidated storage facility (e.g., drying, inert gas, and enclosure in a cask that is typically designed to be transportable) that provides a link in the steps toward final permanent geologic repository disposal. Notwithstanding this widespread confidence in dry cask storage, this linkage from storage to disposal, however, remains potentially incomplete. One of the significant challenges to managing SNF storage using dry casks is the lingering uncertainty about the approval for the transportation canister. Most of the SNF currently stored in dry casks is contained within an inner multipurpose container that is expected to be used to ship the SNF to a repository and be an essential barrier to prevent release of the radioactive waste after disposal. Prior to the termination of the Yucca Mountain repository program, DOE was funding the development of "Transportation, Aging and Disposal" (TAD) SNF canisters. The goal of the TAD program was to allow spent fuel assemblies discharged from nuclear reactors to be placed into sealed canisters at the reactor sites and remain in the same sealed canisters through ultimate disposal in a deep geologic repository. In addition, NRC has indicated that potential new fuels, such as fuels having different cladding, internal materials, different assembly designs, and different operating conditions, and fuels with higher burn-up than current limits may need further review to demonstrate that extended storage can be accomplished safely. As described above, some have expressed concern about the safety of wet pool storage of SNF. Utilities have continued to use wet pool storage largely because it is viewed as adequately safe, it is legally permitted, and shifting to dry cask storage for sufficiently cooled SNF would incur costs many would view as therefore unnecessary. Nuclear power plant operators must generally justify costs to stockholders and public utility commissions, as well as compete for grid dispatch based partly on costs. Accordingly, they seek to maximize the utilization of existing capacity for storage of SNF in wet storage pools before spending money on new, dry cask storage. Hence, the practice has generally been for utilities to move SNF to dry casks only when necessary after space in existing wet pools has been exhausted using approved dense packing procedures. To do otherwise could be viewed by some as spending money unnecessarily before it is warranted or required. Two comparisons are possible in determining whether shifting to dry cask storage as soon as possible is warranted: (a) Does the current storage system "provide reasonable assurance of adequate protection?," and (b) Does dry cask storage provide sufficiently greater safety compared to wet storage pools to justify the cost and potential risks of transferring the SNF (i.e., comparing "wet to dry")? Some have argued that the potential risks from dense packing of SNF in wet pools justify a requirement to shift SNF to dry casks as soon as it has cooled. Those arguments contend not merely that dry casks provide better protection, but that SNF storage pools fail to provide adequate protection, especially given the relatively large inventory of radioactive materials being stored in many SNF pools, compared to operating reactor cores. This concern was elevated after the disaster at the Fukushima Dai-ichi reactors that highlighted specific concerns about the potential for simultaneous failure sequences. Wet storage relies on active pumping and filtration systems that require electric power for operation. NRC regards SNF storage as generally posing little risk if effective precautions are taken. NRC's website describing the two SNF storage options concludes, "[t]he NRC believes spent fuel pools and dry casks both provide adequate protection of the public health and safety and the environment. Therefore there is no pressing safety or security reason to mandate earlier transfer of fuel from pool to cask." Hence, compared to its mandate to provide "adequate protection," NRC has concluded that both technologies meet that goal. Some have made a separate argument that dry casks provide safer SNF storage than wet pools. In its post-9/11 assessment of the safety and security of SNF storage, the National Academy of Sciences/National Research Council (NAS) Committee on the Safety and Security of Commercial Spent Nuclear Fuel Storage "judges that dry cask storage has several potential safety and security advantages over pool storage." In the report's recommendation that has been cited frequently and interpreted diversely, NAS urged, "Depending on the outcome of plant-specific vulnerability analyses described in the committee's classified report, the [NRC] might determine that earlier movements of spent fuel from pools into cask storage would be prudent to reduce the potential consequences of terrorist attacks on pools at some commercial nuclear plants." NRC's response to the NAS report focused on the question of whether wet pools and dry casks were adequate , rather than whether dry casks were preferable : [S]torage of spent fuel in both [wet storage pools] and in dry storage casks provides reasonable assurance that public health and safety, the environment, and the common defense and security will be adequately protected. The NRC will continue to evaluate the results of the ongoing plant-specific assessments and, based upon new information, would evaluate whether any change to its spent fuel storage policy is warranted. The NRC believes spent fuel pools and dry casks both provide adequate protection of the public health and safety and the environment. Therefore there is no pressing safety or security reason to mandate earlier transfer of fuel from pool to cask. NRC has generally limited its statements on SNF storage options to whether they provide reasonable assurance of adequate protection, rather than comparing one technology with another. NRC Chairman Greg Jaczko was quoted, however, in a recent newspaper interview: "It's like the difference between buying one ticket in the Powerball lottery and 10 tickets." Another NRC official went further, comparing the equivalency of dry cask storage to wet pool storage, saying, "I think you have equal risk in both," and that federal policies consider both "equally safe, but they rely on different things to achieve that safety." The Nuclear Waste Technical Review Board concluded in 2010 that "the experience gained to date in the dry storage of spent fuel, demonstrates that used fuel can be safely stored in the short term and then transported for additional storage, processing, or repository disposal without concern." The merits of wet pool storage versus dry casks continue to be debated, with some arguing that the risks of continued storage in wet pools, at high-density configurations, requiring reliable power for cooling water, is too high a risk, while others argue that risks are relatively low, and the increased risk during the operation to move the SNF from the pools to dry casks exceeds the value of incremental safety improvement, and that the probabilities of a mishap with either technology are low and virtually indistinguishable. Many have observed that the dry casks at the Fukushima Dai-ichi plant were unharmed despite the earthquake and subsequent tsunami, whereas the wet SNF storage pools that were located within the same containment structure as the reactors were damaged but not the wet storage pool outside the reactor building. The damage to the wet storage pools inside the reactor buildings occurred largely as a result of the hydrogen explosions and resulting structural collapse into the pools, exacerbated by the loss of power and subsequent lack of operating monitoring instrumentation in the pools. Despite this extraordinary damage, the SNF in the pools appears to have been largely unharmed. Some nuclear critics argue that the magnitude of the radioactive material inventory in wet storage pools warrants protection from the risks of a possible release from any of a number of scenarios, including station blackout or an airplane strike. Some have argued that SNF should be transferred to dry storage after the necessary cooling-off period in wet pool storage. NRC has examined this issue and determined that transfer of SNF to dry storage is not necessary to provide reasonable assurance of adequate safety. Examining the technical merits for such a requirement is beyond the scope of this report. Most recently, NRC staff, in its Near-Term Task Force recommendations from the Fukushima Dai-ichi accident, did not recommend a requirement to transfer SNF from wet to dry storage. NRC has issued orders requiring additional monitoring of SNF storage and safeguards against station blackout and loss-of-power situations, which could add to the cost of maintaining wet pool storage. These added costs, combined with the uncertainty about a permanent geologic repository, could increase the already accelerating rate of transfer from wet pools to dry storage. A shift of all SNF older than five years from wet pools to dry storage would more than triple the amount of SNF in dry cask storage. If this shift were to occur, it would result in 85% of the total SNF stored in dry casks (instead of the current 25% of SNF in dry casks). To accommodate this number of transfers from wet storage pools, more than 2,700 new dry casks would be required. NRC currently provides specific technical requirements for both wet and dry cask storage, and points to this system as a reason there is no pressing safety or security reason to mandate earlier transfer of fuel from pool to cask (see " Hazards and Potential Risks Associated with SNF Storage " above). Because of the increasing use of dry cask storage, NRC's and industry's systems for implementing these requirements may require modification for a larger number of sites. A recent review by the NRC Office of Inspector General (OIG) evaluated NRC's process for inspecting the safety and security of dry cask storage. The OIG review did not identify any current technical risks with SNF storage using dry casks, but noted that NRC lacks an adequately centralized, consistent system for conducting dry cask inspection, including staffing and training. It found that NRC needed to address this issue because dry cask storage was the most likely method for additional storage capacity, and that all reactors are expected to require dry cask storage by 2025. As dry cask increasingly becomes the predominant method for SNF storage, rather than a supplement to wet pool storage, NRC would need to step up the level of staffing, training, and procedural discipline to ensure effective and consistent inspections. The OIG findings did not identify any technical failures with dry casks, but rather recommended adjustments in NRC management to make oversight and inspections more systematic. NRC has begun implementing these improvements in the dry cask inspection program. NRC's recent Near-Term Task Force Review of Insights from the Fukushima Dai-ichi Accident did not include a mandate to switch from wet to dry storage among its recommendations for considerations by the commission. The Near-Term Task Force recommended, instead, "enhancing spent fuel pool makeup capability and instrumentation for the spent fuel pool" (Section 4.2.4) and a number of actions to address site blackout mitigation and preparedness. The commission staff review of the task force recommendations subsequently found there was "no imminent risk from continued operation and licensing activities" and recommended action on several task force recommendations, including addressing site blackout issues (e.g., establish a "coping time of 72 hours for core and spent fuel pool cooling ..." under 10 C.F.R. 50.54(hh)(2)). The staff review recommended deferring action, however, on other task force recommendations related to SNF management, based on the need for additional review, in part to consider related regulatory actions, such as seismic qualification and instrumentation requirements. Options for Where to Store SNF The options for where to store SNF include alternatives ranging from continued decentralized storage at dozens of locations to some combination of consolidated or centralized storage facilities. Among the reasons for considering alternative storage locations are the costs incurred by multiple reactor locations, and concern that nuclear power plants were not originally located and designed to serve as indefinite SNF storage sites. In addition, some analysts have recommended long-term interim storage to improve safety and reduce pressure on establishing a repository in a forced technical and political environment. The SNF storage option most often debated, and most recently recommended by the Blue Ribbon Commission (BRC), is the establishment of centralized storage locations, or consolidated storage, for stranded SNF. Any evaluation of options for where to store SNF begins with the current situation, which includes the location of existing SNF (see above section) and the statute governing SNF management, the Nuclear Waste Policy Act (NWPA) . The current U.S. inventory of SNF is more than 67,000 MTU, and growing by approximately 2,000 MTU per year . Various studies have projected future inventories of SNF requiring storage and disposal. The results depend on assumptions about the rate at which SNF is generated, which depends on assumptions about reactor operations, license renewals, and new reactor construction. For example, a 1995 DOE study projected that SNF storage would reach approximately 86,000 MTU in about 2030 and level off unless a significant number of new reactors are ordered, constructed, and operated. Future inventory levels, which depend on capacity factors at, and number of reactors in operation, and discharge rates for SNF, could have an impact on the need for storage and disposal capacity. Secretary of Energy Spencer Abraham cited security concerns in the wake of the September 11, 2001, attacks as a basis for relocating high-level waste from at-reactor storage to Nevada surface storage. Others have noted that at least some of the spent fuel and high-level waste will remain at the same temporary storage locations for as long as the facilities operate. Storage of discharged spent fuel will require at-reactor storage for at least one to five years to allow the SNF to cool sufficiently to allow transfer to a dry cask for storage or transport. The BRC draft report noted that the NWPA allows for the construction of one consolidated interim storage facility with limited capacity, and only after a nuclear waste repository is licensed. This statutory limitation reflects the perennial concern that establishment of a "temporary" or interim storage site could become a de facto permanent waste repository, and could reduce the perceived need for a permanent geological repository. BRC concluded that "[o]ne or more consolidated storage facilities will be required, independent of the schedule for opening a repository." BRC explicitly recommended that the NWPA be "modified to allow for multiple storage facilities with adequate capacity to be sited, licensed and constructed when needed." BRC's Transportation and Storage Subcommittee had earlier signaled its support for consolidated interim storage in its draft May 2011 report, which indicated that a central interim storage location could provide significant benefits, including reduced costs, improved safety, and increased overall confidence in nuclear power as a viable long-term energy source. The BRC recommendation is consistent with a major report earlier in the year by the Massachusetts Institute of Technology (MIT), which stated, "[t]he possibility of storage for a century, which is longer than the anticipated lifetimes of nuclear reactors, suggests that the U.S. should move toward centralized storage sites—starting with SNF from decommissioned reactor sites and in support of a long-term SNF management strategy." Similarly, in testimony before BRC, a longtime nuclear analyst from Harvard University urged BRC to follow the advice of the bipartisan National Commission on Energy Policy, which recommended that Congress "[a]mend the Nuclear Waste Policy Act to make clear that interim storage and federal responsibility for waste disposal are sufficient to satisfy the Nuclear Regulatory Commission's waste [confidence] rule." Except for state requirements, this need to address long-term SNF storage is not a near-term limitation on building new nuclear power plants. Senators Lisa Murkowski and Mary Landrieu proposed legislation in June 2011 ( S. 1320 , the Nuclear Fuel Storage Improvement Act) intended to help establish up to two interim nuclear waste storage sites. The bill includes provisions to support DOE in paying local governments who offer to host interim spent fuel storage facilities using the Nuclear Waste Fund for these payments. It also directs DOE to arrange for the transportation of the SNF to the interim site. The idea of consolidated interim storage has been debated for many years. The concerns about consolidated interim storage expressed by some include (1) potentially reducing pressure on decision makers to agree on a permanent repository because the problem will appear to have been "solved" and because of a resulting concern that storage sites would become de facto repositories; (2) protracted delays because of the difficulty in finding a willing host community for SNF storage, which could divert resources from other useful efforts (e.g., safety and security of existing SNF storage and repository siting); and (3) potentially higher net risks if the SNF were to require multiple moves to transport it to the interim site and again to the repository (depending on risk reduction from moving SNF from existing storage locations). Many have found common ground on the need to consolidate storage of SNF that is located where a reactor or other nuclear facilities have been shut down (i.e., "stranded" SNF sites). If the SNF at these locations were consolidated to a new or existing storage site, it would have the effect of reducing the number of storage sites and reducing many fixed overhead costs (e.g., security and maintenance). It could also add a new storage site or sites to the map, depending on whether an existing storage site was used. There will be a temporary need for wet storage even after reactors at a site have ceased operation to allow time for the SNF to cool sufficiently (one to five years) to be transferred to dry cask storage. Consolidating current inventories of SNF reduces, but cannot eliminate, the need for spent fuel at these sites. At sites where the reactor continues to operate, SNF will continue to be stored, at a minimum, to allow for cooling of newly generated SNF before it can be moved. Moving SNF from the 10 commercial "stranded" SNF sites to a consolidation site would have the effect of reducing the number of sites requiring security and safeguards, thereby potentially reducing storage costs, or allowing more resources to be devoted to safety and security at the consolidated site, compared to multiple sites. There may be some incremental additional risk in transporting the SNF to a consolidated site. The risks and costs of continuing to store the SNF at the reactor site would have to be compared to the risks of transferring to another location. The United States has some significant experience with safely transporting SNF, largely through the DOE Foreign Research Reactor SNF return program and limited intra-utility transfers. In this program, DOE has, with no significant safety incidents, returned spent fuel from countries where the United States had previously shipped nuclear materials—often weapons-grade uranium—with the expectations that the material would be shipped back to the United States after being discharged from the reactor. Options for SNF Management and Regulatory Oversight To consider alternative management and regulatory oversight structures , there is a range of possible options, including both government and quasi-governmental entities with varying authorities and resources. For decades, Congress has charged three federal agencies with the primary responsibilities for high-level nuclear waste management, including SNF: DOE has been responsible for technical evaluations of the Yucca Mountain site, preparing license application documents and eventually operating the geologic repository; the Environmental Protection Agency has been responsible for developing standards; and NRC has been responsible for the licensing process, including the geologic repository and SNF storage in wet pools and dry casks. With the termination of the Yucca Mountain repository program at DOE, civilian SNF analysis has been transferred from DOE's former Office of Civilian Radioactive Waste Management to DOE's Office of Nuclear Energy. Various institutional structures and models have been proposed to manage nuclear waste in place of the current responsibility given to DOE, mandated by the NWPA. For example, Senator George Voinovich repeatedly introduced the U. S. Nuclear Fuel Management Corporation Establishment Act, which would establish a government corporation with a bipartisan board of directors appointed by the President and confirmed by the Senate. The Blue Ribbon Commission (BRC) concluded that "a new, single-purpose organization is needed to develop and implement a focused, integrated program for the transportation, storage, and disposal of nuclear waste in the United States," and that "moving responsibility ... outside DOE ... offers the best chance for future success." Again, a similar recommendation had been included in the MIT report, which recommended "that a new quasi-government waste management organization be established to implement the nation's waste management program." The BRC recommendation to change the institutional structure for managing SNF by creating a new federal corporation "dedicated solely to implementing the waste management program and empowered with the authority and resources to succeed" was considered by some to be the "centerpiece of the BRC's recommendations," though they criticized it as falling short of their goal of a market-based private SNF management system. Some have recommended the use of existing DOE nuclear weapons facilities for storage of SNF, coupled with spending on research for new reprocessing technologies. The idea of establishing a consolidated storage facility for commercial SNF at a DOE facility is part of the larger debate about whether, how, and where to establish consolidated SNF storage sites. Proposals to use DOE sites (e.g., the Savannah River Site in South Carolina) for this purpose are often linked with using existing DOE facilities, including reprocessing "canyon" buildings. Although it is beyond the scope of this report, as Congress considers the BRC recommendations for alternative nuclear waste management structures, it may useful to consider prior federal government experience in operating and providing both support and regulatory oversight for disposal repository and reprocessing efforts. Managing SNF storage and disposal through reprocessing, or chemical separations, is a perennial issue, distinct from the question of storage location, that has been promoted as an SNF solution for many years. Others have argued that reprocessing has already been demonstrated to be not cost-effective, to produce significant environmental problems, and potentially to affect U.S. nuclear weapons nonproliferation policy. A variety of studies have concluded that reprocessing of SNF cannot be justified on the basis of waste management advantages or economics, but many support additional investment in research and development of more cost-effective reprocessing technologies. A recent MIT study concluded, for example, "[f]or the next several decades, light water reactors using the once-through fuel cycle are the preferred option for the U.S." These studies generally assume other options for spent fuel management, stockpiles and prices for uranium, and the readiness of the "fast" reactors that are viewed as a method to consume plutonium generated from reprocessing. Even the strongest advocates for reprocessing do not promote near-term deployment, and instead urge more government-funded research to pursue new reprocessing technologies, concluding "there is no benefit to reprocessing at this time." BRC concluded that "no currently available or reasonably foreseeable reactor and fuel cycle technology developments—including advances in reprocessing and recycling technologies—have the potential to fundamentally alter the waste management challenge this nation confronts over at least the next several decades, if not longer." Many analysts have raised concerns about the proliferation policy impacts associated with reprocessing, which gave rise to the U.S. halt in reprocessing by President Gerald Ford in the 1970s. Although this presidential ban was subsequently reversed, there are currently no plans for resumption of commercial reprocessing, largely because it has not been viewed as commercially viable. The conclusion that SNF reprocessing is not currently viable as a cost-effective alternative to storage and disposal does not necessarily mean that some viable SNF processing technology could not be developed in the future. Proponents of research on new SNF processing technologies assert that new SNF technologies would not necessarily generate the same wastes as in traditional aqueous "PUREX" reprocessing technologies, or pose a proliferation risk from separation of weapons-usable fissile materials. The Obama Administration has adopted and funded a policy consistent with the view of the chairman of the Senate Subcommittee on Clean Air and Nuclear Safety of the Environmental and Public Works Committee (Senator Thomas Carper), and the conclusions of an earlier MIT report that recommended research into new SNF processing technologies, and more fundamentally, a broader life-cycle effort to integrate fuel designs and reactors with long-term SNF disposition plans. BRC recommended "increased federal funding be provided to the NRC to support ... ongoing work by the NRC to develop a robust ... regulatory framework for advanced nuclear energy systems ... including NRC's ongoing review of the current waste classification system. Such a framework can help guide the design of new systems and lower barriers to commercial investment by increasing confidence that new systems can be successfully licensed." The nuclear industry has indicated that NRC rulemaking is needed because "the cost of the technology cannot be determined until the regulatory framework is known." NRC has initiated a rulemaking to establish a licensing process for SNF reprocessing. Some nuclear critics have questioned the need for rulemaking given the lack of proposals for reprocessing. Issues for Congress In the United States, SNF is largely stored at reactors where the SNF was generated, using dry casks as necessary when storage pool storage capacity is exhausted. Given current prospects for adequate repository capacity and existing and growing inventories of waste, long-term (60 years beyond reactor license) or extended (more than 150 years) SNF storage is likely. While some have expressed concern about the safety of wet pool storage and preference for dry cask systems, others, including NRC, believe that sufficient regulatory controls and economic incentives exist for ensuring safe storage of SNF. Regardless of actual or perceived risk, most growth in SNF storage has been with dry systems, and the portion of SNF storage using dry cask systems, compared to wet pools, is likely to continue to increase more rapidly. The trend is driven largely by the long-term cost advantages of dry cask systems in a storage regime that now has a longer time horizon. The current SNF storage situation could change if Congress adopts the recommendations of the Blue Ribbon Commission on America's Nuclear Future. These recommendations address where and how SNF is stored, as well as the institutional structures responsible. Areas of significant uncertainty include the likelihood of success of siting a "temporary" centralized consolidated storage site, the establishment of a new agency or federal corporation to manage SNF, and the prospects for success in developing advanced nuclear fuel cycles that address the economic, environmental, and proliferation issues that have foiled past efforts. The Senate Energy and Water Development appropriations bill for FY2013 includes provisions to help fund efforts to adopt the BRC recommendations. The Senate committee included language ( S. 2465 , Section 312) authorizing a pilot program to demonstrate one or more consolidated interim storage facilities for SNF and high-level waste. Any consolidated storage site would require the consent of the affected state governor, local government of jurisdiction, affected Indian tribes, and Congress. The Senate panel directed DOE to use $2 million of its program direction funding for the pilot program, along with $17.7 million in unobligated prior-year appropriations from the Nuclear Waste Fund. The bill would also require DOE, within 120 days of enactment, to submit to Congress a Pilot Program Plan and issue a Request for Proposals for Cooperative Agreements to implement the program. Among the issues to be addressed by DOE is the potential cost savings through consolidation of SNF storage. Also, the Senate Energy and Natural Resources Committee is reported to be developing legislation to address BRC recommendations. The House bill does not address SNF storage but provides $25 million in FY2013 to resume Yucca Mountain disposal repository activities. Appendix. U.S. Spent Nuclear Fuel Storage Inventories

Regardless of the outcome of the ongoing debate about the proposed Yucca Mountain geologic waste repository in Nevada, the storage of spent nuclear fuel (SNF)—also referred to as "high-level nuclear waste"—will continue to be needed and the issue will continue to be debated. The need for SNF storage, even after the first repository is opened, will continue for a few reasons. The Obama Administration terminated work on the only planned permanent geologic repository at Yucca Mountain, which was intended to provide a destination for most of the stored SNF. Also, the Yucca Mountain project was not funded by Congress in FY2011 and FY2012, and not included in the Administration's budget request for FY2013. Even if the planned repository had been completed, the quantity of SNF and other high-level waste in storage awaiting final disposal now exceeds the legal limit for the first repository under the Nuclear Waste Policy Act (NWPA). The expected rate of shipment of SNF to the repository would require decades to remove existing SNF from interim storage. Accordingly, the U.S. Nuclear Regulatory Commission (NRC) and reactor operators are considering extended SNF storage lasting for more than 100 years. The debate about SNF typically involves where and how it is stored, as well as what strategies and institutions should govern SNF storage. The earthquake and tsunami in Japan, and resulting damage to the Fukushima Dai-ichi nuclear power plant, caused some in Congress and NRC to consider the adequacy of protective measures at U.S. reactors. The NRC Near-Term Task Force on the disaster concluded it has "not identified any issues that undermine our confidence in the continued safety and emergency planning of U.S. plants." Nonetheless, NRC has accepted a number of staff recommendations on near-term safety enhancement, including requirements affecting spent fuel storage and prevention and coping with station blackout. NRC is not requiring accelerated transfer of SNF from wet pools to dry casks, but the SNF storage data from the last several years indicate that accelerated transfer has already been occurring. As of December 2011, more than 67,000 metric tons of SNF, in more than 174,000 assemblies, is stored at 77 sites (including 4 Department of Energy (DOE) facilities) in the United States located in 35 states (see Table 1 and Figure 5), and increases at a rate of roughly 2,000 metric tons per year. Approximately 80% of commercial SNF is stored east of the Mississippi River. At 9 commercial SNF storage sites there are no operating nuclear reactors (so-called "stranded" SNF), and at the 4 DOE sites reactor operations largely ceased in the 1980s, but DOE-owned and some commercial SNF continues to be stored at DOE facilities. In the United States, SNF is stored largely at nuclear reactor sites where it was generated. Of the 104 operating nuclear reactors in the United States, all necessarily have wet storage pools for storing SNF (wet pools are required to allow for a safe "cooling off" period of 1 to 5 years after discharge of SNF from a reactor). Wet storage pools are used for storage of approximately 73% (49,338 out of 67,450 metric tons of uranium, or MTU) of the current commercial SNF inventory, whereas the remaining 27% (18,112 MTU) of commercial SNF is stored in dry casks on concrete pads or in vaults. As wet storage pools become filled to capacity using "dense packing" storage methods, dry storage is increasingly being used, although there are 27 sites with 36 wet storage pools with no current dry cask storage capabilities. This report focuses on the current situation with spent nuclear fuel storage in the United States. It does not address all of the issues associated with permanent disposal of SNF, but rather focuses on the SNF storage situation, primarily at current and former reactor facilities for the potentially foreseeable future.

Fundamentals of Intellectual Property The term "intellectual property" identifies a number of legal instruments, including copyrights, patents and trade secrets, that provide innovators with proprietary interests in their intangible creations. Copyright provides authors with exclusive rights in their writings, visual works and other works of authorship; patents relate to products, processes and other useful inventions; while trade secret law concerns secret information that is of commercial value. Discussion concerning the intersection of homeland security issues and the intellectual property law has principally concerned patents. As a result, this report will focus upon the patent law, although its broader discussion of the relationship between homeland security and intellectual property is applicable to trade secrets, copyrights and other similar proprietary interests. Patent Policy By providing individuals with exclusive rights to their inventive products and processes, the patent law allows innovators to secure the economic benefits of their discoveries. Absent a patent system, competitors might readily be able to appropriate the benefits of an innovator's research and development efforts. Aware of these potential "free riders," firms might devote few, if any resources towards innovation. The patent law solves this market failure problem by providing economic incentives for individuals and institutions to engage in research and development. The patent system is also said to encourage the disclosure of new technologies. Each issued patent must include a description sufficient to enable skilled artisans to practice the patented invention. Issued patents may also encourage others to "invent around" the patentee's proprietary interest. Others can build upon the patentee's disclosure to produce their own technologies that fall outside the exclusive rights associated with the patent. Patent rights may also facilitate technology transfer. Absent patent rights, an inventor may have no tangible asset to sell or license. In addition, an inventor might otherwise be unable to police the conduct of a contracting party. Any technology or know-how that has been disclosed to a prospective buyer might be appropriated without compensation to the inventor. The availability of patent protection decreases the ability of contracting parties to engage in opportunistic behavior. By lowering such transaction costs, the patent system may make technology-based transactions more feasible. The patent system may also provide a more socially desirable outcome than its chief legal alternative, trade secret protection. Trade secrecy guards against the improper appropriation of valuable, commercially useful information that is the subject of reasonable measures to preserve its secrecy. Taking the steps necessary to maintain secrecy, such as implementing physical security measures, imposes costs that may ultimately be unproductive for society. Also, while the patent law obliges inventors to disclose their inventions to the public, trade secret protection requires firms to hold their protections in secret. The disclosure obligations of the patent system may better serve the goals of encouraging the diffusion of advanced technological knowledge. The patent system has long been subject to criticism, however. Some observers believe that the patent system encourages industry concentration and presents a barrier to entry in some markets. Others believe that the patent system too frequently attracts speculators who prefer to acquire and enforce patents rather than engage in socially productive activity. Still other commentators suggest that the patent system often converts pioneering inventors into technological suppressors, who use their patents to block subsequent improvements and thereby impede technical progress. When analyzing these contending views, it is important to note the lack of rigorous analytical methods available for analyzing the effect of the patent law upon the U.S. economy as a whole. The relationship between innovation and patent rights remains poorly understood. Concerned observers simply do not know what market impacts would result from changing the patent term from its current twenty-year period, for example. Consequently, current economic and policy tools do not allow us to calibrate the patent system precisely in order to produce an optimal level of investment in innovation. Patent Acquisition and Enforcement Patent rights do not arise automatically. Inventors must prepare and submit applications to the U.S. Patent and Trademark Office ("USPTO") if they wish to obtain patent protection. USPTO officials known as examiners then assess whether the application merits the award of a patent. In deciding whether to approve a patent application, a USPTO examiner will consider whether the submitted application fully discloses and distinctly claims the invention. In addition, the application must disclose the "best mode," or preferred way, that the applicant knows to practice the invention. The examiner will also determine whether the invention itself fulfills certain substantive standards set by the patent statute. To be patentable, an invention must be useful, novel and nonobvious. The requirement of usefulness, or utility, is satisfied if the invention is operable and provides a tangible benefit. To be judged novel, the invention must not be fully anticipated by a prior patent, publication or other knowledge within the public domain. A nonobvious invention must not have been readily within the ordinary skills of a competent artisan at the time the invention was made. The USPTO publishes most pending patent applications approximately 18 months after they are filed. For example, if an inventor filed a patent application on August 1, 2006, then the USPTO will make that application available to the public on or after February 1, 2008. Pre-grant publication of patent applications potentially alerts interested parties of the possibility that a patent might later be issued. However, if the inventor has abandoned the application, or has certified that no patent applications on the same technology will be sought outside the United States, then the USPTO will not publish the pending application. If the USPTO allows the patent to be issued, the patent proprietor obtains the right to exclude others from making, using, selling, offering to sell or importing into the United States the patented invention. The maximum term of patent protection is ordinarily set at 20 years from the date the application is filed. The patent applicant gains no enforceable rights until such time as the application is approved for issuance as a granted patent, however. Once the patent expires, others may employ the patented invention without compensation to the patentee. Patent rights do not enforce themselves. A patentee bears responsibility for monitoring its competitors to determine whether they are using the patented invention or not. Patent proprietors who wish to compel others to observe their intellectual property rights must usually commence litigation in the federal district courts. The U.S. Court of Appeals for the Federal Circuit ("Federal Circuit") possesses exclusive national jurisdiction over all patent appeals from the district courts. In turn, the U.S. Supreme Court possesses discretionary authority to review cases decided by the Federal Circuit. Government Use of Privately Owned Intellectual Property Episodes such as the Cipro incident have raised the possibility that intellectual property rights may clash with homeland security needs. If a firm owns a patent that covers an anti-terrorism technology, the exclusive patent right may be perceived as impeding the rapid and widespread deployment of that technology for purposes of homeland security. Current laws provide several possibilities for addressing this conflict, however. One option is a U.S. government taking of the intellectual property, subject to reasonable compensation owed to the patent owner. Another is that the federal government purchase any applicable patents from their owners. Legislative proposals submitted before Congress have suggested additional mechanisms for resolving issues at the interface between homeland security and intellectual property. Eminent Domain The U.S. government possesses the power to take private property for public use. For example, the government may condemn a parcel of land in order to build a highway. This authority is ordinarily termed "eminent domain." This government right is not unlimited, however. In particular, in some circumstances the government must compensate the property owner for use of the property. These general principles are most frequently applied to real estate, but they generally apply to intellectual property as well. As a result, the U.S. government effectively enjoys the ability to declare a "compulsory license" that allows it to use a patented invention without obtaining the permission of the patentee. In turn, the federal government has consented to suit by private patent owners in order to obtain compensation for government uses. Section 1498(a) of Title 28 of the U.S. Code provides in part: Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, the owner's remedy shall be by action against the United States in the United States Claims Court for the recovery of his reasonable and entire compensation for such use and manufacture. The remaining paragraphs of § 1498 provide analogous provisions pertaining to other intellectual property rights, including copyright, plant variety protection certificates, and semiconductor mark works. Section 1498 potentially applies to the use of any patented invention by the federal government, not necessarily those directly related to homeland security. To the extent the U.S. government engages in such activities as filling abandoned mines or constructing highways, it may be subject to a suit under § 1498(a) if it uses a patented invention without authorization. Certainly a number of these cases have concerned uses by the military, however. At least one § 1498 suit involved the federal government use of the patented pharmaceutical meprobamate, an anti-anxiety agent. Under § 1498(a), all patent suits against the U.S. government are litigated in the U.S. Court of Federal Claims. From 1855 through 1982, this tribunal was known as the U.S. Court of Claims, and from 1982-1992 it was named the U.S. Claims Court. The Court of Federal Claims also possesses jurisdiction over a number of other causes of action against the U.S. government, including certain tax and government contract cases. The President appoints sixteen judges to the Court of Federal Claims for fifteen-year terms. The Court of Federal Claims has national jurisdiction, allowing the court to subpoena witnesses and documents anywhere in the United States or its possessions. Court proceedings against the government under § 1498(a) are conducted using the same general standards as does litigation between private parties. The patent owner represents itself, while the Attorney General and Department of Justice are responsible for representing the U.S. government in § 1498 cases. Unlike private patent suits, however, there are no jury trials in § 1498 cases. Appeals from the United States Court of Claims proceed to the U.S. Court of Appeals for the Federal Circuit. As compared to remedies available in patent infringement suits against private parties, the remedies available in § 1498(a) suits are more limited. In private patent litigation, the adjudicated infringer is ordinarily enjoined from using the patented invention throughout the remaining term of the patent. The adjudicated infringer may also have to compensate the patent owner for profits lost due to the infringement. Additionally, if a court deems the defendant to have been a "willful infringer," the court may order the defendant to pay the patent owner up to three times the actual damages suffered. In contrast, § 1498(a) limits available remedies to "reasonable and entire compensation" to the patent owner. As a result, the government may not be enjoined from practicing a patented invention. The courts have also generally limited the damages that the government must pay to the patentee to the level of a "reasonable royalty." A "reasonable royalty" for purposes of patent infringement damages is "the amount that a person desiring to manufacture or use a patented article, as a business proposition, would be willing to pay as a royalty and yet be able to make or use the patented article, in the market at a reasonable profit." Finally, tripled damages for willful infringement are not available against the government. The number of § 1498 suits has been relatively modest over the years. One commentator reports that since 1949, the Court of Federal Claims and its predecessor courts have decided an average of 5.5 cases per year. In the twelve-month period ending September 30, 2002, a total of 6 suits under § 1498(a) were filed in the Court of Federal Claims. This number compares with a total of 2,520 patent infringement suits filed against private defendants in the U.S. federal district courts during the same period. Government Contractors Often the federal government purchases goods and services from private contractors. In the event that a private contractor infringes a patent while performing obligations under a federal government contract, § 1498 ordinarily applies. As a result, the patent proprietor's infringement remedy consists of an action in the Court of Federal Claims against the U.S. government. In such cases the private contractor may not be enjoined from infringing the patent while performing a government contract. In the event the Court of Federal Claims decides that a patent infringement has occurred, ordinarily the U.S. government pays any resulting monetary judgment. If the contract between the private contractor and federal government includes a so-called "patent indemnity" clause, however, the private contractor may have to reimburse the federal government for any damages owed for patent infringement. The Federal Acquisition Regulations (FAR) include a complex set of rules that require a patent indemnity clause for certain government contracts, prohibit it for others, and render the clause optional for still others. For example, the FAR requires that a government contract for any kind of performance that normally appears for sale on the open market include a patent indemnity clause. However, government contracts for small purchases, or for performance that occurs outside the United States, may not contain a patent indemnity clause. Other Compulsory Licenses As noted previously, 28 U.S.C. § 1498 provides a compulsory license in favor of the U.S. government for the use of patented inventions. A modest number of additional compulsory licenses exist within the U.S. patent system, each pertaining to specialized subject matter. For example, the Atomic Energy Act allows for compulsory licenses "if the invention or discovery covered by the patent is of primary importance in the production or utilization of special nuclear material or atomic energy." The Clean Air Act contains a similar provision relating to devices for reducing air pollution. Finally, the Plant Variety Protection Act provides for the compulsory licensing of seed-bearing plants that are protected by plant variety certificates, a patent-like instrument granted by the Department of Agriculture. Legal research completed in connection with this report has failed to discover even a single instance where any of these compulsory licenses has actually been invoked. Plainly, none of these provisions has been frequently employed in the past. Some commentators speculate that the threat of a compulsory license usually induces the grant of contractual licenses on reasonable terms. As a result, there is no need for the government to invoke a compulsory license formally. Legislation introduced in the 109 th Congress would have created an additional compulsory license in the patent law. H.R. 4131 , the Public Health Emergency Medicines Act, would have allowed the government to use the patented invention without the patent owner's permission if the Secretary of Health and Human Services determined that the invention is needed to address a public health emergency. Under the bill, the Secretary of Health and Human Services would have determined compensation for government use of the patented invention. The bill provided in part: In determining the reasonableness of remuneration for use of a patent, the Secretary of Health and Human Services may consider— (1) evidence of the risks and costs associated with the invention claimed in the patent and the commercial development of products that use the invention; (2) evidence of the efficacy and innovative nature and importance to the public health of the invention or products using that invention; (3) the degree to which the invention benefitted from publicly funded research; (4) the need for adequate incentives for the creation and commercialization of new inventions; (5) the interests of the public as patients and payers for health care services; (6) the public health benefits of expanded access to the invention; (7) the benefits of making the invention available to working families and retired persons; (8) the need to correct anti-competitive practices; and (9) other public interest considerations. The Implications of the TRIPS Agreement A leading international agreement on intellectual property bears upon the availability of compulsory licenses under U.S. law. The TRIPS Agreement, or Agreement on Trade-Related Aspects of Intellectual Property Rights, forms one component of the treaties comprising the World Trade Organization (WTO). The TRIPS Agreement addresses a number of intellectual property laws, including patents, copyrights, trademarks and trade secrets. In part this agreement requires WTO signatory states, including the United States, to ensure that their intellectual property laws comply with specified standards. Part III of the TRIPS Agreement addresses compulsory licenses. As noted above, compulsory licensing refers to the grant of a license by a government to a third party to use a patent without the authorization of the patent holder. The TRIPS Agreement places some limits upon the ability of WTO member states to award compulsory licenses for the use of a private person's patented invention. Among the most detailed provisions of the TRIPS Agreement, Article 31 imposes in part the following restrictions upon the issuance of compulsory licenses: Each application for a compulsory license must be considered on its individual merits. The proposed user must have made efforts to obtain authorization from the patent owner on reasonable commercial terms and conditions and must demonstrate that such efforts have not been successful within a reasonable period of time. However, this requirement may be waived in the case of a national emergency or other circumstances of extreme urgency. Any such use shall be authorized predominantly for the supply of the domestic market of the member authorizing such use. The compulsory license must be revocable if and when its motivating circumstances cease to exist and are unlikely to recur. The patent owner must be paid adequate remuneration in the circumstances of each case, taking into account the economic value of the authorization. The legal validity of any decision relating to the authorization of such use shall be subject to judicial or other independent review. In light of this obligation, any proposed compulsory licensing provision may need to be examined for its compliance with the TRIPS Agreement. It should be noted that in the 109 th Congress, the proposed Public Health Emergency Medicines Act, H.R. 4131 , included the following provision: CONSISTENCY WITH TRIPS- The Secretary of Health and Human Services may adopt regulations to implement the purposes of this section, consistent with the Agreement on Trade-Related Aspects of Intellectual Property Rights referred to in section 101(d)(15) of the Uruguay Round Agreements Act. In the event that a U.S. law did not comply with the TRIPS Agreement standard, the possibility exists that the United States could be called before the WTO Dispute Settlement Body (DSB). Under the WTO agreements, if one WTO member state believes that another member state is in violation of the TRIPS Agreement, the member states may enter into consultation through the DSB. If the member states cannot resolve their dispute, then the DSB will convene a panel to hear and resolve the dispute. Panel decisions are subject to review by the DSB Appellate Body. The WTO Agreement calls for compensatory trade measures in circumstances where the DSB finds a member state to be in violation of the TRIPS Agreement, yet that member does not amend its laws. In addition to the possibility of trade sanctions under the TRIPS Agreement, policy makers at the intellectual property-homeland security interface should be aware of recent U.S. foreign policy that has supported the creation of strong patent rights overseas. Many commentators credit the United States with incorporating minimum standards for patent protection within the framework of the WTO. Since the TRIPS Agreement came into effect, the United States has continued to encourage other countries to limit the issuance of compulsory licenses. Some commentators believe that calls from certain U.S. government officials to "override" Bayer's Cipro patent have made it difficult to defend the U.S. view that developing countries should avoid issuing compulsory patent licenses to address their own domestic health needs. As a result, if future discussion occurs over potential reforms to the patent system in view of homeland security needs, it may be advisable to account for possible U.S. foreign policy implications. Government-Sponsored Research Some patented inventions of interest to homeland security may have resulted from government funding of research and development that was performed by the private sector. Current laws set the balance of rights and responsibilities between the federal government and private researchers concerning patented inventions. As the federal government has increased funding for research and development of anti-terrorism technologies, public-private intellectual property ownership issues may be increasingly important in the field of homeland security. The Bayh-Dole Act governs the ownership of patent rights in inventions resulting from research and development supported by federal government funding. The Bayh-Dole Act is the popular name for P.L. 96-517 , which is codified in sections 200-212 of Title 35 of the U.S. Code. The Bayh-Dole Act establishes a presumption that ownership of all patent rights in government-funded research will vest in any contractor who is a nonprofit research institution or small business. A 1987 presidential memorandum instructed federal agencies to apply some Bayh-Dole rights to all contractors, regardless of their size. The purpose of the Bayh-Dole Act was to encourage companies to undertake the additional efforts necessary to bring government-funded inventions to the marketplace. Experience showed that without title to an invention, firms were less likely to commit resources to commercialize inventions. By providing universities, nonprofit institutions and small businesses with intellectual property rights, Congress intended both to promote collaboration between commercial concerns and nonprofit organizations, as well as to promote the commercialization and public availability of inventions. The Bayh-Dole Act describes in some detail the license given to the federal government on any subject invention made under a government contract. The contractor may elect to retain title to the invention unless the U.S. government determines that it is in the nation's best interest to take title to the invention. If the U.S. government makes this determination, the U.S. government must pursue a lengthy process of justifications and approvals before it can take title under the statute. If the contractor is allowed to retain title, the federal government receives "a nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States any subject invention throughout the world." This license is not negotiable and is the minimum that the government receives under a procurement contract, grant, or cooperative agreement. This minimum license allows the government to use the intellectual property for its own purposes and to give such intellectual property to any other entity, including another commercial entity, to build or to use on the government's behalf. The Bayh-Dole Act also provides for so-called "march-in rights." The U.S. government can require the contractor to grant reasonable licenses to third parties under a specific set of circumstances. For example, if a patentee fails to take effective steps in a reasonable amount of time to achieve practical application of the invention, or the action is necessary for public health and safety reasons, or is required by public use regulations, the federal government can require a contractor to grant a license or can even grant a license itself. The federal government has also established "data rights regulations" that operate independently of the Bayh-Dole Act. These regulations apply both to "technical data" and computer software produced during the performance of government contracts. The term "technical data" includes research and development data, engineering drawings, manuals and any other recorded information of a scientific or technical nature that is proprietary to the government contractor. The data rights regulations provide the federal government with the right to access and utilize computer software and technical data that belongs to government contractors. The regulations also establish conditions under which contractors can maintain rights in their software and data against the government. The data rights regulations have been described as "some of the most complicated regulations in the government procurement system." In brief, however, when technical data and computer software are developed by a contractor exclusively with federal funds, the United States enjoys "unlimited rights" to use the information and freely disclose it to others. In other circumstances, however, the government obtains more restrictive rights to use contractor technical data and software. For example, if the government has funded only part of the costs of developing technical data, and the contractor indicates that the data is confidential, then in some circumstances the government has a reduced ability to share the data with others and must maintain the data as confidential. Opinions vary on whether the Bayh-Dole Act and data rights regulations have been fair and effective. Some commentators believe that these rules are inflexible and overly favor the government's position vis-a-vis contractors. For example, Richard N. Kuyath, an attorney in the Office of General Counsel of Minnesota Mining and Manufacturing Company (3M), contends that unless the laws are reformed to improve the intellectual position of government contractors, "many commercial laboratories will continue to refuse government-sponsored R&D." Attorney Diane Sidebottom has argued in accord, contending that current government contracting rules are too rigid and lead to "one size fits all" thinking. In her view, the governing laws and regulations should be changed to "encourage flexibility in the negotiation of intellectual property rights in government contractual arrangements." On the other hand, controversy continues over the ability of government contractors to obtain valuable proprietary interests in the fruits of research that was financed by taxpayer dollars. Other Issues at the Interface Between Intellectual Property and Homeland Security Alongside the various laws pertaining to U.S. government use of subject matter protected by an intellectual property right, other legislation relates to the issues at the intersection of homeland security and intellectual property. This report next considers the more significant of these statutes. Government Purchase of Intellectual Property In addition to invoking a compulsory license of a proprietary right, another government option is to seek a voluntary license, or simply purchase outright, an intellectual property right that pertains to homeland security. Congress has already authorized the Armed Forces to license, or purchase outright, patents and other proprietary rights: Funds appropriated for a military department available for making or procuring supplies may be used to acquire any of the following if the acquisition relates to supplies or processes produced or used by or for, or useful to, that department: (1) Copyrights, patents, and applications for patents. (2) Licenses under copyrights, patents, and applications for patents. (3) Design and process data, technical data, and computer software. (4) Releases for past infringement of patents or copyrights or for unauthorized use of technical data or computer software. This legislation provides for a voluntary negotiation between the Armed Forces and the intellectual property rights holder. The extent to which the Armed Forces, or any other federal government entity, has in fact licensed or purchased an intellectual property right from a private party is unclear. Notably, if a U.S. government entity in fact uses the patented invention without authorization, the maximum extent of its liability is "reasonable and entire compensation" to the patent owner within the meaning of 28 U.S.C. § 1498. This amount is ordinarily set to the value of a voluntarily negotiated license, an amount presumably less than the total worth of the intellectual property right. Given the availability of 28 U.S.C. § 1498, the ability to license or purchase an intellectual property may be of comparatively limited value to the government. The Invention Secrecy Act Although technological innovations may contribute to the solution of national security problems, in some circumstances the disclosure of new technologies may itself lead to possible homeland security issues. Recognizing this potential, Congress enacted the Invention Secrecy Act of 1951 in order to control the disclosure of certain inventions based upon concerns of national security. Under the act, the Director of the USPTO possesses the power to withhold from issuance patent applications due to national security concerns. If the Director believes that the disclosure of a particular invention may be detrimental to national security, he makes the patent application available to the head of the appropriate defense agency. If that individual agrees with the Director's assessment, the Director may issue a secrecy order on that patent application. This order obliges the applicant not to disclose the invention to others for the duration of the order. Failure to comply results in the rejection of the patent application and possibly a fine and imprisonment. Secrecy orders are announced for one-year periods. They may be renewed on an annual basis upon a showing by the appropriate agency head that the national interest continues to support the secrecy order. Secrecy orders can be terminated prematurely if these national security interests cease to exist. Inventors whose applications are subject to a secrecy order are entitled to certain relief. First, applicants may file a petition to have the secrecy order withdrawn. Applicants whose patents have been withheld due to a secrecy order have a right to compensation. If a patent does ultimately issue from an application that was subject to a secrecy order, the patent is entitled to term extension on a day-per-day basis for the length of the secrecy order. Because the 20-year patent term is ordinarily based upon the filing date, this provision ensures that the inventor receives the same term that he would have had the patent been issued without a secrecy order. Incentives for Bioterrorism Countermeasure Development During the 109 th Congress, several bills were introduced (although not enacted), including S. 3 , the Protecting America in the War on Terror Act, S. 975 , the Project Bioshield II Act, and S. 1873 , the Biodefense and Pandemic Vaccine and Drug Development Act, that would have generated additional incentives for the creation of new technologies to counteract potential biological threats. S. 3 and S. 975 would have allowed for the restoration of that portion of the patent term used during the FDA approval process, and/or the extension of a patent term to reward technological innovation in the area of bioterrorism countermeasures. The proposed legislation also would have provided for additional FDA-administered marketing exclusivities for eligible and designated countermeasures. S. 1873 would have permitted a countermeasure product to qualify as an orphan drug and thereby obtain a ten-year period of marketing exclusivity. These unenacted legislative proposals are addressed in greater detail in a separate report. Concluding Observations Intellectual property is an important consideration for the federal government as it shapes homeland security policy. Policy makers should be aware that there is a long history of using patents in order to encourage innovation, accompanied by legislative safeguards that protect government interests. In particular, existing law allows intellectual property owners to obtain compensation should the government use privately owned intellectual property to protect public health and safety without prior authorization. This and other laws attempt to achieve the goals of the prompt, widespread use of critical anti-terrorism technologies, along with the continued encouragement of firms to use their research and development capabilities to help the government fight terrorism in the future.

The U.S. government and private firms alike seek high technology solutions to detect and prevent future terrorist attacks, as well as to respond to any future attacks that do occur. Some concerns exist, however, that patents, trade secrets or other intellectual rights may impede the prompt, widespread and cost-effective distribution of innovations that promote homeland security. In 2001, these concerns arose with respect to pharmaceutical CIPRO, an antibiotic that treats inhalation anthrax. Some commentators called for the U.S. government to "override" a privately owned patent in order to distribute CIPRO to persons who were potential anthrax victims. Although the patent holder ultimately chose to increase production of CIPRO and lower costs, this scenario remains a possibility for other technologies that bear upon homeland security. Perhaps not fully appreciated during the CIPRO incident was the fact that existing laws provide mechanisms for addressing potential conflicts between intellectual property rights and homeland security needs. The principal statute concerning U.S. government use of intellectual property is 28 U.S.C. § 1498. This statute allows the federal government to exercise eminent domain authority against private intellectual property rights. As a result, the federal government may use patented inventions without the prior consent of the patent owner, subject to an obligation to compensate the rights holder on a monetary basis. The federal government may not be enjoined from infringement of an intellectual property right. Intellectual property owners may enforce this government compensation obligation by bringing suit in the U.S. Court of Federal Claims. A number of more specialized statutes, such as the Atomic Energy Act, also allow federal government officials to declare a compulsory license with respect to a particular patent. Reportedly these provisions have been used infrequently. Legislative initiatives have proposed that U.S. law provide for other kinds of compulsory licenses, including a compulsory license that the government could invoke during a public health emergency. Existing legislation and proposed reforms should be evaluated in view of the Agreement on Trade-Related Aspects of Intellectual Property Rights. This "TRIPS Agreement" places some limits on the ability of WTO member states to award compulsory licenses for the use of a private person's patented invention. If an invention was developed using federal government funding, the government may possess certain rights in that invention even though the government contractor obtained a patent. Many entities of the federal government enjoy the statutory authority to purchase a patent or other intellectual property right. Several other statutes and legislative proposals also concern issues at the intersection of homeland security and intellectual property. The Invention Secrecy Act controls the disclosure of inventions that raise national security concerns. Legislative proposals would also call for patent term extensions to award technological progress in anti-terrorism technologies.

Introduction The changing structure of U.S. agriculture has generated concerns about reduced competition in a wide variety of agricultural product markets, including dairy. Two primary areas of concern in the dairy industry are consolidation—the shift to fewer and larger firms—and industry concentration—the extent to which a small number of firms control most of the sales. On August 5, 2009, the Administration announced that the U.S. Department of Agriculture (USDA) and the Department of Justice would hold several public workshops to consider competition issues affecting agriculture and the appropriate role for antitrust and regulatory enforcement. A workshop on the dairy industry is scheduled for June 25, 2010, in Madison, WI. This report provides background on the structure of the U.S. dairy industry and an overview of dairy issues. The first section briefly discusses recent financial stress for dairy farmers and the historical development of the dairy industry. The second section reviews disparate movements in farm and retail prices for milk and dairy products. The third section examines current industry structure in terms of consolidation and concentration at different market levels: farm, cooperative, processor, and retail. The fourth section considers the economic effects of consolidation and concentration. Finally, U.S. antitrust law is outlined, along with recent antitrust activity directed at the dairy industry. Financial Stress for Dairy Farmers The financial stress in the dairy industry in 2009, brought on largely by sharply lower milk prices, activated standing federal programs to support dairy farmers. In calendar year 2009, the federal government spent more than $1 billion to support the industry through various dairy programs. Following appeals from dairy farmers for more financial assistance, Congress granted $350 million in October 2009 in the form of supplemental payments as well as government purchases of dairy products for domestic feeding programs. Despite the government payments and program support, the number of U.S. dairy farms declined during 2009 by 3% to 65,000 farms as of December 31, 2009. During the same period, the number of dairy cows fell, and the subsequent decline in milk production, along with a simultaneous rebound in foreign demand for dairy products, lifted average farm milk prices, estimated at $15.10 per hundredweight for March 2010, up from $11.80 per hundredweight a year earlier. (Prices averaged $14.68 per hundredweight during 2000-2009.) Still, financial concerns remain for dairy farmers who lost significant amounts of farm equity during the milk price collapse and continue to contend with feed prices that are well above historical averages. The financial stress of 2009 and similar episodes over the years have led the industry and Members of Congress to reconsider the options available to handle fluctuations in milk prices and income for dairy farmers. For more information on dairy policy options, see CRS Report R41141, Previewing Dairy Policy Options for the Next Farm Bill . Financial stress in the dairy sector has also motivated the Obama Administration and some Members of Congress to examine issues of consolidation and concentration in the dairy industry. Development of the U.S. Dairy Industry Over the last 100 years, the U.S. dairy industry has evolved from a collection of local producing and consuming areas to a national milk and dairy product market, due in part to significant advancements in milk marketing, particularly the ability to transport milk more efficiently over long distances. The early history of the dairy industry was also shaped by significant government intervention in the market, which continues today. Marketing and Policy History In the mid-1850s, most milk was consumed by families on farms or fed to livestock; some was sold off farms but only for very local use. As urban areas grew, milk was sent to processors to supply these areas with both fluid and manufactured products. By the turn of the 20 th century, many producers had banded together into cooperative associations to bargain with milk handlers (fluid milk processors) as a way to offset handler market power. In the early 1900s, dairy farmers increasingly looked toward cooperatives to market their milk, specifically by negotiating with milk buyers using collective bargaining. The Capper-Volstead Act of 1922 confers limited exemption from antitrust liability to farmer cooperatives (see " U.S. Antitrust Law ," below). By 1925, handlers were paying farmers for fluid-grade milk according to its use (fluid or manufactured products). This concept, known as "classified pricing," is still in use today. Milk for fluid use is valued at the highest level, reflecting higher transportation and handling costs. When the Great Depression hit, demand dropped sharply and the classified pricing system broke down. Federal milk marketing orders (FMMOs) were eventually established (and continue to function today) to stabilize the market and help equalize the market power of dairy farmers with dairy processors. Another motivation for establishing FMMOs was to ensure that consumers had adequate and dependable supplies of milk at reasonable prices. During this period, legislators also enacted import quotas on dairy products to protect producers from foreign competition. Eventually, during World War II, demand increased for farm commodities, including milk. In the late 1940s, the government began supporting the price of milk (and other farm commodities) to protect against price declines through the dairy price support program, now called the Dairy Product Price Support Program (DPPSP). In 1985, an export subsidy program (Dairy Export Incentives Program or DEIP) was added to national dairy policy. Finally, a counter-cyclical income program (Milk Income Loss Contract or MILC) was authorized beginning in 2002. For more information on dairy programs, see CRS Report R40205, Dairy Market and Policy Issues . Advancements in Milk Marketing Advancements in milk marketing have dramatically changed the U.S. dairy industry over the last century. In the early 20 th century, raw milk was transported by truck over short distances and by rail over longer distances (with milk packed in ice and sawdust) to processing plants. Distances ranged from just a few miles in "local" markets to several hundred miles in large markets such as New York, Boston, and Chicago. Milk was "bottled" mostly for home delivery, with only small amounts sold in stores. Home delivery of milk characterized fluid milk marketing for decades, which highlights the historical "local" nature of production and consumption of fluid milk. However, throughout the second half the of 20 th century, several factors combined to reduce the cost of moving milk from producers to consumers, and ensuring a transition to what is now a national milk and dairy product market. These factors included improved roadways (e.g., the interstate highway system) and larger and faster trucks for bulk transport of milk (tanker trucks). By the 1970s, most retail milk was purchased in stores (or through food service), primarily in lightweight plastic or paper containers. Bulk milk is now shipped, perhaps thousands of miles by truck, when market demands exceed local farm milk production. Similarly, individual dairy manufacturing plants ship products such as cheese, yogurt, and flavored milk to food distribution centers located across the country. Farm and Retail Price Movements A long-standing issue during the development of the dairy industry, and in other parts of agriculture, has been the relationship between farm and retail prices. Most recently, as farm prices of milk and other agricultural commodities fell in late 2008, retail food price declines were slow to follow. This decreased the farm value share—the portion of the retail dollar that flows to the farmer—and caused some in Congress to question whether processors and retailers were contributing to economic stress in the agricultural sector, particularly for dairy farmers. In recent decades, across the agricultural sector, several factors have led to a declining farm share of the retail food dollar. These factors include gains in agricultural productivity, growth in demand for value-added products, and changes in food marketing. The farm share of the retail food dollar for all farm products (not just dairy) was 41% in 1950, a time when many food products were sold with much less value-added processing or packaging than today. In 2006, USDA estimated that the average farm-value share of all food products of U.S. farm origin consumed was 18.5%. The remaining 81.5% was accounted for by a host of marketing factors, including labor (processing and retail sectors), packaging, profit, transportation, and energy. For milk and dairy products, the farm share is approximately one-third of the retail dollar, which is greater than the all-food average, largely because other food categories such as cereals and bakery products have a higher overall degree of processing. While the farm share of the retail price bounces around from year to year, the overall trend for milk and dairy products was generally flat between 2000 and 2008. By product category, the farm-share trend was flat for whole milk, butter, and ice cream, with a slight uptrend for cheddar cheese. Examining changes in monthly farm and retail prices during 2008 and early 2009 indicates a decline in the farm-value share of retail product values and a widening of the marketing margin. Between July 2008 and December 2008, the farm price of milk reported by USDA fell by $0.33 per gallon ( Figure 1 ). Meanwhile, the average retail milk price fell only $0.28, with the difference between the retail and farm price (i.e., the marketing margin) increasing to $2.35 per gallon. In January 2009, the difference between the average retail price of milk and the farm price of milk reached a record-high $2.43 per gallon. Throughout 2009, however, amid lower costs for farm milk and other inputs (e.g., energy and transportation), retailers reduced their prices and the difference between farm and retail prices declined sharply. The difference dropped to $1.69 per gallon in December, which is more than $0.25 per gallon below the recent five-year average margin ( Figure 2 ). In early 2010, farm prices weakened slightly and the price spread returned to the five-year average level. As described in CRS Report R40621, Farm-to-Food Price Dynamics , time lags in retail price response to farm price changes are generally months in length, even for perishables like milk. Another characteristic of food markets is that adjustments in retail prices from higher farm prices occur faster and with greater pass-through to the consumer than adjustments to decreases in farm prices, an economic phenomenon often referred to as "sticky" retail food prices. That is, retail prices follow commodity prices upward rapidly, but fall back only slowly and partially when commodity prices recede. Economists have noted that certain aspects of consumer behavior (such as strong consumer store preference and responsiveness to high food prices by higher-income consumers), as well as store inventory management and retailing strategies, may limit retail prices from adjusting fully to downward farm price movements. As a result, these types of price movements do not necessarily imply abnormal or excessive market power by the retailer. Recent economic research has also found that the competition effects of supermarket services can result in stores attracting less price-sensitive consumers. For retail stores that differentiate themselves from competitors by offering additional services (e.g., banking, restaurant, pharmacy) rather than through prices, consumers might pay more for milk. In these cases, there can be a "disconnect" between farm and retail prices of agricultural products. Dairy Industry Structure Consolidation has been a long-term trend in agriculture. Across the industry, including the dairy sector, rising productivity has led to fewer and larger operations along the production and marketing chain, including farms, cooperatives, processors, and retailers. Larger operations tend to have lower per-unit costs. As firms reduce their costs, they become more competitive and can increase sales and market share at the expense of less profitable firms. As a result, fewer dairy farms are needed to produce the same amount of milk. Firm size is a limiting factor for growth, however, once the gains to economies of scale have been exhausted. At the farm level, the number of operations continues to decline, although at a much slower pace during the last decade than in previous periods. Consolidation at the cooperative and processor level has followed a similar path, in order to offset potential market power of large retailers and to satisfy demands from retailers to serve them more efficiently. Concentration—the extent to which a small number of firms controls most of the sales or purchases—has also been increasing in the dairy industry. Nearly all segments of the dairy industry have become more concentrated over time. Farms Increased dairy cow output and advances in dairy farm technology and management have led to a sharp reduction in the number of dairy farms ( Figure 3 ). Annual losses averaged 96,000 operations in the late 1960s and 37,000 in the 1970s. In recent years, the annual drop in dairy farm operations has slowed to about 2,000 to 5,000 farms per year. Operations totaled 65,000 on December 31, 2009. Steady increases in productivity (milk per cow) have more than offset declines in the number of dairy farms and cows, resulting in a steady upward trend in total milk production ( Figure 4 ). Meanwhile, domestic demand for milk and milk products, on a per-capita basis, has grown slowly, at 0.4 % per year since 1990. Rising consumption of dairy products such as cheese has offset a decline in consumption of fluid milk products. Exports of dairy products have increased in recent years, reaching record levels in 2008. The trend in farm numbers depends on the size of the farm ( Table 1 ). Between 2005 and 2009, farms with fewer than 500 cows registered declines, while farms with 500 to 999 cows held steady. In contrast, farms with 1,000 or more cows increased 20%, driven by significantly lower costs of production. In 2005, dairy farms with 1,000 cows or more had average costs of production of $13.59 per hundredweight, 15% below the average for farms with 400-999 head and 35% below the cost for farms with 100-199 head. Average costs were much higher for even smaller operations. Industry structure at the farm level can also be characterized by the volume of milk produced by farms of different sizes ( Table 2 ). In 2009, the largest portion of U.S. milk output (47%) was produced on farms with 1,000 head or more, while small farms (fewer than 100 head) accounted for only 16% of the total. An increase in the number of large farms has contributed to their producing a larger portion of U.S. milk output (the share produced by large farms rose from 35% in 2005 to 47% in 2009). Larger dairy farms enjoy "scale economies" arising in part from the use of large and highly automated milking parlors and feed delivery systems, which also allow for more effective use of labor. Also, large, modern buildings reduce per-animal housing costs, as do automated manure removal and handling systems. The structure of dairy farms also varies by region of the country ( Table 3 ). The average farm size is large in the western states (e.g., California, with 850 cows per farm). In contrast, Wisconsin has many small farms and an average farm size of 88 cows. The U.S. average is 133 cows per farm. Cost structure varies by state ( Figure 5 ). In the western states, where large dairy farms dominate the industry, operating costs have been affected by high feed costs in recent years because these farms purchase much of their feed (alfalfa and grain prices reached record levels in 2008). However, per-unit overhead costs tend to be relatively low because these costs can be spread over a large number of animals. In parts of the country where producers feed grain and hay that is produced on the farm, such as in Wisconsin, operating costs tend to be lower when grain and feed prices rise. These farms tend to have fewer dairy cows, so per-unit overhead costs are relatively high. Cooperatives16 A cooperative is an enterprise owned by and operated for the benefit of those using its services. Farmer-owned dairy cooperatives often operate a complete milk distribution system, procuring raw milk from the farm, routing it where needed, managing or coordinating movements of processed or manufactured products, and managing surplus milk. Dairy cooperatives range in size and function, with some solely arranging for the sale of members' milk while others manufacture a wide range of products for direct sale to customers. The number of dairy cooperatives has been declining since the 1940s as cooperatives merged to take advantage of economic gains from more centralized management of milk supplies and disposition. During 1940-1941, the number of dairy cooperatives totaled over 2,300 and accounted for just under one-half of farm milk marketings. By 2007, the number of cooperatives had shrunk to 155, while the co-op share of farm milk marketings had increased to 83% (with the remaining milk sold without cooperative affiliation). Over time, consolidations as well as strategic alliances among dairy cooperatives have enabled them to serve large retail customers by increasing volume and achieving operational efficiencies. Also, some economists contend that consolidation in the retail sector has encouraged consolidation within cooperatives. In 2008, 79% of the milk produced in the United States was marketed by the 50 largest dairy cooperatives (see Table 4 for a list of the top ten cooperatives). The top four cooperatives—Dairy Farmers of America (Kansas City, MO), California Dairies (Visalia, CA), Land O'Lakes (St. Paul, MN), and Northwest Dairy Association (Seattle, WA)—accounted for 40% of U.S. milk production. The share of the top four firms has been relatively constant since 2002. The National Milk Producers Federation, the largest trade association representing milk producer cooperatives, has commented on the importance of the Capper-Volstead Act (see " U.S. Antitrust Law ," below) in allowing farmers to take cooperative action and remain independent producers. Historically, cooperatives have improved farmers' bargaining position with milk handlers. They also represent their members in the rulemaking process for changes to federal milk marketing orders. Some producers, though, contend that cooperatives can work against their interests (see " Class Action Lawsuit Filed in the Northeast ," below). Processors and Manufacturers The dairy processing industry comprises both processing milk for fluid consumption and manufacturing dairy products such as butter and cheese. A number of factors in recent decades have affected dairy processors and manufacturers, including changes in demand (e.g., declining demand for fluid milk and increasing demand for dairy products like cheese), technological change in manufacturing processes and plants (leading to larger plant sizes), and changes in the retail sector (e.g., large-scale purchasing by retail giants). Over time, the number of dairy firms has declined, with firms reportedly increasing their plant and firm size to reduce their costs and respond to the demands of high-volume retailers, large restaurant chains, and other customers. After declining for many years, the number of dairy manufacturing plants in the United States has stabilized around 1,100 facilities ( Figure 6 ). The number of plants operated by the largest dairy processor/manufacturing companies ranges from 9 to 81 plants ( Table 5 ). Concentration trends in the dairy processing and manufacturing industry are not unlike those in other food processing sectors ( Table 6 ). In 2002, the latest year of available data, the four-firm concentration ratio (the combined market share of the top four firms) was 35% for cheese processing and 43% for fluid milk processing. These figures compare with a mean industry concentration ratio of 49% for nine selected food processing industries. Several industries were substantially more concentrated than dairy, including meatpacking (59%) and soybean processing (80%). While the level of concentration in dairy processing is not unusually high nationally, local or regional markets can be more concentrated, which is a concern for some farmers and policymakers. Based on U.S. Census Bureau data, the level of industry concentration in the fluid milk industry has recently increased ( Figure 7 ), following a merger in 2001 between the two largest private fluid processing firms—Suiza, Inc., and Dean Foods. Nevertheless, industry concentration for fluid milk processing is just below the average level (49%) for selected food manufacturing industries. For cheese manufacturing, the four-firm concentration ratio has ranged between 34% and 52% during 1972-2002, with no clear trend. Retailers The retail sector for food products has changed substantially in recent years, with price competition from nontraditional food retailers—such as discount mass-merchandise stores, warehouse club stores, and supercenters—causing traditional supermarket chains to review pricing and product strategies. Changes in retail sector strategies and competitive pressures have resulted in consolidation in the U.S. grocery retailing industry. According to data reported by USDA's Economic Research Service, the top four firms accounted for 17% of national sales in the early 1990s. By 2005, the four-firm concentration ratio had increased to 36% following acquisitions and mergers by large grocery retailers, including Kroger Co., Albertson's, Ahold USA, and Safeway. National-level concentration ratios are relevant for food product suppliers (including processors and/or wholesalers), who negotiate terms of product sales with retailers. Local-level concentration in the retail food sector is typically higher than at the national level. Typical four-firm concentration shares in specific market areas averaged 74% in 2003, according to a study by the U.S. Government Accountability Office. Four-firm shares ranged from 63% in Minneapolis/St. Paul to 85% in Denver. Previous analysis by USDA's Economic Research Service indicated similar levels in selected markets, averaging 72% in 1992 and 74% in 1998. Compared with national concentration measures in the food retail sector, local-level concentration is more important for consumers because relatively high concentration indicates fewer choices among food stores at the individual consumer level. Dairy industry observers say that one of the most significant impacts of retail consolidation and concentration has been the tendency for dairy processors and manufacturers to increase in size (consolidation) and market share (concentration), to cope with rising demands of food retailers to deliver products at lower costs. Effects of Concentration in the Dairy Industry The primary concern many have with concentration is that it could reduce competition in the marketplace for agricultural and food products and result in market power (i.e., the ability of a firm to influence prices), putting at a disadvantage some segment of the population, such as producers or consumers. However, concentration may also result in efficiency gains, whereby cost savings are passed on to consumers through lower retail prices, which in turn can result in additional demand for commodities and benefit farmers. In summarizing research findings for several agricultural industries, the Government Accountability Office (GAO) concluded that the economic literature has not established that "concentration in the processing segment of the beef, pork, or dairy sectors, or the retail sector overall has adversely affected agricultural commodity or retail food prices." GAO concluded that most of the studies it reviewed found either no evidence of market power, or efficiency effects that were larger than the market power effects of concentration. However, the agency said, experts generally agreed that concentration is likely to increase in the future, potentially raising greater concerns about market power and the manipulation of commodity or food prices. The report also cited an expert who said that further increases in concentration would continue to generate efficiency gains and be beneficial. The GAO report reviewed four studies of dairy processing, concluding overall that concentration in dairy processing had little or no impact on commodity or food prices. In the studies that found concentration affected market power, the authors concluded that efficiency benefits (lower costs that benefit all market participants) were greater than the market power effects. Also, the report commented that the market power of dairy processors can be offset by the market power of dairy cooperatives. The same report included reviews of three studies of regional retail milk markets that generally suggested evidence of market power. For example, one found evidence of noncompetitive behavior (e.g., time lags for retailers response to farm price declines, and retail prices not aligned with product costs) in nine metropolitan markets in several western states. Two other studies found evidence of some market power among retailers in the Boston retail fluid milk market. GAO also reported that most experts it contacted said that concentration is likely to increase, leading to fewer retail outlets, although opinions were mixed on the likely impact of this potential trend. A few experts told GAO that large retail firms may be exerting pressure on food processors to consolidate because some retailers prefer to deal with relatively large suppliers. In this way, concentration at the retail level can lead to further concentration at the food processor level. Concerns About Dairy Pricing28 Another concern is how concentration affects price transparency in markets for dairy products and milk. Some policymakers and industry participants feel that concentration in the dairy industry has weakened market "discovery" of prices. Fewer buyers and sellers means that fewer transactions are made. Typically, markets work more efficiently when there are many "observable" transactions that provide sufficient information to all market participants about demand, supply, and prices. The move within the dairy industry to a more integrated market, with closer ties between various market players such as custom contracts or other pre-arranged transactions, results in fewer trades of products on the cash or "spot" market. In years past, these sales would account for a greater share of market transactions and provide a good measure of current prices. The primary spot market for dairy is located at the Chicago Mercantile Exchange (CME), where cheese, butter, and nonfat dry milk are traded. Actual quantities traded are quite small, but prices determined by buyers and sellers at this market are used to establish wholesale price contracts across the country, subject to premiums and discounts for factors such as quality and transportation. Wholesale dairy product prices are then used to set monthly minimum prices by USDA that milk handlers must pay for farm milk under the federal orders. Some dairy producer groups believe that the CME is an inadequate pricing mechanism because of perceptions that the market is too thinly traded, lacks transparency and sufficient oversight, and creates a highly volatile market that adversely affects producers. The GAO concluded in a 2007 study that "certain market conditions at the CME spot cheese market, including a small number of trades and a small number of traders who make a majority of trades, continue to make this market particularly susceptible to manipulation." However, the report also noted that if price manipulation were to occur, some industry participants claim it would be short-lived because many large participants in the cheese and dairy industry with diverse interests monitor the market and are prepared to participate in it. Reportedly, they would begin trading once prices became disconnected from underlying supply and demand conditions, potentially counteracting any attempted price manipulation. Nevertheless, some industry participants want sales volume to increase on the CME, thereby reducing the possibility of price manipulation. The Commodity Futures Trading Commission (CFTC) and the CME itself monitor activities of the spot market participants for signs of price manipulation. In December 2008, several dairy industry participants agreed to pay a civil monetary penalty for attempting to manipulate milk futures prices through purchases of cheese on the CME in 2004. While there are apparently no current proposals on how to encourage additional volume, the CME recently announced new futures and options contracts for skimmed milk powder as an international dairy risk management tool, with six worldwide delivery points. Some producers and policymakers are also interested in improving overall dairy price transparency by expanding USDA's mandatory price reporting system for dairy products in terms of additional products (e.g., cheese other than cheddar) and/or frequency of price reports. In the 2008 farm bill, Congress authorized more frequent price reporting for dairy products, subject to appropriations. U.S. Antitrust Law32 U.S. antitrust laws (including other statutes applicable to antitrust issues) are concerned with competition in markets and not the protection of any individual competitor. These laws proscribe unlawful mergers and business practices in general terms, leaving courts to decide which are illegal based on the facts of each case. The two basic antitrust laws in the United States are the Sherman Act and the Clayton Act. Both are enforceable either by the Antitrust Division of the Department of Justice (DOJ) or by the Federal Trade Commission (FTC). Private persons may allege economic injury caused by violation of either of the acts. The acts spell out the conduct and activities prohibited in economic and market transactions. The Sherman Act (15 U.S.C. §§ 1-8) prohibits concerted activity that actually restrains trade; an agreement among separate firms not to compete with each other would likely violate Section 1 of the Sherman Act. The act also prohibits unilateral conduct; Section 2 prohibits monopolization or attempted monopolization (merely having a monopoly or being a monopolist does not, by itself, violate Section 2). Violation of either provision is a felony subject to fines of up to $1 million for individuals and $100 million for corporations, or imprisonment of up to 10 years, or both. Section 7 of the Clayton Act (15 U.S.C. § 18) prohibits mergers or acquisitions that may tend to "substantially" lessen competition. In other words, while enforcement under the Sherman Act requires a completed act, the Clayton Act (15 U.S.C. §§ 12 et seq.) is directed at preventing activities that might restrain trade. The "Merger Guidelines" issued by DOJ and FTC, which were promulgated to offer an indication of the ways in which mergers and acquisitions would be analyzed by the two agencies, are currently being updated to reflect the agencies' actual practices. The Clayton Act also provides for "premerger notification" to allow the antitrust enforcement agencies the opportunity to examine potential mergers/acquisitions of certain-sized transactions prior to their consummation. The premerger remedies DOJ/FTC might seek with respect to a proposed merger that is not approved as the transaction was presented are either filing legal action to stop the merger, or conditioning federal approval on modifications to the proposed transaction to remove perceived antitrust concerns (e.g., divestiture by one or another party of assets or operations that duplicate or overlap those of the other party or parties). Negotiating such changes often is seen as in the interests of all parties, because going to court can be expensive, time-consuming, and risky. An important exemption to antitrust laws for agriculture is the Capper-Volstead Act (7 U.S.C. §§ 291-292). The act confers limited exemption from antitrust liability to farmer cooperatives, both for their existence and for joint processing and marketing of their commodities. The act specifically states: "Persons engaged in the production of agricultural products as farmers, planters, ranchmen, dairymen, nut or fruit growers may act together in associations, corporate or otherwise, with or without capital stock, in collectively processing, preparing for market, handling, and marketing in interstate and foreign commerce, such products of persons so engaged." Antitrust Activity in the Dairy Industry U.S. v. Dean Foods In April 2009, Dean Foods, the largest fluid milk processor in the United States, purchased two plants owned by Foremost Farms, a cooperative in Wisconsin. On January 22, 2010, the Department of Justice (DOJ) and several states filed a civil antitrust suit against Dean Foods in the U.S. District Court for Eastern Wisconsin, alleging that the purchase violated Section 7 of the Clayton Act. DOJ asserts that Dean's acquisition will, by eliminating an aggressive price competitor (Foremost Farms), lessen competition in the market to sell milk to schools and in a separate market for supplying fluid milk to grocery chains, restaurants, and other retail outlets in Illinois, Michigan, and Wisconsin. According to DOJ, "The Acquisition's elimination of head-to-head competition between Dean and Foremost will hurt school milk and fluid milk purchases." Prior to the transaction, Foremost Farms had been losing fluid milk customers to other processors who could deliver milk to more distant locations as the customers preferred. As a result, the cooperative had been pricing aggressively in local markets against Dean Foods. The acquisition was not required to be reported to the Department of Justice beforehand. The lawsuit seeks to require Dean Foods to sell the dairy processing plants it acquired from Foremost Farms. According to DOJ, Dean Foods now has approximately 57% of the market for processed milk in northeastern Illinois, Wisconsin, and the upper peninsula of Michigan. Dean Foods has stated that it believes the acquisition was in compliance with antitrust laws and benefits dairy farmers by providing a stable outlet for their milk. The company says the deal has already resulted in cost savings that benefit consumers and spur competition in the region. The ongoing case against Dean Foods highlights the economics of consolidation in the U.S. dairy industry. In individual markets where there is excess capacity, such as in upper Wisconsin, as indicated by DOJ, it may be difficult for a smaller firm to aggressively compete indefinitely if some of that company's customers shift to other companies for market reasons (in this case, for a broader geographic reach by the supplier). Class Action Lawsuit Filed in the Northeast On October 8, 2009, a class action antitrust complaint was filed against four major firms in the Northeast dairy market in the U.S. District Court for Vermont on behalf of Northeast dairy farmers. The defendants include Dairy Farmers of America, Inc. (DFA is the largest U.S. dairy cooperative), Dairy Marketing Services (DMS is a milk marketing organization formed by DFA and Dairylea Cooperative), Dean Foods (milk processor), and HP Hood (milk processor). The lawsuit claims that the defendants have conspired through contracts, agreements, mergers, plant closures, and other actions to control the supply of fluid milk in the Northeast, with the net effect of lowering prices received by farmers. At issue is the state of competition in a milk marketing system once dominated by family-owned processors that were supplied by neighboring producers, many of whom were members of one of several cooperatives that were active in the region. According to the lawsuit, dairy producers must now affiliate with either DFA or DMS because the two firms have exclusive supply agreements with the region's dominant processors, Dean Foods and HP Hood. According to the lawsuit, the defendants, together, have used their market power to the detriment of dairy farmers in the Northeast, particularly independent producers and cooperatives. DFA has said the cooperative has helped to increase returns for dairy farmers through efficiencies leading to cost savings in field services, hauling, and administration. It maintains that rather than suppressing farmer prices, the cooperative looks for ways to increase producer returns. Observers note that it may take years for the litigation to be resolved. A similar (ongoing) case filed in 2008 involves multiple class action lawsuits in the southeastern United States against Dean Foods, National Dairy Holdings, and DFA, and others. Concluding Remark From an economic and legal standpoint, determining the net effect of concentration—namely, the potentially offsetting effects of market power (negative for some participants) and efficiency gains (neutral or positive for all participants)—is complicated by the presence of many other factors that influence prices and the marketplace in general. Market power can be affected by such factors as product differentiation, ease of entering a market, or the structure of contracts between farmers and processors. Likewise, efficiency gains can stem from a variety of sources, including technology changes and business practices. Finally, economic events and government policies can certainly influence commodity prices, making it difficult to pinpoint effects of concentration on the dairy industry.

The changing structure of U.S. agriculture has generated concerns about reduced competition in a wide variety of agricultural products markets, including dairy. Two primary areas of concern in the dairy industry are consolidation—the shift to fewer and larger firms—and industry concentration—the extent to which a small number of firms control most of the sales. On August 5, 2009, the Obama Administration announced that the U.S. Department of Agriculture (USDA) and the Department of Justice would hold several public workshops to consider competition issues affecting agriculture and the appropriate role for antitrust and regulatory enforcement. A workshop on the dairy industry is scheduled for June 25, 2010, in Madison, WI. Consolidation has been a long-term trend in agriculture. Across the industry, including the dairy sector, rising productivity has led to fewer and larger operations along the production and marketing chain, including farms, cooperatives, processors, and retailers. Larger operations tend to have lower per-unit costs. As firms reduce their costs, they become more competitive and can increase sales and market share at the expense of less profitable firms. As a result, fewer dairy farms are needed to produce the same amount of milk. Firm size is a limiting factor for growth, however, once the gains to economies of scale have been exhausted. At the farm level, the number of farms continues to decline, although at a much slower pace during the last decade than in previous periods. Consolidation at the cooperative and processor levels has followed a similar path, in order to offset market power of large downstream entities and to satisfy demands from retailers to serve them more efficiently. Concentration has also been increasing in the dairy industry. Nearly all segments of the industry have become more concentrated over time. The primary concern many have with concentration is that it may reduce competition in the marketplace for agricultural and food products and result in market power (i.e., the ability of a firm to influence prices), putting at a disadvantage some segment of the population, such as producers or consumers. However, concentration may also result in efficiency gains, whereby cost savings are passed on to consumers through lower retail prices, which in turn can generate additional demand for commodities and benefit farmers. Another concern is how concentration affects price transparency in markets for dairy products and milk. In summarizing research findings for several agricultural industries, including the dairy industry, the Government Accountability Office concluded that most of the studies it reviewed found either no evidence of market power, or efficiency effects that were larger than the market power effects of concentration. However, the agency said experts generally agreed that concentration is likely to increase in the future, potentially raising greater concerns about market power and the manipulation of commodity or food prices. U.S. antitrust laws (specifically the Sherman Act and the Clayton Act) are concerned with competition in markets and not the protection of any individual competitor. These laws proscribe unlawful mergers and business practices in general terms, leaving courts to decide which are illegal based on the facts of each case. Two current court cases against Dean Foods, the largest fluid milk processor in the United States, highlight the ongoing concern about consolidation in the U.S. dairy industry.

Most Recent Developments P.L. 112-10, 112th Congress On April 15, 2011, the President signed H.R. 1473 into law as P.L. 112-10 . This public law represents the final appropriations act for FY2011. P.L. 112-10 includes roughly $41.6 billion in non-emergency discretionary spending for the Department of Homeland Security, while mandating a 0.2% across-the-board rescission for all departmental appropriations except for narrowly delineated funding for Coast Guard "overseas contingency operations directly related to the global war on terrorism." As is often the case with continuing resolutions, P.L. 112-10 provides more limited direction than is given through a traditional bill and conference report as to how appropriations should be divided among individual programs, projects and activities, but instead requires the department to provide spending plans to outline how DHS chooses to allocate those funds. Summary of DHS-Related provisions in the Several CRs for FY20111 Congress did not enact the 12 regular appropriations bills for FY2011 before the end of FY2010. As a result, until P.L. 112-10 was signed into law, funding levels for government activities were set by a series of FY2011 interim continuing resolutions: P.L. 111-242 (124 Stat. 2607), covering October 1, 2010—December 3, 2010; P.L. 111-290 (124 Stat. 3063), covering December 4, 2010—December 18, 2010; P.L. 111-317 , (124 Stat. 3454), covering December 19, 2010—December 21, 2010; P.L. 111-322 (124 Stat. 3518), covering December 22, 2010—March 4, 2011; P.L. 112-4 (125 Stat. 6), covering March 5, 2011—March 18, 2011; P.L. 112-6 (125 Stat. 23), covering March 19, 2011—April 8, 2011; and P.L. 112-8 (125 Stat. 34), covering April 9, 2011—April 15, 2011. The initial CR, P.L. 111-242 , extended funding for the 12 outstanding regular bills generally at FY2010-enacted spending levels from October 1, 2010, through December 3, 2010. The second CR, P.L. 111-290 , extended this expiration date through December 18, 2010. On December 8, 2010, the House passed the FY2011 full-year CR, H.R. 3082 (111 th Congress), covering the 12 regular bills. To provide more time to resolve differences within Congress and between Congress and the President, the House adopted another interim CR, H.J.Res. 105 (111 th Congress), on December 17, 2010. This measure extended the December 18, 2010, expiration date three days, through December 21, 2010. On December 21, 2010, the Senate amended House-passed H.R. 3082 , to extend funding for the outstanding appropriations bills at the FY2010-enacted spending level. The House passed the Senate-amended version of H.R. 3082 , which was signed by the President on December 22, 2010. P.L. 111-322 extended funding through March 4, 2011. After the new Congress was sworn in, the House adopted the Full-Year Continuing Appropriations Act, 2011 ( H.R. 1 , 112 th Congress) on February 19, 2011. On February 28, 2011, Further Continuing Appropriations Amendments, 2011 ( H.J.Res. 44 , 112 th Congress) was introduced to continue funding for two weeks, from March 5, 2011, through March 18, 2011. Both pieces of legislation included provisions that would reduce funding available for specific DHS accounts and programs. On March 1, 2011, the House passed H.J.Res. 44 . The Senate passed H.J.Res. 44 on March 2, 2011, and the measure was signed by the President on March 3, 2011 ( P.L. 112-4 ). H.J.Res. 44 provided a spending rate for all 12 regular bills at FY2010 levels through March 18, 2011 with certain reductions in spending compared with P.L. 111-322 (the fourth CR in effect from December 21), and compared with FY2010 enacted levels. These reductions included the following for DHS: $1 million from DHS Undersecretary for Management—for logistics training; $1 million from Customs and Border Protection Salaries and Expenses—for a solar powered batteries program; $43 million from Customs and Border Protection Construction—for facility construction projects; $1 million from the Transportation Security Administration—for the National "Safe Skies" Alliance; $4 million from the Coast Guard's Operations and Expenses account—for the Operations System Center; $17 million from the Coast Guard's Acquisition, Construction, and Improvements account—for shore construction accounts; $4 million from the Coast Guard's Alteration of Bridges account; $20 million from the National Programs and Protection Directorate—for cyber-security and infrastructure projects; $5 million from the Office of Health Affairs for bio-preparedness; $103 million from FEMA's State and Local programs account for university and emergency operations center grants; $25 million from FEMA's Pre-Disaster Mitigation grants; and $41 million from Science and Technology Directorate research projects. On March 15, 2011, the House passed H.J.Res. 48 . The Senate passed H.J.Res. 48 on March 17, 2011, and the President signed the measure into law on March 18, 2011 ( P.L. 112-6 ). P.L. 112-6 provided a spending rate for all 12 regular bills through April 8, 2011, at the level of the previous short-term CR with additional modifications. The only further reduction to the Department of Homeland Security in P.L. 112-6 was a $106.6 million rescission from Customs and Border Protection Construction. On April 7, the House passed H.R. 1363 . The Senate passed H.R. 1363 with an amendment on April 8, 2011. The House passed the amended bill on April 9, 2011, and the President signed the measure into law the same day ( P.L. 112-8 ). P.L. 112-8 provided a spending rate for all 12 regular bills through April 15, 2011, at the level of the previous short-term CR with additional modifications, allowing time for the final year-long CR to be completed. None of those modifications directly affected the Department of Homeland Security's budget. Committee Action Senate-Reported S. 3607, 111th Congress, 2nd Session The Senate Committee on Appropriations reported its version of the FY2010 DHS Appropriations bill on July 15, 2010. This report uses Senate-reported S. 3607  and the committee report ( S.Rept. 111-222 ) accompanying  S. 3607  as the source for the Senate-reported numbers. The Senate-reported S. 3607  recommends a net appropriation of $45.2 billion for DHS for FY2011. This amounts to a $195 million increase as compared to the Administration's request, and a nearly $1.3 billion increase as compared to the $43.9 billion enacted for FY2010 (not including FY2010 supplemental funding). House Action, 111th Congress, 2nd Session The House Appropriations Subcommittee on Homeland Security marked up its draft bill in subcommittee on June 24, 2010. However, the day the bill was scheduled for full committee markup, the bill was withdrawn and the legislation was never brought before the full committee or made public. President's FY2011 Budget Request Submitted The Administration requested a net appropriation of $45.0 billion in budget authority for FY2011. This amounts to a $1.1 billion, or a 2.4% increase from the $43.9 billion enacted for FY2010. Total budget authority requested by the Administration for DHS for FY2011 amounts to $52.6 billion as compared to $51.7 billion enacted for FY2010. Net requested appropriations for major agencies within DHS were as follows: Customs and Border Protection (CBP), $9,809 million; Immigration and Customs Enforcement (ICE), $5,524 million; Transportation Security Administration (TSA), $5,729 million; Coast Guard, $9,867 million; Secret Service, $1,570 million; National Protection & Programs Directorate, $2,362 million; Federal Emergency Management Administration (FEMA), $7,294 million; Science and Technology, $1,018 million; and the Domestic Nuclear Detection Office, $306 million. Note on Most Recent Data Data used in this report for FY2010 enacted and FY2011 are from the President's Budget Documents, the FY2011 DHS Congressional Budget Justifications , the FY2011 DHS Budget in Brief , the Senate-reported version of S. 3607 , and P.L. 112-10 . Data used in Appendix B are taken from the Analytical Perspectives volume of the FY2006-FY2011 President's Budget. Except when discussing total amounts for the bill as a whole, all amounts contained in this report are generally rounded to the nearest million. Background This report describes the final direction given to the Department of Homeland Security through P.L. 112-10 by title, then goes into more detail by component, outlining President's FY2011 request for funding for DHS programs and activities, as submitted to Congress on February 1, 2010. It compares the enacted FY2010 amounts to the request for FY2011, tracks the Senate's recommendations as included in Senate's Committee Report, and notes congressional issues related to the FY2011 DHS appropriations bills with particular attention paid to discretionary funding amounts. No House recommendations are available for comparison as no full committee markup was held for the House draft in the second session of the 111 th Congress. The report does not follow specific funding issues related to mandatory funding—such as retirement pay—nor does the report systematically follow any legislation related to the authorization or amendment of DHS programs. This report will not be updated further. Department of Homeland Security The Homeland Security Act of 2002 ( P.L. 107-296 ) transferred the functions, relevant funding, and most of the personnel of 22 agencies and offices to the new Department of Homeland Security created by the act. Appropriations measures for DHS have been organized into five titles: Title I, Departmental Management and Operations; Title II, Security, Enforcement, and Investigations; Title III, Preparedness and Recovery; Title IV, Research and Development, Training, Assessments, and Services; and Title V, general provisions. Title I contains appropriations for the Office of Management, the Office of the Secretary, the Office of the Chief Financial Officer, Analysis and Operations (A&O), the Office of the Chief Information Officer (CIO), the Office of the Inspector General (OIG), and the Office of the Federal Coordinator for Gulf Coast Rebuilding. Title II contains appropriations for Customs and Border Protection (CBP), Immigration and Customs Enforcement (ICE), the Transportation Security Administration (TSA), the Coast Guard (USCG), and the Secret Service. The U.S. Visitor and Immigrant Status Indicator Technology (US-VISIT) program was appropriated within Title II through the FY2007 appropriation. The FY2008 appropriation transferred US-VISIT, as proposed by the Administration, to the newly created National Protection & Programs Directorate (NPPD) in Title III. Division E of P.L. 110-161 , the DHS Appropriations Act, 2008, enacted this reorganization. Through the FY2007 appropriation, Title III contained appropriations for the Preparedness Directorate, Infrastructure Protection and Information Security (IPIS) and the Federal Emergency Management Administration (FEMA). The President's FY2008 request included a proposal to shift a number of programs and offices to eliminate the Preparedness Directorate, create the NPPD, and move several programs to FEMA. These changes were largely agreed to by Congress in the FY2008 appropriation, reflected by Title III in Division E of P.L. 110-161 . Title IV contains appropriations for U.S. Citizenship and Immigration Services (USCIS), the Science and Technology Directorate (S&T), and the Federal Law Enforcement Training Center (FLETC). 302(a) and 302(b) Allocations The maximum budget authority for annual appropriations (including DHS) is determined through a two-stage congressional budget process. In the first stage, Congress sets overall spending totals in the annual concurrent resolution on the budget. Subsequently, these amounts are allocated among the appropriations committees, usually through the statement of managers for the conference report on the budget resolution. These amounts are known as the 302(a) allocations. They include discretionary totals available to the House and Senate Committees on Appropriations for enactment in annual appropriations bills through the subcommittees responsible for the development of the bills. In the second stage of the process, the appropriations committees allocate the 302(a) discretionary funds among their subcommittees for each of the appropriations bills. These amounts are known as the 302(b) allocations. These allocations must add up to no more than the 302(a) discretionary allocation and form the basis for enforcing budget discipline, since any bill reported with a total above the ceiling is subject to a point of order. 302(b) allocations may be adjusted during the year as the various appropriations bills progress towards final enactment. The annual concurrent resolution on the budget sets forth the congressional budget. Table 2 shows DHS's 302(b) allocations for FY2010 and the current appropriations cycle. Budget Authority, Obligations, and Outlays Federal government spending involves a multi-step process that begins with the enactment of budget authority by Congress. Federal agencies then obligate funds from the enacted budget authority to pay for their activities. Finally, payments are made to liquidate those obligations; the actual payment amounts are reflected in the budget as outlays. Budget authority is established through appropriations acts or direct spending legislation and determines the amounts that are available for federal agencies to spend. The Antideficiency Act prohibits federal agencies from obligating more funds than the budget authority that was enacted by Congress. Budget authority may also be indefinite, as when Congress enacts language providing "such sums as may be necessary" to complete a project or purpose. Budget authority may be available on a one-year, multi-year, or no-year basis. One-year budget authority is only available for obligation during a specific fiscal year; any unobligated funds at the end of that year are no longer available for spending. Multi-year budget authority specifies a range of time during which funds can be obligated for spending; no-year budget authority is available for obligation for an indefinite period of time. Obligations are incurred when federal agencies employ personnel, enter into contracts, receive services, and engage in similar transactions in a given fiscal year. Outlays are the funds that are actually spent during the fiscal year. Because multi-year and no-year budget authorities may be obligated over a number of years, outlays do not always match the budget authority enacted in a given year. Additionally, budget authority may be obligated in one fiscal year but spent in a future fiscal year, especially with certain contracts. In sum, budget authority allows federal agencies to incur obligations and authorizes payments, or outlays, to be made from the Treasury. Discretionary agencies and programs, and appropriated entitlement programs, are funded each year in appropriations acts. Discretionary and Mandatory Spending Gross budget authority, or the total funds available for spending by a federal agency, may be composed of discretionary and mandatory spending. Discretionary spending is not mandated by existing law and is thus appropriated yearly by Congress through appropriations acts. The Budget Enforcement Act of 1990 defines discretionary appropriations as budget authority provided in annual appropriation acts and the outlays derived from that authority, but it excludes appropriations for entitlements. Mandatory spending, also known as direct spending, consists of budget authority and resulting outlays provided in laws other than appropriation acts and is typically not appropriated each year. However, some mandatory entitlement programs must be appropriated each year and are included in the appropriations acts. Within DHS, the Coast Guard retirement pay is an example of appropriated mandatory spending. Offsetting Collections6 Offsetting funds are collected by the federal government, either from government accounts or the public, as part of a business-type transaction such as offsets to outlays or collection of a fee. These funds are not counted as revenue. Instead, they are counted as negative outlays. DHS net discretionary budget authority, or the total funds that are appropriated by Congress each year, is composed of discretionary spending minus any fee or fund collections that offset discretionary spending. Some collections offset a portion of an agency's discretionary budget authority. Other collections offset an agency's mandatory spending. They are typically entitlement programs under which individuals, businesses, or units of government that meet the requirements or qualifications established by law are entitled to receive certain payments if they establish eligibility. The DHS budget features two mandatory entitlement programs: the Secret Service and the Coast Guard retired pay accounts (pensions). Some entitlements are funded by permanent appropriations, others by annual appropriations. The Secret Service retirement pay is a permanent appropriation and as such is not annually appropriated, whereas the Coast Guard retirement pay is annually appropriated. In addition to these entitlements, the DHS budget contains offsetting Trust and Public Enterprise Funds. These funds are not appropriated by Congress. They are available for obligation and included in the President's budget to calculate the gross budget authority. Appropriations for the Department of Homeland Security DHS Appropriations Trends Table 3 presents DHS Appropriations, as enacted, for FY2003 through FY2011. The appropriation amounts are presented in current dollars and are not adjusted. The amounts shown in Table 3 represent enacted amounts at the time of the start of the next fiscal year's appropriation cycle (with the exception of FY2009 and FY2011). Summary of DHS Appropriations Table 4 is a summary table comparing the enacted total for FY2010 to the request for, and congressional action on the FY2011 appropriations. Due to the lack of a comparative statement of budget authority that encompasses FY2011 accompanying P.L. 112-10 or H.R. 2017 , the Department of Homeland Security Appropriations Bill, 2012, FY2011 enacted numbers are drawn directly from P.L. 112-10 and P.L. 111-83 . Gross numbers are estimates due to the resulting lack of reliable data on fees and mandatory spending. Title I: Departmental Management and Operations7 Title I covers the general administrative expenses of DHS. It includes the Office of the Secretary and Executive Management (OSEM), which is comprised of the immediate Office of the Secretary and 12 entities that report directly to the Secretary; the Under Secretary for Management (USM) and its components, such as the offices of the Chief Administrative Officer, Chief Human Capital Officer, and Chief Procurement Officer; the Office of the Chief Financial Officer (OCFO); the Office of the Chief Information Officer (OCIO); the Analysis and Operations Office (AOO); the Office of the Federal Coordinator for Gulf Coast Rebuilding (OFCGCR); and the Office of the Inspector General (OIG). New Title I accounts proposed for FY2011 were DHS Headquarters Consolidation and the National Special Security Event (NSSE) State and Local Reimbursement Fund. Table 5 , below, shows Title I appropriations for FY2010, the President's request for FY2011, the Senate-reported amounts for FY2011, and the appropriations for FY2011. After discussing the impact of P.L. 112-10 on DHS components under this title, this report will outline the Administration's request, Senate action on the request in the 2 nd session of the 111 th Congress, and possible issues for Congress. As the House position on the Administration's full request was never officially ratified by the Appropriations Committee in 2010, there is no data available from the House for direct comparison. P.L. 112-10 and Title I H.R. 1473 , the final FY2011 CR ( P.L. 112-10 ), explicitly established funding levels for all existing Title I accounts, with the exception of the OIG. Funds were provided as follows, compared to the President's request: OSEM, $137 million ($20 million or 13% less); USM, $240 million ($27 million, or 10.1% less) plus $77 million for headquarters consolidation ($285 million, or 79% less); CFO, $53 million ($13 million, or 19% less), with $4 million explicitly for consolidation of the department's financial systems; and CIO, $333.4 million ($65 million, or 16% less). The OIG would continue to receive $114 million, plus $16 million transferred from FEMA's disaster relief fund, as outlined in P.L. 111-83 , providing them with funding roughly equal to the President's request. Under Section 1604 of P.L. 112-10 , the $77 million appropriated for DHS Headquarters Consolidation is to be used to "plan, acquire, construct, renovate, remediate, equip, furnish, and occupy buildings and facilities for the consolidation." Section 1605 of the law provides that of the $53 million appropriated for the OCFO, $4 million is to "remain available until September 30, 2014, for financial systems consolidation efforts." These funding levels overall reflected a $154 million, or 11.3% reduction from the Administration's request under Title I, not including the initiatives for headquarters consolidation activities and NSSE reimbursement. When those are added to the calculation, Title I of the final legislation is $452 million, or 25.8%, below the President's request for FY2011. Rescissions In addition to the specifically directed reductions in funding levels, all of these accounts are subject to a 0.2% across-the-board rescission of budget authority for FY2011 in P.L. 112-10 , which amounts to a further $3 million reduction in Title I, to be applied proportionately across the accounts in the title, and to the subaccounts within those accounts. Section 1656 of P.L. 112-10 rescinds $3 million in FY2010 unobligated balances from Title I components. The major elements of those rescissions include $1.4 million from OSEM and $0.8 million from USM. President's FY2011 Request The total FY2011 request for Title I accounts that were funded in FY2010 was $1,366 million. This represents an increase of $114 million (+9.1%) over the FY2010 total. FY2011 request compared to the FY2010 enacted appropriations was as follows: OSEM, $157 million, an increase of $9 million (+6.1%); USM, $267 million, an increase of $13 million (+5.1%); OCFO, $66 million, an increase of $5 million (+8.2%); OCIO, $398 million, an increase of $60 million (+17.7%); AOO, $348 million, an increase of $13 million (+3.9%); OFCGCR, no funding, a decrease of $2 million; and OIG, $130 million, an increase of $16 million (+14%). As for the two new accounts for FY2011, the DHS Headquarters Consolidation request was $363 million and the National Special Security Event State and Local Reimbursement Fund request was $20 million. Therefore, the total FY2011 request for all Title I accounts was $1,749 million. This represents an increase of $497 million (+39.7%) over the FY2010 total. Of the amounts requested for accounts that were funded in FY2010, the largest increase would occur in the OCIO (requesting $398 million and 309 full-time equivalent (FTE) employees, up from $338 million and 203 FTEs in FY2010). Within OCIO, program increases are requested for Information Technology Services (requesting $56 million), Infrastructure and Security Activities (requesting $186 million), and National Security Systems (requesting $74 million). The next largest increase would have occurred in the OIG (requesting $130 million and 665 FTEs, up from $114 million and 632 FTEs in FY2010). Within OIG, a program increase of $4 million and 9 FTEs was requested for Audit, Inspections, and Investigations to fund planned audits on TSA international in-bound flight initiatives, best practices with international partners, and the Secure Flight Program. Reviews and evaluations of TSA's in-line baggage screening system, the paperless boarding pass, TSA Worker Identification Credentials, and the procurement and deployment of new screening technology are also planned. An FY2011 funding request for the OFCGCR was not requested because the office closed on March 31, 2010. The new DHS Headquarters Consolidation account is expected to provide DHS, the Office of Management and Budget (OMB), and Congress "with improved visibility of the ongoing efforts for establishing a central DHS facility" and "facilitate better reporting and overall management of the program" by DHS. The $363 million requested for FY2011 was to support both the consolidation of mission support elements that are not relocating to the St. Elizabeths Campus and the consolidation of the department's headquarters to that Campus. There are no FTEs attached to this account. Another new account, the NSSE State and Local Reimbursement Fund, would be administered by the Office of Operations Coordination and Planning. Among events that have been designated as NSSEs in the past have been presidential inaugurations, presidential nominating conventions, major sports events, major international meetings, presidential funerals, and world economic summits. The requested $20 million appropriation for the fund will be used to reimburse state and local governments for the actual costs associated with increased security measures for unplanned NSSEs. There are no FTEs attached to this account. Senate-Reported S. 3607, 111th Congress The Senate Committee on Appropriations recommended these appropriations, as compared with the President's request: OSEM, $151 million ($6 million or 3.8% less); USM, $240 million ($27 million or 10.1% less); OCFO, $64 million ($2 million or 3% less); OCIO, $382 million ($16 million or 4% less); AOO, $340 million ($8 million or 2.3% less); OFCGCR, $0 (the same as the budget request); National Security Event, $0 (20 million less); and OIG, $133 million ($3 million or 2.3% more). The total funding recommended by the Senate committee for Title I was $1,310 million. This represents a decrease of $439 million, or 25.1%, from the President's request. A general provision at Section 556 of S. 3607 , as reported, included funding of $288 million (rounded) to continue development of the DHS Consolidated Headquarters at St. Elizabeths and $54 million (rounded) to consolidate leases across the National Capital Region. The Chief Administrative Officer is directed to continue regular briefings on the consolidation plan, including the status of National Capital Planning Commission approvals, the project schedule, and any deviation from the plans described in the FY2011 budget justification. For the OSEM appropriation, $50 million would not be obligated until the Secretary submits a comprehensive risk assessment and national security strategy for the railroad sector, a detailed timeline for meeting all remaining congressional requirements for the security of surface transportation, and a comprehensive plan for meeting the recommendations in the Surface Transportation Security Priority Assessment of the National Security Council. In addition, $25 million would not be obligated until the Secretary submits a comprehensive plan to implement a biometric air exit capability in FY2011 to the Senate and House Committees on Appropriations. Of the OS&EM total, $20 million would be made available to the Office of Policy to host Visa Waiver Program negotiations in Washington, DC. For the USM appropriation, $5 million would fund the alteration and improvement of facilities, tenant improvements, and relocation costs to consolidate DHS headquarters operations at the Nebraska Avenue Complex. Among the directives included in the committee report for the departmental management and operations accounts are the following: The Secretary is strongly encouraged to negotiate with the relevant foreign governments to permit rapid deployment of Federal Air Marshals to and from such countries. The Secretary, in consultation with the Secretary of State, is encouraged to negotiate with the relevant governments on an expansion of U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement personnel associated with the Immigration Advisory Program and the Visa Security Program. The OCFO is directed to ensure that annual appropriations justifications are prepared for each DHS component in support of the President's budget and submitted on the day the budget is delivered to Congress. The OCFO also is directed to include detailed information by appropriations account, program, project, and activity on all reimbursable agreements, and significant uses of the Economy Act for each fiscal year. Additionally, the OCFO must ensure that the DHS justifications accompanying the President's FY2012 budget request include a status report of overdue committee reports, plans, and other directives. One standard format must be used by all offices and agencies and inserted in the justifications reflecting the status of congressional directives for each of fiscal years 2009, 2010, and 2011. The OCIO is required to submit an expenditure plan for certain information technology acquisition projects to the House and Senate committees on Appropriations within 60 days after the act's enactment. Of the OCIO funding, $75 million would not be obligated until the plan has been submitted. The DHS Chief Intelligence Officer must submit an expenditure plan for FY2011 within 60 days after the act's enactment. The plan must include the following: (1) FY2011 expenditures and staffing allotted for each program as compared to fiscal years 2010 and 2009; (2) all funded versus on-board positions, including federal FTE, contractors, and reimbursable and nonreimbursable detailees; (3) an explanation for maintaining contract staff in lieu of federal FTE; (4) a plan, including dates or timeframes for achieving key milestones, to reduce the office's reliance on contract staff in lieu of federal FTE; (5) funding, by object classification, including a comparison fiscal years 2009 and 2008; and (6) the number of I&A-funded employees supporting organizations outside I&A and within DHS. The expenditure plan must focus the activities of the office on areas where DHS can provide unique expertise or serve intelligence customers who are not supported by other components of the intelligence community. The committee believes that "to avoid corruption and misconduct it is imperative that all agents, especially new hires, receive comprehensive training in ethics and public integrity." The committee provides the OIG with additional funding of $3 million to conduct integrity investigations and directs the IG to submit a plan, developed in coordination with CBP and ICE, for the expenditure of these funds within 90 days after the act's enactment. A general provision at Section 516 of S. 3607 , as reported, requires the CFO "to submit monthly budget execution and staffing reports within 45 days after the close of each month." Personnel Issues The Office of the Chief Human Capital Officer (OCHCO) manages and administers human resources at DHS and includes the Office of Human Capital (OHC). The OCHCO "establishes policy and procedures" and provides "oversight, guidance, and leadership within the Department" for the various functions under human capital management. These functions are policy and programs, learning and development, executive resources, human capital business systems, headquarters human resources management services, and business support and operations. The OCHCO reports to the Under Secretary for Management. The OHC implements the Human Capital Operational Plan and is organized around the initiatives of talent management, performance culture, learning and development, and service excellence. The Human Resources Information Technology (HRIT) program "is to merge and modernize the DHS HRIT infrastructure to provide flexibility and the management information that will allow DHS to continuously evolve in response to changing business, legislative and economic" circumstances. Table 6 , below, shows the funding for the OCHCO for FY2010 and the President's request for FY2011. The OCHCO appropriation is included in the total for the Office of the Under Secretary of Management, as shown in Table 5 . Personnel and the President's FY2011 Request According to the DHS Justifications, the FY2011 budget requested $25 million (rounded) and 108 full-time equivalent (FTE) employees for the OCHCO. The requested funding is $474,000 less than the $25 million (rounded) provided for FY2010. The number of FTEs would increase by 19, from 89 to 108, for FY2011. The appropriation requested for HRIT for FY2011 was $17 million (rounded), the same amount as the funding authorized for FY2010. The FTEs for this account for FY2011 would be 25. The OCHCO funding for FY2011 would be used for, among other initiatives, continued efforts to improve diversity across DHS and particularly in the executive ranks, to develop and implement a comprehensive leader development program across the department, to enhance the Candidate Development Program for the Senior Executive Service, and to aggressively expand outreach to former military personnel to meet the Secretary's goal of having 50,000 veterans employed by DHS. Human capital policies, programs, practices, and staffing will be consolidated to make them more efficient. For FY2011, the HRIT program was to fund and deploy TALENTLink to the U.S. Coast Guard and U.S. Customs and Immigration Service. TALENTLink is an automated system for recruiting and staffing across DHS that was intended to streamline the department's hiring process. However, DHS decommissioned TALENTLink effective June 26, 2010. Personnel and the Senate-Reported S. 3607, 111th Congress The Senate committee recommended an appropriation of $39 million (rounded amount) for the OCHCO, that is $3 million less than the President's request. Of the total, $14 million (rounded) is allocated to the Human Resources Information Technology Program, and accounts for the decrease from the President's request. The OCHCO terminated TALENTLink, a department-wide automated recruiting and staffing system, because it did not meet federal standards and the reduction in funding reflects this action. The committee report states that the OCHCO must use TALENTLink funds appropriated in FY2010 if a follow-on system is developed. According to the committee report, the OCHCO appropriation will maintain current services; provide for 133 FTEs, as requested; and result in savings of more than $1 million by converting 15 contractor positions to FTEs, as requested. The report also states the committee's expectation that the OCHCO will provide briefings to the committee on the department's progress in developing a strategic plan to overhaul the DHS hiring process and how the plan aligns with the Administration's plans to overhaul the federal hiring process. The OCHCO is also required to provide quarterly briefings summarizing vacancy data at DHS that will include the number of new hires for each headquarters office in the previous month; the ratio of applications received to positions closed; data from the Office of Security on progress made to reduce the security clearance backlog, including whether the 15-day standard for suitability reviews is being met; and an end-of-the-month hiring "snapshot" for each headquarters office. Included in the "snapshot" will be the number of new hires pending security or suitability clearance, the number of open vacancies, and the number of selection referral lists pending with management. The briefings will explain hiring delays, steps being taken or planned to correct the delays, and Office of Security information on progress made to reduce the security clearance backlog and compliance with the time requirement for suitability reviews. The results of the FY2010 performance metrics for the OCHCO will be presented at the first quarterly meeting. A general provision at Section 519 of S. 3607 , as reported, prohibits "funds for the development, testing, deployment, or operation of any portion of a human resources management system authorized by 5 U.S.C. §9701(a), or by regulations prescribed pursuant to" that statute "for an employee as defined in 5 U.S.C. §7103(a)(2)." In addition, general provisions prohibit the obligation of funds for the Office of the Secretary and Executive Management for new hires not verified through the E-Verify Program (Section 533) and for adverse personnel actions for employees who use protective equipment or measures, including surgical masks, N95 respirators, gloves, or hand-sanitizers, in the conduct of their official duties (Section 547). Analysis and Operations26 The DHS intelligence mission is outlined in Title II of the Homeland Security Act of 2002 (codified at 6 U.S.C. 121). Organizationally, and from a budget perspective, there have been several changes to the information, intelligence analysis, and infrastructure protection functions at DHS. Pursuant to the Homeland Security Act of 2002, the Information Analysis and Infrastructure Protection (IAIP) Directorate was established. The act created an Under Secretary for IAIP to whom two Assistant Secretaries, one each for Information Analysis (IA) and Infrastructure Protection (IP), reported. The act outlined 19 functions for the IAIP Directorate, including the following: To receive, assess, and analyze law enforcement information, intelligence information, and other information from federal, state, and local government agencies, and the private sector to (1) identify and assess the nature and scope of the terrorist threats to the homeland, (2) detect and identify threats of terrorism against the United States, and (3) understand such threats in light of actual and potential vulnerabilities of the homeland; To develop a comprehensive national plan for securing the key resources and critical infrastructure of the United States; To review, analyze, and make recommendations for improvements in the policies and procedures governing the sharing of law enforcement information, intelligence information, and intelligence-related information within the federal government and between the federal government and state and local government agencies and authorities. Former Secretary Chertoff's Second Stage Review reorganization of the department in 2005 made several changes to the DHS intelligence structure. IAIP was disbanded and the Office of Infrastructure Protection was placed within the newly created National Protection and Programs Directorate. The Office of Information Analysis was renamed the Office of Intelligence and Analysis and became a stand-alone entity. The Assistant Secretary for Intelligence Analysis was designated the department's Chief Intelligence Officer. Pursuant to the Implementing Recommendations of the 9/11 Commission Act of 2007 ( P.L. 110-53 ), the Homeland Security Act of 2002 (codified at 6 U.S.C. 201) was amended to codify the Office of Intelligence and Analysis and the Office of Infrastructure Protection and made the head of the Office of Intelligence and Analysis an Under Secretary position. It also designated the Under Secretary for Intelligence and Analysis as the department's Chief Intelligence Officer with responsibility for managing the entire DHS Intelligence Enterprise. In 2008, former Secretary Chertoff established the Office of Operations Coordination and Planning (OPS), built on the foundation of the former Office of Operations Coordination. OPS supports departmental and interagency crisis and contingency planning and operations to support the Secretary of Homeland Security in his/her role as the principal Federal official for domestic incident management. President's FY2011 Request The FY2011 request for the Analysis and Operations (AOO) account was $348 million, an increase of nearly $13 million (+3.9 %) over the enacted FY2010 amount. It should be noted that funds included in this account support both the Office of Intelligence and Analysis (I&A) and the Office of Operations Coordination and Planning (OPS). I&A is responsible for managing the DHS intelligence enterprise and for collecting, analyzing, and sharing intelligence information for and among all components of DHS, and with the state, local, tribal, and private sector homeland security partners. As a member of the intelligence community, I&A's budget is part of the National Intelligence Program, a classified program document. OPS develops and coordinates departmental and interagency operations plans and manages the National Operations Center, the primary 24/7 national-level hub for domestic incident management, operations coordination, and situational awareness, fusing law enforcement, national intelligence, emergency response, and private sector information. Senate-Reported S. 3607 Prior to the passage of P.L. 112-10 , Senate-reported S. 3607 included $340 million for AOO. This was an increase of nearly $5 million (1.5%) above the FY2010-enacted level but a decrease of nearly $8 million (2.3%) from the Administration's request for FY2011. S. 3607 stipulated that none of the funds provided in this or any other Act shall be available to commence operations of the National Immigration Information Sharing Operation or any follow-on entity until the Secretary certifies that such program complies with all existing laws, including all applicable privacy and civil liberties standards, the Comptroller General of the United States notifies the Committees on Appropriations of the Senate and the House of Representatives and the Secretary that the Comptroller has reviewed such certification, and the Secretary notifies the Committees on Appropriations of the Senate and the House of Representatives of all funds to be expended on operations of the National Immigration Information Sharing Operation or any follow-on entity pursuant to section 503 of this act. In S.Rept. 111-222 , the committee required the department's Chief Intelligence Officer to submit an expenditure plan for FY2011 no later than 60 days after the date of enactment of the act and outlined what information should be included in that expenditure plan. Also in S.Rept. 111-222 , the committee directed I&A to brief the committee quarterly on progress in placing DHS intelligence professionals in state and local fusion centers (SLFC) and outlined what information should be included in those briefings. Title II: Security, Enforcement, and Investigations Title II contains the appropriations for the Bureau of Customs and Border Protection (CBP), the Bureau of Immigration and Customs Enforcement (ICE), the Transportation Security Administration (TSA), the U.S. Coast Guard, and the U.S. Secret Service. Table 7 shows the FY2010 enacted and FY2011 appropriation action for Title II. After discussing the impact of P.L. 112-10 on DHS components under this title, this report will outline the Administration's request, Senate action on the request in the 2 nd session of the 111 th Congress, and possible issues for Congress. As the House position on the Administration's full request was never officially ratified by the Appropriations Committee in 2010, there is no data available from the House for direct comparison. P.L. 112-10 and Title II Sections 1608 through 1625 of H.R. 1473 , the final FY 2011 CR ( P.L. 112-10 ; 125 Stat. 140-142)), provide explicit direction for funding levels for many Title II components of DHS. For CBP, funds were provided as follows, compared to the President's request: Salaries and Expenses, $8,213 million ($5 million, or 0.1% above); Automation Modernization, $337 million ($11 million, or 3.2% below), with $148 million directed to the Automated Commercial Environment ($5 million, or 3.3% below); Border Security Fencing, Infrastructure and Technology, $574 million (even); Air and Marine Interdiction, $516 million ($13 million, or 2.6% above); and Construction and Facilities Management, $260 million ($20 million, or 7% below, as the $100 million cancellation proposed in this account was taken as a rescission was encompassed in Sec. 257 of P.L. 112-6 , the sixth continuing resolution for FY2011 (125 Stat. 26)). In addition, under Sec. 1608, the Border Patrol was directed to "achieve an active duty presence of not less than 21,370 agents protecting the border of the United States by September 30, 2011," 1,000 more agents than the floor for the entire fiscal year suggested by the Senate bill. For ICE, P.L. 112-10 expressly provided $5,438 million to ICE for Salaries and Expenses ($0.5 million below) and $74 million for Automation Modernization ($11 million, or 12.6% below). ICE is directed to maintain at least 33,400 detention beds throughout the fiscal year. No funding was requested or provided for construction projects. For TSA, funds were provided as follows, compared to the President's request: Aviation Security, $5,220 million ($6 million above), including $4,308 million for screening operations, $629 million for explosives detection systems (9% of which is expressly set aside for medium- and small-sized airports), and $912 million for aviation security direction and enforcement; $106 million for surface transportation security ($32 million, 23% below); $163 million for transportation threat assessment and credentialing ($11 million, or 6.1% below); $989 million for transportation security support ($64 million, or 6.1% below); and $930 million for the Federal Air Marshal Service ($20 million, or 2.1% below). Overall, TSA got $507 million less than requested, leaving it with a budget roughly equivalent to the FY2010 amount. The Federal Air Marshal Service received the largest relative increase, funded at $69 million (8%) above FY2010 levels. Language in P.L. 112-10 directs that all TSA aviation security spending beyond $3,114 million be offset by fee collections. Furthermore, the year-ending CR caps TSA screener staffing at a level of 46,000 full time equivalents (FTEs), but would not require that TSA include newly hired part-time screeners in this count. The act requires DHS to report on: efforts to develop advanced, integrated passenger and baggage screening technologies; efforts to deploy screeners in a most cost effective manner; and any improvements in labor savings resulting from these efforts. For the Coast Guard, funds were provided as follows, compared to the President's request: $6,907 million for Operating Expenses, of which $254 million is designated as being for global war on terror contingency operations, and therefore scored outside the 302(b) ($2 million above the total request, overall); $1,520 million for Acquisition, Construction, and Improvements (AC&I) ($139 million, or 9.1% above); and $25 million for research and development ($5 million, or 23.5% above), including $4 million for toxic chemical and oil spill prevention and response technology. No funding is provided for alteration of bridges that are hazards to navigation. Of the funding provided for AC&I, $1,267 million is for Deepwater ($154 million, or 13.8% above the request), which accommodates a $154 million (28.6%) increase above the Administration's initial request for the National Security Cutter. $2 million is provided for the Administration's new initiative to upgrade Coast Guard housing. Section 1621 authorizes the Coast Guard to decommission one Medium Endurance Cutter, two High Endurance Cutters, four HU-25 aircraft and one Maritime Safety and Security Team, as well as make staffing changes at specific units as specified in the budget justification. For the Secret Service, $1,514 million is provided for salaries and expenses ($53 million, or 3.4% below the request), with construction is left at roughly $4 million, the FY2010 level, and equal to the President's request. Funding is provided for NSSE reimbursement, but not under Secret Service control. Rescissions In addition to the specifically directed reductions in funding levels, all of the accounts in Title II are subject to a 0.2% across-the-board rescission of budget authority for FY2011 in P.L. 112-10 , except for the Coast Guard's funding for overseas contingency operations, which amounts to a $64 million reduction, to be applied proportionately across the accounts in the title, and to the subaccounts within those accounts. Section 1656 of P.L. 112-10 rescinds $51 million in FY2010 unobligated balances from Title II components, including $13 million from CBP salaries and expenses, $18 million from ICE salaries and expenses and $14 million from Coast Guard operating expenses. An additional $15 million rescission is taken from TSA unobligated balances, and although its target is unspecified, it must not come from explosives detection systems, checkpoint support, aviation regulation and other enforcement, or air cargo programs. An additional $10 million in unobligated balances is rescinded from ICE construction. Customs and Border Protection29 CBP is responsible for security at and between ports-of-entry along the border. Since September 11, 2001, CBP's primary mission is to prevent the entry of terrorists and the instruments of terrorism. CBP's ongoing responsibilities include inspecting people and goods to determine if they are authorized to enter the United States; interdicting terrorists and instruments of terrorism; intercepting illegal narcotics, firearms, and other types of contraband; interdicting unauthorized travelers and immigrants; and enforcing more than 400 laws and regulations at the border on behalf of more than 60 government agencies. CBP is comprised of the inspection functions of the legacy Customs Service, Immigration and Naturalization Service (INS), and the Animal and Plant Health Inspection Service (APHIS); the Office of Air and Marine Interdiction, now known as Office of Air and Marine (OAM); and the U.S. Border Patrol (USBP). See Table 7 for account-level detail for all of the agencies in Title II, and Table 8 for sub-account-level detail for CBP Salaries and Expenses (S&E) for FY2010 and FY2011. President's FY2011 Request The Administration requested $11,174 million in gross budget authority for CBP for FY2011, amounting to a $384 million (or 3.3%) decrease from the enacted FY2010 level of $11,559 million. The Administration requested $9,809 million in net budget authority for CBP in FY2011, which amounts to a $318 million decrease from the net FY2010 appropriation of $10,127 million. The request included the following changes: Increase of $27 million for the Data Center consolidation effort; Increase of $25 million for Intellectual Property Rights (IPR) enforcement; Increase of $10 million for 103 Intelligence Analysts; Reduction of $74 million from the Office of Information Technology (OIT); Reduction of $28 million derived from not sustaining certain FY2010 initiatives including $20 million from Office of Air and Marine (OAM) personnel enhancements, $5 millions from Cyber Security, and $3 million from the API/PNR program; Reduction of $15 million from Border Patrol Premium Pay and Agent Staffing; Reduction of $4 million from human resource reductions; Reduction of $24 million from the Office of Training and Development (OTD); Reduction of $17 million from the Secure Freight Initiative (SFI); Reduction of $12 million from the Customs-Trade Partnership Against Terrorism (C-TPAT); Reduction of $4 million from terminating certain United States Postal Service (USPS) leases; Elimination of the CBP Explosive Detector Dog program ($400,000); Reduction of $51 million from the Container Security Initiative (CSI); Reduction of $25 million from the Western Hemisphere Travel Initiative (WHTI); Reduction of $20 million from the Foreign Language Award Program (FLAP); Reductions of $158 million from the Border Security, Fencing, Infrastructure, and Technology (BSFIT) program, including $135 million from Development and Deployment, and $23 million from Program Management; Reduction to base funding for Automation Modernization account of $75 million in funding to the Automated Commercial Environment (ACE)/International Trade Database System (ITDS); Reduction to base funding of $44 million to the Construction and Facilities Management Account, and a cancellation of nearly $100 million in previously appropriated non-expended funds; Reduction to base funding for Air and Marine Interdiction funding of $14 million, and programmatic reduction of $3 million for planned logistics and management systems upgrades. Senate-Reported S. 3607, 111th Congress Senate-reported S. 3607 provided $11,282 million in gross budget authority for CBP for FY2011, amounting to $108 million (1%) more than was requested by the Administration, and a $277 million, (2.4%), decrease from the enacted FY2010 level of $11,559 million. Senate-reported S. 3607 included $9,916 million in direct appropriations for CBP for FY2010, amounting to a $107 million increase over the Administration's request and a $211 million decrease from the FY2010-enacted level of $10,127 million. Issues for Congress Issues that Congress considered during the FY2011 appropriations cycle included funding for Border Patrol agent hiring and staffing levels; the Secure Border Initiative (SBI) surveillance technologies, including SBInet; Unmanned Aerial Vehicles (UAVs), and cargo security. Border Patrol Staffing Levels For FY2011, CBP submitted two budget requests: (1) the original budget request, and (2) a revised budget request that made adjustments to the request for Border Patrol staffing and premium pay. While the most recent version of the FY2011 budget request only included a reduction of $15 million to Border Patrol premium pay, the original FY2011 budget request included a proposed reduction of premium pay of $31 million and a reduction 181 U.S. Border Patrol (USBP) Agents. This reduction would have reduced the number of USBP Agents from 20,163 in FY2010 to 19,983 in FY2011. Several members of Congress expressed concern over this reduction and which geographic areas would have had their staffing levels reduced. Prior to the revised budget request, in testimony before the Senate Homeland Security and Government Affairs Committee, DHS Secretary Napolitano stated that there would be no reductions of agent numbers at the southwest border and the department would continue to meet its staffing obligations at the northern border. Subsequently, CBP revised its premium pay reduction request, and removed language on Border Patrol Agent reductions altogether. In August, Congress passed an Emergency Supplemental Appropriation Bill for border security, P.L. 111-230 , that provided $254 million in CBP salaries and expenses, including $176 million to hire additional Border Patrol agents for deployment to the southwest border. At the same time, the Administration authorized the deployment of up to 1,200 additional National Guard troops to the southwest border to provide intelligence surveillance, reconnaissance support, and support to counternarcotics enforcement until CBP recruits and trains additional Border Patrol agents. Senate-reported S. 3607 included bill language that would have mandated a floor of not less than 20,370 Border Patrol agents onboard throughout FY2011. Fencing, Infrastructure, and Technology The Administration requested $574 million for the deployment of SBI technology and tactical infrastructure, including SBInet, a decrease of $226 million over the FY2010 enacted level of $800 million. Within the FY2011 request, the Administration proposed to allocate $336 million for developing and deploying additional technology and infrastructure solutions to the southwest border. An additional $169 million was requested for operations and maintenance of the cameras, sensors, and tactical infrastructure (TI) fencing. Secretary Napolitano stated in February 2010 that 645.2 miles of pedestrian and vehicle fencing were in place along the southwest border and that DHS/CBP planned to construct an additional 6.4 miles of fencing. Senate-reported S. 3607 and P.L. 112-10 matched the Administration's funding request. The management and deployment of SBInet have been a subject of controversy for several years. The Government Accountability Office (GAO) noted that the Border Patrol was not consulted early enough in the process of developing the technology solutions that would be used by SBInet, and that this fact combined with some challenges relating to the integration of the technologies deployed by Boeing led to an eight month delay in the initial pilot program's deployment in Tucson Sector. Secretary Napolitano froze spending on the Boeing portion of SBInet in March 2010 and ordered a department-wide assessment of the SBInet technology project. In January 2011, the Administration announced its intention to end the Boeing SBInet contract and to develop a new border security technology plan incorporating SBInet technology along with other surveillance technologies. Unmanned Aerial Vehicles The Administration's FY2011 budget request included a reduction of $20 million for the Office of Air and Marine Operations, which the Administration would have accomplished mainly by not sustaining program enhancements, resulting in the elimination of 120 staffing positions. In FY2010, Congress fully funded the Administration's request at the time to hire 144 new OAM pilots, vessel commanders, and support personnel; but as of July 2010 the Administration had taken steps to hire only 24 of the 144 funded positions. The Emergency Supplemental Appropriation Bill for Border Security, P.L. 111-230 , provided $32 million for the acquisition of two additional Unmanned Aerial Vehicle systems (UAVs). The Senate-reported S. 3607 would have provided $15.9 million above the Administration's request for OAM personnel and $20.5 million above the Administration's request for OAM procurement to fund and support two additional UAVs. Cargo Security The Administration's FY2011 budget request contained decreases in funding for cargo security initiatives. The international cargo screening activity in the budget included funding for the Container Security Initiative (CSI) program and the Secure Freight Initiative (SFI). In FY2010 Congress appropriated $162 million for these two programs. The President's budget request for this activity in FY2011 was $84 million, a decrease of $78 million or 48%. The Senate-reported version of S. 3607 proposed $103 million for these two programs, a decrease of $59 million, or 36%, as compared to the FY2010-enacted level. The SFI is characterized as a "three-pronged approach to enhance supply chain security." The three prongs of this approach are the International Container Security (ICS) program (see below); an initiative known as Security Filing (10+2) that consists of the development of a regulation to require additional data elements for improved high-risk targeting; and additional efforts to identify and acquire technology to enhance cargo scanning and risk assessment capabilities. The ICS program is CBP's effort to subject all U.S.-bound maritime containers to an integrated scan (image and radiation detection) at participating overseas port before being loaded onto a U.S.-bound vessel. In FY2010 ICS was operational in six ports (Hong Kong; Busan, South Korea; Southampton, United Kingdom; Puerto Cortes, Honduras; Qasim, Pakistan; and in a very limited capacity in Salalah, Oman) and scanning 100% of U.S.-bound containers as mandated by the SAFE Port Act at Southampton, Puerto Cortes, and Qasim. The President's FY2011 request proposed a reduction of nearly $17 million for ICS, to be achieved by changing the protocols at two of these fully operational ICS ports (Honduras and Southampton) and at the port of Busan from the ICS protocols (100% integrated scanning of cargo) to CSI protocols (integrated scanning only of high risk containers; see below). The Administration proposed to continue following the ICS program at Port Qasim in Pakistan and in Salalah, Oman. The President's FY2011 budget also proposed a $58 million reduction to the CSI program. CSI is a program under which CBP stations CBP officers in foreign ports to target high-risk containers for inspection before they are loaded on U.S.-bound ships. CSI was operational in 58 ports for FY2010, and screened over 80 percent of the volume of maritime containers destined for the U.S. According to the FY2011 Congressional Budget Justifications , the proposed $58 million reduction in CSI funding will be achieved by changing CSI's operational posture from one in which CBP Officers are on the ground in foreign ports, to a remote posture whereby the targeting and selection of high risk containers are done at the National Targeting Center-Cargo (NTC-C). For FY2011 CBP plans to phase out physical operations at 54 of the 58 existing CSI ports. These reductions were the subject of congressional scrutiny. The Senate Appropriations Committee noted in S.Rept. 111-222 that it strongly supports programs that effectively support and promote the strategies of "pushing out the borders" and layered border security, citing the Container Security Initiative as an example. The committee also noted its disappointment in the proposed cuts to C-TPAT, a voluntary government-business partnership to validate international supply chains and provide expedited processing for trusted importers; and to the Western Hemisphere Travel Initiative, which requires travelers from Mexico and Canada to present a passport or other secure travel document. The committee further requested a briefing within 90 days of enactment to explain how the additional $29 million provided for these programs will be used by CBP, and how the agency plans to mitigate the potential effects of the proposed cuts on security. Immigration and Customs Enforcement45 ICE focuses on enforcement of immigration and customs laws within the United States. ICE develops intelligence to reduce illegal entry into the United States and is responsible for investigating and enforcing violations of the immigration laws (e.g., alien smuggling, hiring unauthorized alien workers). ICE is also responsible for locating and removing aliens who have overstayed their visas, entered illegally, or have become deportable. In addition, ICE develops intelligence to combat terrorist financing and money laundering, and to enforce export laws against smuggling, fraud, forced labor, trade agreement noncompliance, and vehicle and cargo theft. This bureau no longer oversees the building security activities of the Federal Protective Service (FPS), which has been transferred to the National Protection and Programs Directorate (NPPD). See Table 7 for account-level detail for all of the agencies in Title II, and Table 9 for sub-account-level detail for ICE Salaries and Expenses (S&E) for FY2010 and FY2011. President's FY2011 Request The Administration requested $5,835 million in gross budget authority for ICE in FY2011. This represented a 1.6% increase over the enacted FY2010 level of $5,742 million. The Administration requested an appropriation of $5,524 million in net budget authority for ICE in FY2011, representing a 1.6% increase over the FY2010 enacted level of $5,437 million. The request includes the following increases: $20 million to Detention and Removal Operations (DRO) to maintain current bed space; $20 million for the co-location of ICE facilities; $15 million for Office of Investigations mission support; $10 million for data center migration; $10 million for addition Border Enforcement Security Task Forces (BEST); $5 million for intellectual property rights enforcement. Senate-Reported S. 3607, 111th Congress Senate-reported S. 3607  provided $5,863 million to ICE in gross budget authority for FY2011, $27 million more than the Administration requested. Senate-reported S. 3607  provided $5,551 million to ICE in net budget authority, $27 million more than the Administration request.  Issues for Congress ICE is responsible for many divergent activities due to the breadth of the civil and criminal violations of law that fall under its jurisdiction. As a result, how ICE resources are allocated in order to best achieve its mission is a continuously contentious issue. Debate during the FY2011 appropriations process included questions about ICE's role in detaining and removing (deporting) aliens and on the role of state and local law enforcement agencies in immigration enforcement. Detention and Removal Operations Part of ICE's mission includes locating and removing deportable aliens, which also involves determining the appropriate amount of detention space as well as which aliens should be detained. Although many contend that the priority should be placed on removing aliens who have committed crimes in the United States, less than one-third of those deported by ICE in FY2008 and in FY2009 were convicted of a criminal offense. Furthermore, others argue that the prioritization of criminal aliens should not come at the expense of ICE's other responsibilities, such as terrorist travel and worksite enforcement investigations. ICE's office of Detention and Removal Operations provides custody management of the aliens who are in removal proceedings or who have been ordered removed from the United States. DRO is also responsible for ensuring that aliens ordered removed actually depart from the United States. Many contend that DRO does not have enough detention space to house all those who should be detained. Concerns have been raised that decisions regarding which aliens to release and when to release them may be based on the amount of detention space, not on the merits of individual cases, and that detention conditions may vary by area of the country leading to inequities. A number of policymakers have advocated for the increased use of alternatives to detention programs for non-criminal alien detainees, citing these programs as a lower cost option than detention and a more proportional treatment relative to the violation. Furthermore, there have been concerns raised about the adequacy of medical care received by aliens in detention. In 2009, ICE released new detention standards aimed at addressing these criticisms. The total number of FY2010 detention beds was 33,400, and the President's FY2011 budget requested an increase of $20 million to maintain the current amount of bed space. Senate-reported S. 3607 matched the Administration's funding request. State and Local Law Enforcement52 The Immigration and Nationality Act (INA) provides limited avenues for state enforcement of its civil provisions, including most laws governing the removal of unauthorized immigrants. One of the broadest grants of authority for state and local immigration enforcement activity stems from INA §287(g), which authorizes the Attorney General to enter into a written agreement with a state, or any political subdivision, to allow state and local law enforcement officers to perform the functions of an immigration officer in relation to the investigation, apprehension, or detention of aliens in the United States. The enforcement of immigration by state and local officials has sparked debate among many who question what the proper role of state and local law enforcement officials should be in enforcing federal immigration laws. Many have expressed concern over proper training, finite resources at the local level, possible civil rights violations, and the overall impact on communities. Nonetheless, some observers contend that the federal government has scarce resources to enforce immigration law and that state and local law enforcement entities should be utilized. The President's FY2011 request for ICE included $5 million for 287(g) agreements which is the FY2010 ICE funding level for such agreements; however, state and local entities may apply for additional funding through appropriations to the Office of State and Local Government Coordination in FEMA. Senate-reported S. 3607 matched the Administration's funding request. Transportation Security Administration53 The TSA, created by the Aviation and Transportation Security Act (ATSA, P.L. 107-71 ), is charged with protecting air, land, and rail transportation systems within the United States to ensure the freedom of movement for people and commerce. In 2002, the TSA was transferred to DHS with the passage of the Homeland Security Act ( P.L. 107-296 ). The TSA's responsibilities include protecting the aviation system against terrorist threats, sabotage, and other acts of violence through the deployment of passenger and baggage screeners; detection systems for explosives, weapons, and other contraband; and other security technologies. The TSA also has certain responsibilities for marine and land modes of transportation including assessing the risk of terrorist attacks to all non-aviation transportation assets, including seaports; issuing regulations to improve security; and enforcing these regulations to ensure the protection of these transportation systems. TSA is further charged with serving as the primary liaison for transportation security to the law enforcement and intelligence communities. See Table 7 for account-level detail for all of the agencies in Title II, and Table 10 for amounts specified for TSA budget activities. President's FY2011 Request The President's request specified total gross funding of $8,165 million in FY2011 for the TSA, an increase of about 7% over FY2010 enacted levels. The request for Aviation Security of $5,560 million was also roughly 7% more than FY2010 enacted levels and would comprise 68% of the total TSA budget. Proposed programmatic increases for aviation security highlight initiatives on passenger screening and international aviation security, two key areas brought to the forefront of policy debate following the December 25, 2009, attempted bombing of a trans-Atlantic flight on approach to Detroit. Proposed increases for passenger screening and security include an increase of $215 million over FY2010 baseline levels for the purchase and deployment of advanced imaging technology (AIT), also known as whole body imaging (WBI) systems, at airport screening checkpoints. The President's request also specified an additional $219 million for about 3,500 full-time equivalent (FTE) screeners to operate newly deployed AIT systems, as well as $96 million for airport management and mission support for deploying and operating these systems. The President's budget also specified a $60 million increase, within the Checkpoint Support activity, for purchasing about 800 new portable Explosive Trace Detection (ETD) machines for deployment to airport screening checkpoints. In contrast to the proposed budget increases for Checkpoint Support, the President's request reflected a decrease of $404 million for checked baggage Explosives Detection Systems (EDS) and ETD purchase and installation, due to a high level of non-recurring procurement and installation costs for EDS and ETD that were allocated in the FY2010 budget. The FY2011 budget request also included $71 million for 275 additional canine explosives detection teams as part of the proposed increase for Aviation Regulation and Other Enforcement activities, and $20 million for deploying 350 additional behavioral detection officers (BDOs) to spot suspicious behavior as part of passenger and baggage screening operations. To enhance international aviation security initiatives, the President's request included an increase of $85 million for the Federal Air Marshals (FAMS) to increase coverage on international flights, as well as an additional $39 million for international cooperative programs and rapid response capabilities to deploy to high risk areas such as the Middle East and Africa, included as part of the proposed increase for Aviation Regulation and Other Enforcement activities. The President's request included an increase of roughly $27 million for Surface Transportation Security, reflecting an increase in rail security inspectors and canine explosives detection teams. The request also included an increase of about $51 million for Transportation Security Support, including $10 million to increase Office of Intelligence staffing by 35 FTEs, primarily to expand the Field Intelligence Officer (FIO) program presence at large airports. Senate-Reported S. 3607, 111th Congress Senate-reported S. 3607 specified $8,064 million for the TSA, $100 million less than the President's request. Of this amount, $5,491 million (68%) was designated for aviation security programs. Additionally, $950 million was specified for FAMS, and an additional $250 million was to be provided as grants to airports derived from the mandatory Aviation Security Capital Fund (ASCF). The amount specified in S. 3607 for aviation security is $69 million less than the requested amount. The Senate-reported amount for passenger and baggage screener personnel, compensation, and benefits (PC&B) was $37 million less than requested. The Senate committee denied the TSA's request for additional BDOs, at an additional cost of roughly $16 million, expressing concern over further expansion of the program without a complete assessment and validation of its effectiveness. Additionally, the Senate-reported amount reflected an anticipation that increased efficiency gains from the expedited deployment of in-line EDS systems will allow for personnel reductions. The committee also noted that in prior years, the TSA has carried large unobligated balances for screener PC&B, and included a general provision rescinding $15 million from prior year balances. The Senate-reported amount for EDS/ETD purchase and installation is $19 million less than requested, and the amount specified for Screening Technology Maintenance and Utilities is $9 million below the requested amount. These lower amounts reflect anticipated recovery of amounts appropriated in prior years but not fully expended for EDS procurement and installation, as well as reductions in anticipated maintenance costs due to the negotiation of extended vendor warranties for AIT systems currently being deployed. The Senate-reported bill provides $360 million, the same as requested, for procurement and installation of AIT systems and other checkpoint technologies under the Checkpoint Support program. The Senate-reported bill included the requested level of $368 million for Aviation Regulation and Other Enforcement, supporting the Administration's request for an increase of $114 million above FY2010 levels to provide for additional canine teams and strengthening of international aviation security programs in high risk areas of the world. The Senate committee also recommended $122 million for Air Cargo Security, $4 million above the request to accelerate inspector needs and canine cooperative programs with state and local law enforcement to support cargo screening mandates. The Senate-reported bill included $138 million for Surface Transportation Security, as requested. It also specified, $1,049 million for Transportation Security Support, roughly in-line with the requested amount. S. 3607 , however, specified $147 million for Transportation Threat Assessment and Credentialing (TTAC), $25 million less than the requested amount. The lower amount reflects the TSA's decision to pursue competitive bidding for its initiative to "modernize" its vetting and credentialing infrastructure, to reduce duplication and complexity among the various programs and services for conducting criminal checks, security threat assessments, and maintaining data on transportation workers and others with access to transportation systems and facilities. As a result of the shift to a competitive procurement, less development funding was anticipated in FY2011 for this initiative. Issues for Congress The FY2011 DHS appropriations process was conducted amid heightened congressional interest in aviation security issues following the December 25, 2009, attempted bombing of a Detroit-bound international airline flight from Amsterdam. The incident focused particular attention on the use of terrorist watchlists in aviation security, the screening of passengers and carry-on items for explosives, and security measures for inbound international flights. Additionally, TSA faced challenges in meeting the statutory deadline set forth in P.L. 110-53 to screen 100% of all cargo placed on passenger airliners by August 2010. Challenges in meeting this deadline, particularly for inbound international flights, raised specific issues regarding cargo screening technologies and TSA oversight of air carriers, freight forwarders, and cargo consolidation operations. Amid growing concerns over deficit spending, options for increasing aviation security fees, most notably the passenger security fee, have been discussed in the context of TSA appropriations. Checkpoint Explosives Screening The President's request included $344 million to test, procure, and deploy a variety of new checkpoint technologies to improve the detection of explosives and prohibited items, an increase of $227 million over FY2010 baseline funding levels. The most controversial of these technologies are whole body imaging systems, that the TSA refers to as advanced imaging technology (AIT), used to screen passengers for items concealed by clothing. In addition to raising considerable concerns among privacy advocates, these systems are costly to acquire and maintain. They are also labor intensive, since current generations require the images to be analyzed by human operators, although future versions may include automated target recognition capabilities. In addition to AIT, advanced technology X-ray systems, bottle liquid scanner, and next generation explosives trace detection (ETD) equipment are also being procured. By the end of FY2011, the TSA anticipates that AT X-ray deployment will be at 96% of full operating capacity (FOC) sought by FY2014, whereas AIT deployments will only be at 56% of FOC. The TSA strategy has been to focus its AIT deployments at larger airports first, and by end of FY2011, it plans to have deployed 75% of the FOC at the most critical Category X airports. This strategy may, however, leave vulnerabilities at smaller airports. The sustainment costs of checkpoint screening systems has also been a particular concern for appropriators. For FY2011, the President's request included $74 million for maintenance of checkpoint screening equipment, a 45% increase compared to FY2010. Checkpoint screening maintenance costs will likely increase considerably in future years, to pay for upkeep and extend the service life of the more complex next generation screening technologies currently being deployed. Another concern is the costs of modifying airport terminals to accommodate next-generation checkpoint technologies, particularly AIT systems. S.Rept. 111-222 contains language instructing the TSA to work closely with airport authorities to address space and facility requirements and constraints before AIT units are deployed, and to provide funding for necessary terminal modifications. The Senate-reported bill included $65 million within the Checkpoint Support program, as requested, for anticipated costs to accommodate AIT equipment. P.L. 112-10 requires DHS to report on efforts to develop advanced, integrated passenger and baggage screening technologies, efforts to deploy screeners in a most cost effective manner, and any resulting improvements in labor savings. Secure Flight, Terrorist Watchlists, and Transportation Security Intelligence Terrorist watchlisting and the TSA's efforts to deploy its Secure Flight system to check passenger names for possible ties to terrorism have been considerable issues in appropriations debate for several years. Past appropriations measures have included language requiring that adequate steps be taken to protect data, ensure privacy, and provide avenues for passenger redress before Secure Flight could be fully deployed. Full implementation of Secure Flight, covering both domestic and international flights, was completed in December 2010, and the FY2011 request only included inflationary adjustments to the FY2010 enacted levels for the Secure Flight program. To a large degree, following the December 25, 2009, incident, the policy emphasis has now shifted from the procedural, technical, and privacy issues surrounding the Secure Flight system development and deployment to the intelligence analysis process underlying the no-fly and selectee lists against which passenger names are checked. While the circumstances of the incident have focused attention more specifically on intelligence gathering and analysis agencies, the FY2011 President's request included a proposed increase of $10 million for the TSA's Office of Intelligence (TSA-OI). The increase was intended to provide additional field intelligence capabilities at large airports and to implement improved secure communications capabilities between TSA headquarters and large airports to improve the dissemination of intelligence information to security operations in the field. Another relevant issue has been the adequacy of TSA-OI resources and capabilities to work with the intelligence community with respect to making accurate and timely decisions for including terrorist identities on the no-fly and selectee lists. Lawmakers have also raised questions regarding the scope of those lists compared to the broader available information contained in government terrorist systems and databases, such as the Terrorist Identities Datamart Environment (TIDE), maintained by the National Counterterrorism Center (NCTC), and the Terrorist Screening Database (TSDB), maintained by the Terrorist Screening Center (TSC). S. 3607 (111 th Congress) included a general provision that would have required the TSA to certify that no significant security risks are raised if the Secure Flight system checks passengers names against a subset of the full terrorist watchlist, instead of the full terrorist watchlist. Air Cargo Screening The Implementing Recommendations of the 9/11 Commission Act of 2007 ( P.L. 110-53 , Sec. 1602) required the TSA to establish a system for screening 50% of cargo placed on passenger airliners by February 2009, and 100% of such cargo by August 2010. The TSA currently requires 100% screening of cargo placed on domestic passenger flights. It relies on a process known as the Certified Cargo Screening Program (CCSP) to regulate screening and supply chain security practices of participating shippers, freight forwarders, and cargo consolidation facilities to carry out these screening requirements. About 15,000 shipping facilities and 250 freight forwarding and cargo consolidation facilities participate in the CCSP. However, screening of cargo on inbound international flights remains a particular challenge for meeting the statutory requirements. Specific challenges in the international arena include limited control over foreign supply chain activities, the scale of diversity among various supply chains, and diplomatic considerations that pose specific challenges to implementing the CCSP model overseas. The TSA indicates that it will continue to work with international partners through FY2011 to better harmonize air cargo security standards and advance the supply chain screening approach to move toward achieving 100% screening of cargo on inbound international passenger flights. With respect to domestic air cargo security, the TSA is anticipated to face continuing resource challenges to adequately oversee the large number of shipping and freight forwarding entities participating in the CCSP. The FY2011 request included $28 million for air cargo policy and programs, a reduction of $11 million compared to FY2010 levels reflecting the culmination of the air cargo screening technology pilot program effective August 2010, and the transition of those technologies and screening responsibilities to the CCSP participants. The request also includes $74 million for air cargo inspectors, which reflects inflationary adjustments to the FY2010 baseline of $70 million. The request also included $15 million for the National Explosive Detection Canine Training Program (NEDCTP) which provides for the training and certification of local law enforcement canine teams assigned to air cargo screening duties at airports, as well as partial reimbursement for the operational and maintenance costs through cooperative agreements with local law enforcement agencies. S. 3607 included a general provision that would have directed the TSA to continue its quarterly reporting of cargo screening statistics and provide an implementation plan for meeting the 100% screening mandate for passenger aircraft in the event that the August 2010 statutory deadline was not met. The Senate committee also issued report language (see S.Rept. 111-222 , p. 65) encouraging the TSA to expedite approval of effective and suitable technologies for screening air cargo commodities with a particular emphasis on continuing its ongoing work with the fresh fruit industry to identify and certify screening systems. Passenger Security Fee Collections ATSA gave the TSA authority to collect passenger security fees totaling $2.50 per leg, not to exceed $5.00 per one-way trip. The Bush Administration had unsuccessfully attempted to raise passenger security fees on several occasions, but its proposals failed to gain sufficient support in Congress. The Obama Administration proposed a phased-in increase beginning in FY2012. Under this proposal, the base fee would increase by $1 per leg each year in FY2012, FY2013, and FY2014, until it reaches a level of $5.50 per leg with a cap of $11 per one-way trip. Congress has also considered options to increase passenger security fee collections. For example, S. 1808 (111 th Congress) and S. 698 (111 th Congress), both offered by Senator Feingold, sought a flat fee of $5.00 per one-way trip. The airline industry has ardently opposed such fee increases, arguing that aviation security is a national concern that impacts all citizens, and therefore, like national defense, its costs should be borne by all and not just aviation system users. The airline industry also argues that the passenger security fees, along with ticket taxes and other government fees, must be offset to some degree in the pricing of airline tickets to sustain passenger demand, which impacts airline revenues during tough economic times. Notwithstanding these arguments, Congress may be more willing to consider a fee increase in the current context given that the fee has remained unchanged and has not been adjusted for inflation since its initial authorization in 2001, and there is increasing pressure to identify offsetting revenue sources to reduce federal deficit spending. No changes were made to passenger security fees during the 111 th Congress or in the context of FY2011 appropriations, however this remains an issue of considerable interest to the 112 th Congress and the Obama Administration. United States Coast Guard58 The Coast Guard is the lead federal agency for the maritime component of homeland security. As such, it is the lead agency responsible for the security of U.S. ports, coastal and inland waterways, and territorial waters. The Coast Guard also performs missions that are not related to homeland security, such as maritime search and rescue, marine environmental protection, fisheries enforcement, and aids to navigation. The Coast Guard was transferred from the Department of Transportation to the DHS on March 1, 2003. President's FY2011 Request The President's requested amount for major accounts compared with last year's enacted level is shown in Table 7 . As the table indicates, the President requested $87 million more in operating expenses (an increase of 1%) and $155 million less in the capital (ACI) account (a decrease of 10%) compared to last year's enacted level. These two accounts are shown in further detail in Table 11 , below. The President requested no funds for the Bridge Alteration account (consistent with prior Administration budget requests) and requested $5 million less for research and development. The other requested amounts are nearly the same as last year's enacted level. Senate-Reported S. 3607, 111th Congress The Senate Appropriations Committee recommended about 6% more than the President requested. However, the Senate committee included $254 million for the Coast Guard's overseas activities in Iraq and Afghanistan, while the President requested these funds under the Navy's budget. Other major differences are that the Senate committee provided $41 million more than requested for vessel acquisition, about $40 million more for shore facilities, $8 million more for research and development, and $4 million for modifying bridges interfering with navigation. Other differences are discussed below. Issues for Congress Increased duties in the maritime realm related to homeland security have added to the Coast Guard's obligations and increased the complexity of the issues it faces. Some members of Congress have expressed concern with how the agency is operationally responding to these demands, including Coast Guard plans to replace many of its aging vessels and aircraft. The President's FY2011 budget request reflects a trade off of mission hours for capital investment in order not to further delay the replacement of older vessels and aircraft. Deepwater The Deepwater program is a 25-year acquisition program to replace or modernize 91 cutters, 124 small surface craft, and 247 aircraft at an estimated cost of over $25 billion. The Coast Guard's management and execution of the program has been strongly criticized and the GAO and DHS IG have been very active in reviewing Deepwater. In 2007, the Coast Guard decided to phase out an outside system integrator (a team led by Lockheed Martin and Northrup Grumman) to execute the program. Issues for Congress include the Coast Guard's management of the program, which is the largest and most complex acquisition effort in Coast Guard history, the overall cost of the program, and the program's time line for acquisition. For FY2011, the President requested $1,113 million for Deepwater. This amount includes $538 million for the construction of a fifth National Security Cutter and $240 million for four Fast Response Cutters. The Senate Appropriations Committee provided $121 million more than the request for Deepwater. Most of this difference is for advancing the procurement of a sixth national security cutter. Over the last several years, the Coast Guard lost two C-130s and several helicopters in flight accidents. In 2010, Congress provided through H.R. 4899 ( P.L. 111-212 ) funding to recondition an existing airframe to replace a crashed HH-65 and direction that the Department of Defense purchase two C-103Js and transfer them to the Coast Guard. P.L. 112-10 provided $1,267 million for Deepwater; $101 million for Deepwater aircraft and $1,101 million for surface ships. Personnel Strength The FY2011 budget request would reduce the size of the Coast Guard's military workforce by 485 FTE (1,112 positions) and increase the size of the civilian workforce by 384 FTE (339 positions) for a net reduction of 773 personnel. Some military positions would be re-classified as civilian positions. Some of the reduction in personnel is due to the planned decommissioning of older vessels (cutters) that require more crew than the newer vessels replacing them. However, some of the newer vessels will not be ready for service when the older vessels are taken out of service, reducing total cutter hours in FY2011 by an estimated 5,000 hours. The USCG has 12 Maritime Safety and Security Teams (MSSTs), which can be deployed to respond to a safety or security situation in a port that requires additional personnel. MSSTs escort vessels, patrol critical infrastructure, perform counter terrorism activities, board high interest vessels, and respond to unanticipated surge operations (e.g., mass migration, hurricane response, terrorist attack, etc.). The MSSTs are part of a larger group called the Deployable Operations Group (DOG), consisting of 3,000 personnel who are ready to provide a "surge capacity" when needed at a particular port. The President's budget proposes eliminating five of the 12 MSSTs for a savings of $18.2 million. Teams would be eliminated in San Francisco, New Orleans, New York, Anchorage, and Kings Bay, GA. The decision of where to eliminate teams was based, in part, on where the agency already had a large permanent presence of Coast Guard personnel. The Senate Appropriations Committee rejected the President's request to eliminate five MSSTs. The committee also partially rejected the request for decommissioning certain assets, continuing the operations of two High Endurance Cutters and five HH-65 helicopters. P.L. 112-10 (sec. 1621) allowed the Coast Guard to decommission one Medium Endurance Cutter, two High Endurance Cutters, four HU-25 aircraft, and one MSST. Marine Safety Mission The oil spill from the drilling rig in the Gulf of Mexico has focused attention on the Coast Guard's role in marine safety and environmental protection. The Coast Guard oversees the safety of the non-drilling aspects of offshore oil platforms, rescues crews when in danger, and is the lead agency in responding to oil spill clean up. One issue that has been raised with respect to the Coast Guard's role in overseeing the safety of oil rigs is its ability to keep pace with changing technology in the offshore industry. For instance, it has been noted that some areas of the Coast Guard regulations covering the safety requirements of "Mobile Offshore Drilling Units," such as the Deepwater Horizon , date back to 1978 when rigs were much closer to shore and in shallower water. The Coast Guard's pace in issuing rulemakings and its overall competence in carrying out its marine safety mission was the subject of a recent congressional hearing as well as an issue raised in the aftermath of the Cosco Busan oil spill in San Francisco Bay in November 2007. In response to these criticisms, the Coast Guard has revamped its marine safety program. In FY2009, the Administration requested and Congress provided funds for about 300 additional marine safety personnel. The Senate Appropriations Committee provided $20 million more in the operations account than the President requested for 176 marine safety positions to improve regulation, enforcement, and compliance of the maritime industry. Rescue-21 Congress has been concerned with the Coast Guard's management of the Rescue 21 program, the Coast Guard's new coastal zone communications network that is key to its search and rescue mission and replaces its National Distress and Response System. A 2006 GAO audit of the program found a tripling of project cost from the original estimate and likely further delays in project completion, which was already five years behind schedule. The GAO's FY2008 Coast Guard budget review noted that while Rescue-21 was originally intended to limit gaps to 2% of coverage area, that target has now expanded to a less than 10% coverage gap. As of December 2009, Rescue-21 was deployed at 24 of 39 planned locations. For FY2011, the President requested $36 million for Rescue-21, to complete deployment at six locations and continue deployment at four other locations. The Senate committee agreed with the President's request. United States Secret Service67 The U.S. Secret Service (USSS) has two broad missions, criminal investigations and protection. Criminal investigation activities encompass financial crimes, identity theft, counterfeiting, computer fraud, and computer-based attacks on the nation's financial, banking, and telecommunications infrastructure, among other areas. The protection mission is the most prominent, covering the President, Vice President, their families, and candidates for those offices, along with the White House and Vice President's residence, through the Service's Uniformed Division. Protective duties also extend to foreign missions in the District of Columbia and to designated individuals, such as the DHS Secretary and visiting foreign dignitaries. Aside from these specific mandated assignments, USSS is responsible for security activities at National Special Security Events (NSSE) , which include the major party quadrennial national conventions as well as international conferences and events held in the United States. The NSSE designation by the President gives the USSS authority to organize and coordinate security arrangements involving various law enforcement units from other federal agencies and state and local governments, as well as from the National Guard. President's FY2011 Request For FY2011, the Administration requested an appropriation of $1,570 million. The Administration's request reflected an increase of $87 million from FY2010. Within the Protection of Persons and Facilities account, the Administration protects 34 individuals, of which 24 are authorized under U.S. Code and ten are provisional protectees authorized pursuant to presidential memoranda. Additionally the Secretary of the Treasury receives protection on a reimbursable basis. USSS intends to continue to provide protection for the President and Vice President, their families, visiting heads-of-state, and the White House and other buildings within the Washington, DC, area. Finally, USSS plans to continue implementing operational security for designated NSSEs. Senate-Reported S. 3607, 111th Congress The Senate Committee on Appropriations recommended $1,576 million for the Secret Service for FY2011, an increase of $93 million over the FY2010 appropriations and $4 million over the president's FY2011 budget request. In all spending categories (except for one), the Appropriations Committee recommendations for FY2011 were identical to the president's budget request. The single difference was for domestic investigations: the committee recommended $4 million above the president's request, which accounts for the increase in the total amount between the committee's recommendation and the president's request. The panel raised concerns—based on a 2010 Government Accountability Office report (GAO-10-762)—however, that the Secret Service was in violation of the Anti-Deficiency Act, by spending more funds than it had available. The committee directed the Secret Service and the DHS Chief Financial Officer (CFO) to implement the GAO recommendations related to financial management and compliance. The panel also retained bill language withholding from obligation $20 million until the DHS Chief Information Officer submits a report to the House and Senate Appropriations Committees certifying that all information security modernization plans are consistent with DHS data center migration and enterprise architecture requirements. Issues for Congress There are two issues of potential interest to Congress concerning the FY2011 appropriations for USSS. The two issues include funding for the Service's protection mission, and NSSE funding. Protection Mission Funding USSS's protection mission, as opposed to its investigative mission, employs the majority of the Service's agents and receives a larger share of the agency's resources. Additionally, the majority of congressional action concerning USSS has been related to its protection mission, as evidenced by past appropriations, and their accompanying conference report, for USSS. The priority given to protection reflects the costs associated with an increase in protecting individuals, events, and facilities, which the conferees noted in the conference report accompanying P.L. 111-83 (FY2010 DHS appropriations). While Congress has maintained USSS's role in investigating financial crimes, such as providing funding for a new international field office in Estonia to combat electronic crimes in FY2010, congressional action primarily has addressed, and continues to address, the Service's protection mission. An example of this is the 110 th Congress' enactment of P.L. 110-326 , the Former Vice President Protection Act of 2008, which requires the Service to protect former Vice Presidents, their spouses, and minor children for a period of up to six months after leaving office. Congress has, however, moved to reduce the Service's protection mission by specifically stating, in the FY2010 DHS appropriation, that the USSS could not use any funds to protect any federal department head, except the DHS Secretary, unless the Service is reimbursed. One could argue that potential terrorist attacks and possible threats to the President have resulted in an increase in the need for the Service's protection activities. Advocates for expansion of the investigation mission, however, may contend that protection is enhanced through better threat investigation efforts. National Special Security Event Funding The Administration proposed $20 million for a new initiative, the NSSE State and Local Reimbursement Fund (NSSE Fund). For FY2011, the Administration proposes housing this account in Title I, under Analysis and Operations (see Table 5 ). The NSSE Fund would reimburse state and local governments for costs incurred when providing security at NSSEs. In the past state and local governments were reimbursed for NSSE costs through targeted through multiple federal programs that were not consolidated or coordinated. Eligible costs of the NSSE Fund would be determined by the DHS Secretary and the fund's management and administrative costs could not exceed one percent ($200,000). NSSE Fund allocations would not be available to states and localities that receive reimbursement from other federal programs, including the Department of State's "Protection of Foreign Missions and Officials" account. NSSEs are events of national significance that may heighten the possibility of terrorist attacks because of the anticipated attendance by U.S. officials and foreign dignitaries; the size of the event; and the event's historical, political, and symbolic significance. Recent NSSEs include the January 2009 inauguration of President Barack Obama and the 2008 presidential nominating conventions. The U.S. Secret Service (USSS) is the lead federal agency for planning, implementing, and coordinating operational security at NSSEs. USSS's Major Events Division (MED) plans and coordinates NSSE security operations. Some of the coordination includes advance planning and liaison for venue and air space security, training, communications, and security credentialing. State and local law enforcement entities augment federal law enforcement security of NSSEs. Recent NSSE funding include the appropriation of $100 million for securing the 2008 Presidential Nominating Conventions in Denver, CO, and Minneapolis-St. Paul, MN. The $100 million was appropriated to the Department of Justice (DOJ) and administered through the DOJ's Edward Byrne Memorial State and Local Enforcement Assistance Programs (Byrne Programs). DOJ used most of this funding to reimburse state and local law enforcement entities for NSSE security costs. Until the passage of P.L. 112-10 , the most recent NSSE funding was $15 million for "emergency planning and security costs" incurred by the District of Columbia (DC) during the January 20, 2009, inauguration of President Obama. Prior to the inauguration, former President George W. Bush issued an emergency declaration for DC, which authorized the federal government to reimburse the District for emergency preparedness activities and expenditures that exceeded the $15 million Congress appropriated in P.L. 110-329 , "The Consolidated Security, Disaster Assistance, and Continued Appropriations Act, 2009." Additionally, Congress appropriated, in the FY2009 Omnibus Appropriations Act, $39.2 million for emergency planning and security costs in DC; however, this funding was not specifically for NSSEs. The Administration's request for a NSSE Fund raises potential questions that include the following: In 2008, the Presidential Nominating Conventions were provided a total of $100 million, with $50 million each provided to Denver and Minneapolis-St. Paul, which hosted a convention. DC was provided $15 million to reimburse 2009 inauguration security and emergency preparedness activities, with an additional $39.2 million appropriated in the FY2009 omnibus. How did DHS determine $20 million as the appropriate amount for the NSSE Fund for FY2011? The FY2011 budget request proposed that the NSSE Fund be placed in the Office of the Secretary but does not identify an administering agency. USSS has statutory authority to administer, plan, and implement NSSE operations; however, USSS is not identified as the NSSE Fund administrating agency. One would assume that there would be coordination, at a minimum, between USSS and the DHS entity that administers the NSSE Fund. The budget request is silent on the NSSE Fund's relationship with other grants and assistance provided to states and localities by other DHS agencies. For example, the Federal Emergency Management Agency's (FEMA) Grant Programs Directorate (GPD) provides homeland security grants and assistance to states and localities, and has an established relationship with states and localities. What entity within DHS would administer the NSSE Fund? In the past, Congress funded some state and local NSSE costs by providing assistance through the DOJ Byrne Programs. If Congress were to approve the Administration's NSSE Fund, one would assume that Congress would not provide funding through the DOJ Byrne Program. As noted earlier, DHS already provides funding to states and localities through GPD for homeland security assistance. Specifically, GPD's State Homeland Security Program and the Urban Area Security Initiative can be used for NSSE security activities. The grant approval process for these programs, however, is not flexible, so the programs have limited application to NSSEs. Would the NSSE Fund be redundant of the other federal programs? Title III: Protection, Preparedness, Response, and Recovery Title III includes appropriations for the Federal Emergency Management Agency (FEMA), the National Protection and Programs Directorate (NPPD), and the Office of Health Affairs (OHA). Congress expanded FEMA's authorities and responsibilities in the Post-Katrina Emergency Reform Act ( P.L. 109-295 ) and explicitly kept certain DHS functions out of the "new FEMA." In response to these statutory exclusions, DHS officials created the NPPD to house functions not transferred to FEMA, and the OHA was established for the Office of the Chief Medical Officer. Table 13 provides account-level appropriations detail for Title III. After discussing the impact of P.L. 112-10 on DHS components under this title, this report will outline the Administration's request, Senate action on the request in the 2 nd session of the 111 th Congress, and possible issues for Congress. As the House position on the Administration's full request was never officially ratified by the Appropriations Committee in 2010, there is no data available from the House for direct comparison. P.L. 112-10 and Title III Sections 1626 through 1638 of H.R. 1473 , the final FY 2011 CR ( P.L. 112-10 ), provide explicit direction for funding levels for the Title III components of DHS. For NPPD, funds were provided as follows, compared to the President's request: Management and Administration, $44 million ($3 million, or 5.4% below); IPIS, $840 million ($25 million, or 2.9% below); US-VISIT, $335 million (even with the request). P.L. 112-10 f also rescinded a total $877 million in unobligated funds appropriated for the IPIS program. FPS is not funded at a specified level—it is funded through fees collected for its activities. This authority is restated in P.L. 112-10 , Section 1628: "the revenues and collections of security fees credited to FPS would be available until expended for necessary expenses related to the protection of federally-owned and leased buildings and for the operations of the Federal Protective Service." In addition, the Federal Protective Service is directed to reach a staffing level of "not fewer than 1,250 full-time staff and 935 full-time Police Officers, Inspectors, Area Commanders, and Special Agents who... are directly engaged on a daily basis in protecting and enforcing laws at Federal buildings." This represents a drop of 98 full-time staff and 76 in-service field staff from the Senate proposal. For OHA, P.L. 112-10 expressly provides $140 million ($73 million, or 34% below the President's request), with $27 million for salaries and expenses, $0.5 million below the President's request. For FEMA Management and Administration, $788 million was provided directly. This is $115 million, or 12.7% below the Administration's request, not counting $106 million to be transferred from DRF. P.L 112-10 increased the amount requested by the Administration for the DRF by 36% ($2,650 million), and provided 20% less ($3,380 million) for the major grant programs for state and local governments (State and Local Programs, firefighter assistance grants and emergency management performance grants) than what was recommended ($4,234 million) in S. 3607 . Other funding in P.L. 112-10 included $182 million for Flood Map Modernization, a decrease of 6% compared to both the Administration's request, and S. 3607 , and $120 million for Emergency Food and Shelter—a 20% increase compared to the Administration's request—but a 20% decrease when compared to S. 3607 . Though FY2010 funding levels for the State Homeland Security Grant Program only included funding for the Operation Stonegarden program, the FY2011 funding levels for the State Homeland Security Grant Program provided by P.L. 112-10 included funding for the Operation Stonegarden, REAL ID, Citizen Corps, and Metropolitan Medical Response System programs. P.L. 112-10 also provided funding levels for the Public Transportation Security Assistance and Railroad Security Assistance that included funding for the Over-the-Road Bus Security Assistance and the AMTRAK Security program. Past funding levels for the Public Transportation Security Assistance and Railroad Security Assistance did not include funding for the Over-the-Road Bus Security Assistance. P.L. 112-10 set the EFS program funding level at $120 million, a $20 million increase over the Administration's request and an $80 million reduction from the previous year's funding level. The suggested cut-backs are significant within the context of current hunger statistics that suggest increased need. P.L. 112-10 also provides $50 million for the PDM program, matching the lowest level of funding for the program since FY2006, and $182 million for Flood Map Modernization, $12 million below requested amounts. Finally, Section 1653 provides $8 million for reimbursement of costs to state and local governments for certain costs associated with the presence of a National Special Security Event, to be managed by the FEMA Administrator. Rescissions In addition to the specifically directed reductions in funding levels, all of the accounts in Title III are subject to a 0.2% across-the-board rescission of budget authority for FY2011 in P.L. 112-10 , which amounts to a $18 million reduction. Section 1656 of P.L. 112-10 rescinds $3 million in FY2010 unobligated balances from Title III components. Section 1660 of P.L. 112-10 rescinds in unobligated balances $16 million from NPPD IPIS programs—$6 million from Next Generation Networks, and $10 million from programs to be determined by the department. Section 1662 rescinds $33 million from US-VISIT unobligated balances. National Protection and Programs Directorate89 The National Protection and Programs Directorate (NPPD) was formed by the Secretary for Homeland Security in response to the Post-Katrina Emergency Management Reform Act of 2006. The Directorate includes the Office of the Under Secretary and accompanying administrative support functions (budget, communications, etc.), the Office of Risk Management and Analysis, the Office of Infrastructure Protection, the Office of Cybersecurity and Communications, the U.S. Visitor and Immigrant Status Indicator Technology Program (US-VISIT), and the Federal Protective Service. The activities of the Office of the Under Secretary and the other administrative functions and the Office of Risk Management and Analysis (RMA) are supported by the Management and Administration Program. The activities of the Office of Infrastructure Protection and the Office of Cybersecurity and Communications are supported by the Infrastructure Protection and Information Security Program (IPIS). The US-VISIT and the Federal Protective Service each have their own programs. Management and Administration The Management and Administration Program supports the basic administrative functions of the directorate through the Directorate Administration Program/Project Activity (PPA). It also supports the activities of the Office of Risk Management and Analysis (through the Risk Management and Analysis PPA). The Office of Risk Management and Analysis is responsible for developing and implementing a common risk management framework and to leverage risk management expertise throughout the department. Among its projects are the development of the Risk Assessment Process for Informed Decision-making (RAPID) and support for the Homeland Security National Risk Assessment (HSNRA). RAPID is being developed to inform the department's budgeting and programming efforts to help it prioritize the allocation of resources. HSNRA is used to support the DHS Quadrennial Homeland Security Review. President's FY2011 Request For FY2011, the Administration requested $46 million for Management and Administration: $36 million for Directorate Administration and $10 million for RMA. This was $1 million above the funding appropriated for FY2010, with all of the budget increase going to Directorate Administration. The increase was the net effect of adjustments to the base and some minor programmatic changes. Base adjustments included a request for 54 additional FTE slots: 41 for functions supported by the Directorate Administration account and 13 for RMA. The department's effort to reduce the number of contractors working at DHS accounted for the request. The cost was more than offset by a reduction in contracting fees. The Administration claimed that it was saving a half million dollars in contracting expenses. Programmatic changes were minor. The Administration requested an additional $2 million in the Directorate Administration account to support the establishment of two DHS Enterprise Data Centers and the migration of applications to those Centers. The Administration also requested a modest programmatic reduction for RMA (much less than $1 million). The reduction would reduce the technical assistance RMA provides to other components inside DHS. Senate-Reported S. 3607, 111th Congress Senate-reported S. 3607 included $45 million for Management and Administration. It approved $1 million less than the request for the Office of Risk Management and Analysis (RMA). According to report language, the Senate found RMA's expenditure plan, required by the Homeland Security Appropriations Act, 2010, did not adequately clarify quantifiable outcomes that would show how the office was fulfilling its mission. Senate-reported S. 3607 would require the Under Secretary to report to Congress on which quantifiable priorities will be implemented with the FY2011 appropriation. Infrastructure Protection and Information Security90 The Infrastructure Protection and Information Security Program (IPIS) supports the activities of the Office of Infrastructure Protection (OIP) and the Office of Cybersecurity and Communications. The latter includes the National Cyber Security Division (NCSD), the National Communication System (NCS), and the Office of Emergency Communications (OEC). OIP coordinates the national effort to reduce the risks associated with the loss or damage to the nation's critical infrastructure due to terrorist attack or natural events. This effort is a cooperative one between the federal government, state, local and tribal governments, and the private sector, to identify critical elements of the nation's infrastructure, their vulnerabilities, the potential consequences of their loss or damage, and ways to mitigate those losses. The NCSD performs a similar function, but specifically focuses on the nation's information networks. The NCS also performs a similar function, but specifically focuses on the nation's communication systems, in particular the communications systems and programs that ensure the President can communicate with selected federal agencies, state, local, and tribal governments, and certain private sector entities during times of national emergencies. The OEC is responsible for promoting the ability of state, local and federal emergency response providers to communicate with each other during an emergency through the development and distribution of interoperable communication equipment. President's FY2011 Request For FY2011, the Administration requested $866 million for the IPIS program. This is $33 million below what Congress appropriated for FY2010, about a 4% reduction. Net adjustments to base funding accounted for between $4 million and $5 million of the reductions. Net programmatic changes accounted for slightly less than $29 million of the proposed reductions. The Administration aggregated the activities supported by the IPIS program into 11 line items called Program/Project Activities (PAAs). Adjustments to the base funding and programmatic changes requested by the Administration resulted in net reductions to all but 2 of the PPAs (see Table 15 ). What follows is a brief discussion of selected changes being proposed within this PPA structure. Base adjustments (worth -$12 million) resulted in the large net decrease in the United States Computer Emergency Readiness Team (US-CERT) PPA. These adjustments were the migration of information systems to a different location, presumably outside the US-CERT budget, and the transfer of funds to the Federal Law Enforcement Training Center to support the National Computer Forensic Institute. The largest programmatic reductions within various PPAs were proposed for the National Cybersecurity Protection System (-$13 million) and Critical Infrastructure and Key Resources Partnerships and Information Sharing Program (-$10 million). Other reductions were proposed for Vulnerability Assessments (-$4 million), the National Infrastructure Simulation and Analysis Center (-$4 million), the National Infrastructure Protection Plan Management Program (-$4 million), and Next Generation Networks (-$4 million), cybersecurity-related Training and Education (-$4 million), and Critical Infrastructure Protection-Cybersecurity (-$4 million). The Administration proposed programmatic increases within various PPAs for Assessment, Testing, and Analysis (+$9 million), Infrastructure Protection Data Center Migration (+$7 million), Cybersecurity Coordination (+$5 million), Cybersecurity Exercises (+$3 million), and the National Coordinating Center (+$2 million). Some of the increases/decreases in requested funding resulted from proposed increases/decreases in requested FTE levels. In some cases, the Administration requested increased FTE levels as part of an effort to reduce the number of contractors working for NPPD. These requests, considered as adjustments to the base, were budget neutral, with the costs offset by reductions in contracting budgets. In other cases, the Administration requested fewer FTEs, based on an analysis of the historical rates at which those FTEs were being filled. In other cases, increases/decreases in FTEs resulted from proposed programmatic changes. In all, the Administration requested a net increase of 138 FTEs. The predominate share of these fell within the US-CERT PPA. The second largest increase occurred within the Mitigation PPA. Also, the Administration attributed a number of programmatic reductions within the PPAs managed by the NCSD and NCS to greater efficiencies associated with newly instituted Cybersecurity and Communications quarterly reviews collaboratively managed by US-CERT and the Office of the Assistant Secretary of Cybersecurity and Communications. Along with the IPIS FY2011 budget justification, the Administration submitted an Addendum proposing an alternative PPA structure for the IPIS. The restructuring proposed three basic changes. The creation of a separate PPA for the Office of the Assistant Secretary for Cybersecurity and Communications; a restructuring of the activities carried out by the National Cyber Security Division; and a realignment of the FTEs associated with the activities of the National Communications System. Senate-Reported S. 3607, 111th Congress The Senate approved $881 million for the IPIS program. It provided more funds than requested for vulnerability assessments (+$4 million) and the NISAC (+$2 million) in the IP-Identification and Analysis PPA. It provided more funds than requested for the National Infrastructure Protection Plan Management program and the Critical Infrastructure/Key Resources Partnership program ($7 million) in the IP- Coordination and Information Sharing PPA. It did not fund the department's request for data center migration (-$7 million). The Senate provided the requested funds for the IP- Mitigation Program PPA and required DHS to provide quarterly updates on progress in hiring personnel to enforce compliance associated with security at chemical facilities and ammonia nitrate security program. The Senate also encouraged the Secretary to consider the ability of chemical facilities covered under security regulations to communicate with local law enforcement and first responders as part of that compliance program. The Senate adopted a new PPA structure for the National Cyber Security Division, similar to the one proposed by DHS in its budget justification addendum. The Senate also provided the funds requested, plus an additional $9 million for the new Cybersecurity Protection and Response PPA. The additional funds included $5 million for expediting network security deployments. It also included $4 million associated with not transferring funds to the Federal Law Enforcement Training Center to support the National Computer Forensic Institute. The Senate provided funds as requested for the Office of Emergency Communications, but expressed concerns that the potential of emerging commercial broadband services has not been adequately explored and taken advantage of. The Senate requested a report on plans for developing and disseminating training and best practices on standard operating procedures, equipment purchases and other issues associated with broadband technologies. The Senate provided funds as requested for the National Security/Emergency Preparedness Telecommunications. However, it continued to express concern about the lack of clarity regarding the mission of the Next Generation Networks PPA and the difficulty this program has had obligating funds. Issues for Congress The Administration proposed a $13 million reduction for the National Cybersecurity Protection System Program, also known as EINSTEIN. The reduction in funding would slow the deployment of the latest intrusion detection hardware and software throughout the federal government and its partners. The deployment of this hardware/software and the analysis of the resulting information is a major part of the Comprehensive National Cybersecurity Initiative. Some of these funds were redirected toward initiating the new Assessment, Test, and Analysis Program. The Assessment, Test, and Analysis Program supports penetration testing of federal networks by red and blue teams, to assess the effectiveness of agencies' cybersecurity protections. Such regular penetration testing has been suggested for a number of years by many in the information security community. Congress might consider the trade-offs associated with this redirection of funds. The Administration proposed a $10 million reduction in the Critical Infrastructure and Key Resources Partnerships and Information Sharing Program. This program supports the Sector and Government Coordinating Councils and their operations. The reduction would reduce the travel, meeting, workshop, and Secretariat support for State, local, tribal, and territorial government, and regional consortium representatives. The number of joint regional consortium meetings between public and private stakeholders would be reduced. The Administration also anticipated the end of operations for the Critical Infrastructure Warning Information Network (CWIN) or its incorporation into the department's overall future communication enterprise. Congress might investigate how this reduction impacts the participation of the affected groups and to what extent termination of CWIN operations has been considered at the department level. In the past, the Appropriations Committees of both chambers have expressed their frustration with the NPPD's budget documentation. Congress instructed DHS to use the current budget structure. Congress might consider the merits of the DHS restructuring proposal and if it achieves the transparency and rationalization that both seek. The migration of information systems appeared in various places within the NPPD budget. In the Directorate Administration PPA and as part of the IPIS Coordination and Information Sharing PAA, it appeared as programmatic increases. In the US-CERT PPA, it appeared as a programmatic reduction. Congress might ask for clarification of the budget impact of these migrations and consolidation of information resources. The FY2011 appropriation represents a 6% drop in funding from FY2010 levels. Congress might consider how these reductions were allocated throughout the program. U.S. Visitor and Immigrant Status Indicator Technology (US-VISIT)92 US-VISIT leads the collection and storage of biometric identification information on foreign visitors seeking entry into the United States and other immigration benefits. This information is shared with a wide range of federal, state, and local government agencies to help them accurately identify people who pose a risk to the United States. US-VISIT stores biometric data—10-print digital fingerprints and a photograph—collected from international travelers at U.S. visa-issuing posts and ports of entry. This information helps immigration officers to apprehend or detain individuals for law enforcement actions as well as to determine whether individuals are eligible to receive a visa, enter the United States, or receive immigration benefits. Directorship of US-VISIT has changed several times since it was created. Until FY2006, US-VISIT was coordinated out of the Directorate of Border and Transportation Security (BTS). A second stage review by Former DHS Secretary Chertoff eliminated BTS and proposed placing US-VISIT within a new Screening Coordination Office (SCO) that would have included several DHS screening programs and reported directly to the Secretary. However, funding for the SCO was never appropriated, and US-VISIT became a stand-alone office within Title II of the DHS appropriation in FY2006. In FY2008, DHS transferred US-VISIT into its new National Protection Programs Directorate (NPPD) "to support coordination for the program's protection mission and to strengthen DHS management oversight." Major NPPD divisions include Cyber Security and Communications, Infrastructure Protection, Federal Protective Service, US-VISIT and Risk Management and Analysis. President's FY2011 Request The Administration requested $335 million for US-VISIT in FY2011, a decrease of $39 million from the FY2010 enacted level of $374 million. Included in the Administration's request was a reduction of $12 million for US-VISIT Program Management Services and no funding request for the Comprehensive Biometric Exit Program, which was appropriated $22 million in FY2010. Other program changes identified by US-VISIT included identity management and screening, data center mirror and migration, unique identity, and US-VISIT 1.0. Senate-Reported S. 3607, 111th Congress Senate-reported S. 3607  included $335 million for US-VISIT, thereby matching the Administration's budget request. Moreover, language in the bill would have provided that not less than $50 million in prior-year balances would remain available until expended solely for implementation of a biometric air exit capability. Also, bill language would have prohibited the obligation of $167 million for US-VISIT until it submitted an expenditure plan for use of the FY2011 funds. Issues for Congress Biometric Exit Component Deployment of a biometric exit system has been of concern to Congress since 1996, and US-VISIT has been heavily criticized for not implementing an exit system at ports of entry. Without verifying the identity of travelers who leave the United States, DHS has no reliable way of identifying individuals who overstay their visas and remain in the country illegally. Currently, DHS uses biographical information from confirmed arrivals of Traveler Enforcement Compliance System (TECS) officers, I-94 forms, and other traveler information to conduct matching of entry data to exit data—a method with inherent inaccuracies. A pair of recent pilot projects on biometric exit systems were completed in late 2009, yet according to GAO there is no transition plan in place to begin comprehensive deployment of either system. The FY2011 budget requested no funding for implementation of a biometric exit capability. The lack of such a funding request could indicate that a comprehensive biometric exit solution at ports of entry is unlikely to begin deployment in FY2011. The exact nature of US-VISIT's exit system strategy may be an issue that Congress will examine, given the intense congressional interest on this topic in the past. Federal Protective Service98 The Federal Protective Service (FPS), now within National Protection and Programs Directorate (NPPD), is responsible for the protection and security of federally owned and leased buildings, property, and personnel. In general, FPS operations focus on security and law enforcement activities that reduce vulnerability to criminal and terrorist threats. FPS protection and security operations include all-hazards based risk assessments; emplacement of criminal and terrorist countermeasures, such as vehicle barriers and close-circuit cameras; law enforcement response; assistance to federal agencies through Facility Security Committees; and emergency and safety education programs. FPS also assists other federal agencies, such as the U.S. Secret Service (USSS) at National Special Security Events (NSSE), with additional security. FPS is the lead "Government Facilities Sector Agency" for the National Infrastructure Protection Plan (NIPP). Currently, FPS employs approximately 1,225 law enforcement officers, investigators, and administrative personnel, and administers the services of approximately 13,000 contract security guards. President's FY2011 Request The FPS congressional budget justification proposed $1,115 million for FPS in FY2011 to be collected in security fees (which is not an appropriation, but an accounting of other agencies' funding for security fees), the same amount Congress enacted in FY2010. FPS estimated a collection of security leasing fees to provide $220 million for basic security operations, $420 million for building specific security operations, and $475 million for Security Work Authorizations. Senate-Reported S. 3607, 111th Congress Senate-reported S. 3607 would provide FPS with $1,115 million for salaries and expenses. This is the same amount requested for FY2011, and enacted in FY2010. This appropriation would be fully offset by collections of security fees. The total amount would provide $220 million for basic security operations, $420 million for building specific security operations, and $475 million for Security Work Authorizations. In report language ( S.Rept. 111-222 ), the Senate Appropriations Committee expressed its continued concern about the lack of adequate resources for FPS to address terrorist attacks and threats against federal employees and facilities. The committee noted that the threats continue while FPS faces a 2% increase in protected square footage since the last fee increase. The President's FY2011 budget did not assume an increase in fee charges, and the committee encouraged the Office of Management and Budget to adjust fees charged for FY2011. In addition, the committee provided for an increase in the number of FPS employees to 1,348, including at least 1,011 police officers, inspectors, area commanders, and special agents. The committee also directed NPPD to provide to the committee and GAO, within 45 days of the enactment date of S. 3607 , with the new FPS staffing model that has been in development. GAO is expected to report to the committee on the model's validity within 75 days after it receives the model. Finally, the committee directed NPPD and ICE to provide without delay a signed copy of the memorandum of understanding (MOU) between ICE and NPPD regarding the business services provided to FPS. Issue for Congress FPS Operations In July 2009, the Government Accountability Office (GAO) completed and reported a survey that indicated that 82% of FPS customers do not use the agency as their primary law enforcement agency in emergency situations. Additionally, the customers informed GAO that they primarily rely on other entities such as local law enforcement, the U.S. Marshals Service, or the Federal Bureau of Investigation. GSA also informed GAO that it has not been satisfied with the level of protection and security provided by FPS since being transferred to DHS. According to GSA officials, FPS has not been responsive and timely in providing building security assessments for new leases. GAO, however, stated FPS has taken steps to improve customer service through education and outreach initiatives. As a result of GAO's findings and other criticisms, FPS intends (in FY2011) to improve the strategic methods used in identifying and reducing actual and potential threats directed at FPS-protected facilities; restore proactive monitoring activities to mitigate the increased risk to FPS-protected facilities noted by GAO; improve the service provided by contract security guard forces through acquisition strategies and "intensive" monitoring and training; develop risk-based security standards tied to intelligence and risk-assessments; refine business practices to ensure full collection of revenue through "positive" stakeholder interface; and implement a capital plan that will improve security and customer service. Office of Health Affairs110 The Office of Health Affairs (OHA) coordinates or consults on DHS programs that have a public health or medical component. These include several of the homeland security grant programs, and medical care provided at ICE detention facilities. OHA also administers several programs, including the BioWatch program, the National Biosurveillance Integration System (NBIS), and the department's occupational health and safety programs. Dr. Alexander G. Garza, President Obama's nominee for the position, was confirmed by the Senate as Assistant Secretary of Homeland Security and Chief Medical Officer in August 2009. OHA received $139 million in FY2010 appropriations. President's FY2011 Request The President requested $213 million for OHA for FY2011, $74 million (53%) more than was provided for FY2010. The requested funding level would support 95 FTEs, 11 more than in FY2010. The requested increase would more than double the funding for the BioWatch program, discussed below. The request would decrease funding for other OHA budget lines, namely Salaries and Expenses; Planning and Coordination (under which numerous leadership and coordination activities are implemented); the National Biosurveillance Integration Center; and the Rapidly Deployable Chemical Detection System. Senate-Reported S. 3607, 111th Congress The committee recommended $155 million for OHA for FY2011, $57 million (27%) less than the President's request. While the recommendation included a modest increase for the BioWatch program above the FY2010 level, it still fell $60 million below the FY2011 request. The recommendation also included requested amounts for NBIC and Salaries and Expenses, and small increases above requested amounts for the Rapidly Deployable Chemical Detection System and Planning and Coordination. Issues for Congress BioWatch: Effectiveness and Deployment The BioWatch program deploys sensors in more than 30 large U.S. cities to detect the possible aerosol release of a bioterrorism pathogen, in order that medications could be distributed before exposed individuals became ill. The Administration requested an $84 million (93%) increase for BioWatch, from about $90 million in FY2010 to almost $174 million in FY2011. The increase would be used to procure and deploy "Generation 3" (Gen-3) detectors, which are intended to improve timeliness by automating detection on site, no longer requiring daily collection and off-site analysis. However, deployments of Gen-3 prototypes raised questions about their performance. In the past, appropriators have withheld some funding for the transition to next-generation automated detectors, and/or required notification prior to any such deployments. For FY2011, the Senate committee noted that problems with Gen-3 detector development and deployment had led to significant carryover of funds in previous years. In FY2008, Congress funded a National Academies study of the effectiveness of the BioWatch program. Among other things, the group recommended thorough operational testing of Gen-3 detectors before deployment; more robust assessments of BioWatch system performance; and improved coordination with federal and non-federal partners. In addition, they estimated the average annual costs to deploy and operate a system of Gen-3 detectors, over a ten-year period, at $200 million per year. Federal Emergency Management Agency117 The Federal Emergency Management Agency (FEMA) is responsible for leading and supporting the nation's preparedness through a risk-based and comprehensive emergency management system of preparedness, protection, response, recovery, and mitigation. This comprehensive emergency management system is intended to reduce the loss of life and property, and protect the nation from all hazards. These hazards include natural and accidental man-made disasters, and acts of terrorism. FEMA executes its mission through a number of activities such as providing assistance through its administration of the Disaster Relief Fund (DRF) and the Pre-Disaster Mitigation Fund. Additionally, FEMA provides assistance to state, local, and tribal governments, and non-governmental entities through its management and administration of programs such as State and Local Programs, the Emergency Food and Shelter program, and the Radiological Emergency Preparedness program. Table 13 provides information on the FY2010 appropriations and the FY2011 budget request for all of FEMA's activities. President's FY2011 Request For FY2011, the Administration proposed an appropriation of $7,294 million for FEMA, which is an increase of $165 million compared to the FY2010 FEMA appropriation of $7,129 million. The proposed increase was due to a proposed appropriation of $696 million for FEMA's Management and Administration activities, which was $105 million more than appropriated in FY2010; and a proposed appropriation of $1,950 million for the DRF, which was $250 million more than the FY2010 amount. These proposed increases, however, were slightly offset by a proposed reduction in other FEMA activities. The Administration proposed $4,001 million for State and Local Programs, which was a $164 million reduction from the FY2010 amount; $194 million for the Flood Map Modernization Fund, which was a $16 million reduction from the FY2010 appropriation; and $100 million for Emergency Food and Shelter, which was a $100 million reduction from the FY2010 amount. Significant budget proposals include consolidating selected State and Local Programs; refocusing FEMA's resources on its mission of preparing for and coordinating disaster response and recovery while providing support for the non-disaster Emergency Food and Shelter program; repairing, maintaining, and improving regional facilities; and eliminating the National Flood Mitigation Fund and funding its activities through the National Flood Insurance Fund. The Administration also proposed to partner FEMA with the Department of Housing and Urban Development to support strategic local approaches to sustainable development by combining certain hazard mitigation objectives with community development objectives. Finally, the Administration assumed that catastrophic disasters are rare and that these catastrophic disasters would be funded through a supplemental or emergency appropriation. Senate-Reported S. 3607, 111th Congress Compared to the Administration's request, the Senate proposed a slight increase for FEMA's budget ($7,345 million). The Senate also proposed a decrease of 24% for the Management and Administration ($696 million). The decrease is offset, however, by a transfer of $216 million from the DRF, making the proposal comparable to the Administration's request. The Senate committee recommended a total appropriation of $4,234 million for State and Local Programs, which was $236 million more than the Administration proposed. The Senate proposal for Emergency Food and Shelter was $150 million, an increase of $50 million compared to the Administration's request. The Senate proposed the same amount for Flood Map Modernization ($194 million). Issues for Congress As noted above, there are several significant issues associated with FEMA's FY2011 budget. They include supplemental appropriations for the DRF, consolidation of selected state and local programs, reduction in funding for the Assistance to Firefighters Program, reduction in funding for the Emergency Food and Shelter Program, expiration of the Pre-Disaster Mitigation program, and Flood Map Modernization appropriations. Disaster Relief Fund125 The DRF is the main account used to fund a wide variety of programs, grants, and other forms of emergency and disaster assistance to states, local governments, certain nonprofit entities, and families and individuals affected by disasters. The DRF is funded yearly through regular appropriations; however, the account often needs supplemental funds for continued disaster assistance. Ongoing recovery efforts from the Gulf Coast hurricanes of 2005 have increased the federal government's reliance on supplemental funding for the DRF. The DRF appropriation for FY2011 may be of particular concern due to developments that occurred after the initial FY2011 request, when the President submitted a supplemental request for appropriations for the DRF for FY2010. According to President Obama, additional funds for the DRF were needed to supplement continued response and recovery efforts. Initially, the Administration included a request for $3,600 million in supplemental funds to carry out disaster assistance in FY2010, with the FY2011 budget request. Unexpected recovery costs were incurred by FEMA however, which prompted the Administration to amend this supplemental request by an additional $1,500 million, making the FY2010 request for supplemental appropriations to the DRF $5,100. These requests for additional supplemental FY2010 funds were included in the proposed legislative language of the FY2011 request as a General Provision in Title V, and on May 27, 2010, Congress provided the requested supplement of $5,100 million in P.L. 111-212 . Emergency supplemental appropriations for disasters in the past five years have increased significantly. However, it is unclear if increased expenditures are due solely to hurricane activity in the Gulf Coast since 2005. Rather, the rise in expenditures may indicate increases in the number of disasters occurring each year, an escalation of federal involvement in disaster assistance more broadly, or both. Moreover, the arbitration panels authorized by P.L. 111-5 have resulted in increased costs to the DRF because arbitrators have overturned some of FEMA's cost decisions for FY2010. Regardless of the cause, the federal funding for disaster assistance since 2005 has been on the rise and monthly pay-outs from the DRF have been averaging roughly $350 million. Thus, it could be argued that the $2,650 million provided in P.L. 112-10 was still insufficient to cover annual emergency and disaster recovery costs. State and Local Programs129 FEMA's State and Local Programs assist state, local, and tribal governments—primarily first responder entities—to meet homeland security needs and enhance capabilities to prepare for, respond to, and recover from both man-made and natural disasters. Table 16 provides information on the FY2010 appropriations, the Administration's FY2011 budget request and enacted funding levels for all State and Local Programs. For FY2011, the Administration proposed a total appropriation of $4,001 million for State and Local Programs, which was $164 million less than Congress appropriated in FY2010. P.L. 112-10 provided $3,380 for FY2011. This proposed reduction in total appropriations is a combination of reducing funding for some programs and the elimination of selected programs. This proposed reduction in total appropriations and elimination of selected programs, such as the Interoperable Emergency Communications Grant Program and the Metropolitan Medical Response System, could potentially lead to two scenarios: Grantees would attempt to continue funding all of their homeland security projects, including those that are eliminated but eligible under other programs, which might result in reduced funding for all homeland security projects; and grantees would not fund all of their needed homeland security projects. The Administration, however, states that the reduction in the number of assistance programs consolidates prior individual programs and expands the eligible activities of the remaining programs. Additionally, the Administration states that the consolidation increases grantee discretion and encourages grantees to prioritize investments that meet specific homeland security needs that vary from grantee to grantee. Assistance to Firefighters Grant Program (AFG)131 The Administration's FY2011 budget proposed $610 million for firefighter assistance. The FY2011 request is a 25% decrease from the FY2010 level, and would, if approved, constitute the lowest amount for firefighter assistance since FY2002. Specifically, the Administration's FY2011 budget proposed $305 million for AFG (a 22% decrease from the FY2010 level) and $305 million for the Staffing for Adequate Fire and Emergency Response Program (SAFER) (a 27% decrease). The FY2011 request for AFG alone would, if approved, be the lowest amount since FY2001, the initial year of the program. The FY2011 budget proposal stated that the firefighter assistance grant process "will give priority to applications that enhance capabilities for terrorism response and other major incidents." The Senate Appropriations Committee approved $810 million for firefighter assistance (including $390 million for AFG and $420 million for SAFER), the same level as FY2010 and 33% more than the Administration proposal. Unlike the Administration proposal, the committee would continue to keep firefighter assistance in its own separate budget account. The committee report directed DHS to continue funding applications according to local priorities and priorities established by the United States Fire Administration, and to continue direct funding to fire departments and the peer review process. Emergency Food and Shelter Program (EFS)132 The EFS Program is authorized by Title III of the McKinney-Vento Homeless Assistance Act. The program enables thousands of social service providers across the nation to provide emergency help (preventing evictions, utility cut-offs; supplementing shelters, soup kitchens, food banks; etc.) to families and individuals in need. FEMA chairs a national board consisting of representatives from the Salvation Army, Catholic Charities USA, the United Way, the American Red Cross, the Jewish Federations of North America, and the National Council of Churches. The unique part of the program is that after allocations are made at the national level, decisions on funding to specific provider organizations are made at the local level by an EFS Local Board similar in composition to the EFS National Board. The total administrative budget for the program is 3.5%, so almost all funds go to direct services. The Administration's FY2011 budget suggests cutting the EFS program in half, from its current $200 million to $100 million. The program had received an additional $100 million in supplemental appropriations for FY2009, from P.L. 111-5 , the American Recovery and Reinvestment Act of 2009, the availability of which extended three months into FY2010. This means that the proposed funding cuts may have had a greater impact on local recipients given the recent funding history. The Administration's justification notes that the reduction in EFS funding will permit a "refocus of agency-wide resources on FEMA's primary mission" of disaster response and recovery efforts. The Senate has suggested a program budget of $150 million, $50 million above the Administration level and $50 million below the current funding level. While the EFS program is not a disaster program, it has been hosted at FEMA for more than 25 years and has a significant role in communities during times of high unemployment. The program has frequently been augmented during economic downturns, but the FY2011 budget request of $100 million, as well as the Senate mark of $150 million (from the $200 million of the previous year), represents the largest reduction in the program's 27-year history. Pre-Disaster Mitigation134 The Pre-Disaster Mitigation (PDM) program provides federal grants to mitigate property damage and loss of life due to disasters. Although funding is authorized under Section 203 of the Stafford Act, eligibility for the PDM program does not require a Stafford Act disaster declaration. Authorization for the PDM program was scheduled to expire on September 30, 2010. The Administration's FY2011 budget request would extend the authorization until September 30, 2011. In the 111 th Congress, Representative Oberstar and other sponsors introduced the Pre-Disaster Mitigation Act of 2010 which became P.L. 111-351 . That act re-authorized the PDM program for an additional three years at $180 million for FY2011 and $200 million per year for the remaining two years. The FY2011 budget requested $100 million, which does not reflect any change from the appropriated amount for FY2010. The Senate has suggested $75 million, a reduction of $25 million. Flood Map Modernization139 FEMA was directed to perform digital updates of flood maps every five years for communities participating in the National Flood Insurance Program. The Administration's FY2011 budget requested $26 million less than the FY2010 appropriated level, from $220 million to $194 million. In agreement with the Administration's request, the Senate committee recommended $194 million for FY2011 for flood mapping activities. The reduced funding level may be attributed to the anticipated completion of the Flood Map Modernization Initiative (FMMI), and greater sharing of the costs of ongoing Flood Map Modernization (MapMod) with other federal, state, local, and private stakeholders. Title IV: Research and Development, Training, Assessments, and Services Title IV includes appropriations for U.S. Citizenship and Immigration Services (USCIS), the Federal Law Enforcement Training Center (FLETC), the Science and Technology Directorate (S&T), and the Domestic Nuclear Detection Office (DNDO). Table 17 provides account-level details of Title IV appropriations. After discussing the impact of P.L. 112-10 on DHS components under this title, this report will outline the Administration's request, Senate action on the request in the 2 nd session of the 111 th Congress, and possible issues for Congress. As the House position on the Administration's full request was never officially ratified by the Appropriations Committee in 2010, there is no data available from the House for direct comparison. P.L. 112-10 and Title IV Sections 1639 through 1647 of H.R. 1473 , the final FY2011 CR ( P.L. 112-10 ), provide explicit direction and funding level for the Title IV components of DHS. The act appropriates $147 million for USCIS, stipulating that $103 million should be used for E-Verify and $25 million for processing applications for asylum and refugee status. This represents a decline of $239 million or 62% from the FY2011 request, and a decline of $77 million or 34% from the FY2010 enacted appropriation of $224 million. The Federal Law Enforcement Training Center is provided $235.9 million for salaries and expenses, even with the President's request, and $35.5 million for acquisitions, construction, improvements, and related expenses, $3 million, or 7.8% below the request. The Science and Technology Directorate is provided $141.2 million for management and administration ($10.7 million, or 7% below the request), and $688 million for research, development, acquisition, and operations ($178 million, or 21% below the request). The act states that funding for university programs shall not be reduced more than 20% from the FY2010 enacted level. It also sets aside $40 million of the account as multi-year funding for the National Bio- and Agro-defense Facility's (NBAF) central utility plant. The act goes on in Section 1647 to restrict the use of funds it provides for NBAF until DHS has completed 50% of the design planning for NBAF and submitted a revised site-specific biosafety and biosecurity mitigation risk assessment that addresses the shortcomings found by the National Academy of Sciences' evaluation of the first risk assessment for NBAF. For DNDO, funds were provided as follows, compared to the President's request: Management and Administration, $37 million (even); Research, Development, and Operations, $275.4 million ($67.6 million, or 32.5% above); and Systems Acquisition, $30 million ($31 million, or 50.8% below). Rescissions In addition to the specifically directed reductions in funding levels, all of these accounts are subject to a 0.2% across-the-board rescission of budget authority for FY2011 in P.L. 112-10 , which amounts to a $3.2 million reduction. Section 1656 of P.L. 112-10 rescinds $9.4 million in FY2010 unobligated balances from Title IVcomponents, including $7.9 million from USCIS. Section 1663 rescinds a further $13 million in unobligated balances from USCIS, but states those funds may not come from E-Verify, data center migration, and processing applications for asylum and refugee status. U.S. Citizenship and Immigration Services144 Three major activities dominate the work of the U.S. Citizenship and Immigration Services (USCIS): (1) adjudication of immigration petitions (including nonimmigrant change of status petitions, relative petitions, employment-based petitions, work authorizations, and travel documents); (2) adjudication of naturalization petitions for legal permanent residents to become citizens; and (3) consideration of refugee and asylum claims, and related humanitarian and international concerns. USCIS funds the processing and adjudication of immigrant, nonimmigrant, refugee, asylum, and citizenship benefits largely through funds generated by the Examinations Fee Account. As part of the former Immigration and Naturalization Service (INS), USCIS was directed to transform its revenue structure with the creation of the Examinations Fee Account. Although the agency has received annual direct appropriations in the last decade, they have been largely directed towards specific projects such as backlog reduction initiatives. The agency receives most of its revenue from adjudication fees of immigration benefit applications and petitions. President's FY2011 Request Table 18 , which presents the FY2010 appropriations and FY2011 request, shows the requested USCIS gross budget authority for FY2011 at approximately $2,813 million. The requested direct appropriation of $386 million included $103 million for the E-Verify program, $23 million for data center development, and $18 million for the Immigrant Integration Initiative. Moreover, the agency requested $34 million for a new Systematic Alien Verification Entitlements (SAVE) Program to assist state, local, and federal agencies to determine individuals' eligibility for public benefits based on their immigration status. USCIS also proposed to fund asylum and refugee applications and military naturalizations—all which have no fees attached—with a direct appropriation of $207 million. The remaining $2,427 million in gross budget authority requested was expected to be funded by fee revenue. Of the fee-collected funds for FY2011, $1,955 million would fund the USCIS adjudication services. The President's budget request also included requested funding levels of $84 million for information and customer services, and $337 million for administration. Senate-Reported S. 3607, 111th Congress The Senate-reported S. 3607 proposed appropriating $172 million for USCIS, the same as the Administration's request, including $50 million for processing asylee and refugee applications and $103 million for immigration verification programs such as E-Verify. The Senate also proposed that immigrant integration funds be limited to assist immigrants lawfully admitted for permanent residence. Issues for Congress For the FY2011 budget cycle, potential issues for Congress continue to include declines in immigrant and nonimmigrant applications, the use of fee-generated funding, and the USCIS request for appropriations to process refugee, asylee, and military naturalization applications. Application Declines and Fee-generated Funding Because USCIS supports itself primarily through fee revenue, it must accurately project the number of anticipated applications to avoid building backlogs or over-budgeting projects. USCIS was criticized for its alleged unpreparedness in the face of surging applications prior to the 2007 fee increases. More recently, the global economic downturn raised concerns about declining application volume and agency revenue. Such declines would affect future projects and require additional Congressional appropriations. In response, USCIS has moved to more accurately project its application volume to better inform the budgeting process. Appropriations for Waiver Applications In its FY2011 presidential budget request, USCIS sought direct appropriations of $207 million to fund applications for refugees, asylum-seekers, and military naturalizations. Historically, USCIS has funded these no-fee applications through its general application fee revenue. Congress has considered providing USCIS with direct appropriations for such application processing and the fees. This may be an issue of concern to Congress as it considers the FY2011 request. Likewise, the FY2011 presidential budget request also included a $34 million appropriation for the SAVE Program, currently funded through "surcharges" on immigration application fees. Federal Law Enforcement Training Center149 The Federal Law Enforcement Training Center (FLETC) provides law enforcement instruction, such as firearms training, high-speed vehicle pursuit, and defendant interview techniques, for 85 federal entities with law enforcement responsibilities. FLETC also provides training to state and local law enforcement entities and international law enforcement agencies. Training policies, programs, and standards developed by an interagency board of directors focus on providing training that develop the skills and knowledge needed to perform law enforcement activities. FLETC administers four training sites throughout the United States and employs approximately 1,000 personnel. President's FY2011 Request The overall request for FLETC in FY2011 was $280 million, a decrease of $3 million from the FY2010 appropriation of $283 million. In FY2011, FLETC officials intend to continue the re-accreditation, begun in FY2010, for its law enforcement training programs; and continue to provide professional law enforcement training to its federal, state, local, and international partners. Senate-Reported S. 3607, 111th Congress The Senate-reported S. 3607 would provide $274 million to FLETC, or $5 million less than the administration request and a $8 million decrease from the FY2010-enacted amount. Science and Technology151 The Directorate of Science and Technology (S&T) is the primary DHS organization for research and development (R&D). Headed by the Under Secretary for Science and Technology, it performs R&D in several laboratories of its own and funds R&D performed by the Department of Energy national laboratories, industry, universities, and others. President's FY2011 Request The Administration has requested a total of $1,018 million for the S&T Directorate for FY2011 (see Table 19 ). This is 2% more than the FY2010 appropriation, but it includes $109 million for radiological and nuclear countermeasures R&D, an activity formerly funded in the Domestic Nuclear Detection Office (DNDO). Funding for the directorate's other activities is 9% below the FY2010 level. The proposed reduction of $39 million for the Infrastructure and Geophysical Division includes the termination of local and regional initiatives previously established or funded at congressional direction. The request for Laboratory Facilities includes no funds for the planned National Bio and Agro Defense Facility (NBAF), which received $32 million in FY2010, but DHS announced plans to request a reprogramming of unobligated prior-year funds to support construction of a utility plant at the NBAF site. Senate-Reported S. 3607, 111th Congress The Senate-reported bill would provide $8 million less than requested for the S&T Directorate. Relative to the request, the bill would restore $21 million for local and regional initiatives in the Infrastructure and Geophysical Division and add $10 million for University Programs. These increases would be more than offset, however, by an unspecified reduction of $36 million and the elimination of $5 million requested for data center migration in the Management and Administration account. The Senate committee "strongly endorsed" the transfer of radiological and nuclear R&D from DNDO to the S&T Directorate but called for an independent review before S&T determines the program's FY2011 research priorities. Issues for Congress National Bio and Agro Defense Facility (NBAF) The construction of NBAF will likely require significant increases in Laboratory Facilities funding over the next several years. It may also result in increased congressional oversight. For construction of NBAF and decommissioning of the Plum Island Animal Disease Center (PIADC), which NBAF will replace, DHS expects to need further appropriations of $691 million between FY2012 and FY2017. The estimated total federal cost of the NBAF project increased from $451 million in December 2006 to $615 million in May 2009. Additional site-specific infrastructure and utility upgrade costs of $110 million are to be contributed in-kind by Kansas State University and its partners. Decommissioning PIADC is expected to cost another $190 million. These estimated costs have not changed since May 2009, but the completion schedule has been extended by one year because the process of selling Plum Island is taking longer than DHS had planned. In the Department of Homeland Security Appropriations Act, 2009 ( P.L. 110-329 , Div. D, Sec. 540) and the Department of Homeland Security Appropriations Act, 2010 ( P.L. 111-83 , Sec. 540) Congress authorized DHS to use receipts from the sale of Plum Island, subject to appropriation, to offset NBAF construction and PIADC decommissioning costs. Similar language is included in S. 3607 as reported. Testing and Evaluation for Large DHS Acquisition Projects Congress has been interested for several years in DHS policies and procedures for testing and evaluation (T&E) of large acquisition projects. This interest has especially focused on the T&E role of the S&T Directorate in acquisitions by other DHS components. The Homeland Security Act of 2002 ( P.L. 107-296 , Section 306) authorizes the Secretary of Homeland Security, acting through the Under Secretary for Science and Technology, to "issue necessary regulations with respect to ... testing and evaluation activities of the Department." Under current DHS policy, in establishing T&E policies and procedures for DHS acquisitions, the Under Secretary acts through the Director of the S&T Directorate's Test and Evaluation and Standards Division (TSD) and a special assistant in the TSD known as the Director of Operational Testing and Evaluation (DOT&E). Congressional oversight of DHS acquisition and T&E may therefore focus attention on the S&T Directorate's funding for Test and Evaluation and Standards. Federally Funded Research and Development Centers: HSI, HSSAI, and HSSEDI Statutory authority for the Homeland Security Institute (HSI) expired in April 2009. Under its general authority to establish federally funded R&D centers, the S&T Directorate has replaced HSI with the Homeland Security Studies and Analysis Institute (HSSAI). It has also established a new Homeland Security Systems Engineering and Development Institute (HSSEDI). Both institutes are funded mostly on a cost-reimbursement basis by other S&T programs and other DHS and non-DHS agencies. The institutes attracted outside users in FY2009 at only about one-third the level that DHS had anticipated. Nevertheless, DHS expects them to grow rapidly in FY2010 and continue growing in FY2011. The FY2011 budget justification projects reimbursable obligations of $187 million in FY2011, more than four times the FY2009 level of $42 million. Domestic Nuclear Detection Office156 The Domestic Nuclear Detection Office (DNDO) is the primary DHS organization for combating the threat of nuclear attack. It is currently responsible for all DHS nuclear detection research, development, testing, evaluation, acquisition, and operational support. Under the Administration's FY2011 budget, DNDO's research role would be transferred to the Directorate of Science and Technology (S&T). President's FY2011 Request The Administration requested a total of $306 million for DNDO for FY2011 (see Table 20 ). This is a 20% decrease from the FY2010 appropriation, but excluding Transformational R&D, which would be transferred to the S&T Directorate, the remaining activities would increase by 12%. In some cases, however, there would be substantial shifts in emphasis. Systems Acquisition would receive $53 million for human-portable radiation detection systems, versus none in FY2010. Systems Development would be reduced by $31 million. Senate-Reported S. 3607, 111th Congress The Senate-reported bill would provide $17 million more than the request for DNDO. It would provide the requested amount for Research, Development, and Operations but would rescind $27 million in unobligated prior-year balances. Relative to the request for Systems Acquisition, the bill would increase funding for radiation portal monitors by $12 million in order to address coverage gaps, restore funding for the Securing the Cities program, and reduce funding for human-portable radiation detectors by $15 million because of procurement delays. The Senate committee encouraged DHS to review whether the acquisition of nuclear detection equipment should be funded by the operational components rather than by DNDO; in this discussion, the committee characterized DNDO as primarily an R&D organization. Issues for Congress Advanced Spectroscopic Portal (ASP) Program Congressional attention has focused in recent years on the testing and analysis DNDO has conducted to support its planned purchase and deployment of Advanced Spectroscopic Portals (ASPs), a type of next-generation radiation portal monitor. Congress included a requirement for secretarial certification before full-scale ASP procurement in each homeland security appropriations act from FY2007 through FY2010. Similar language is included in S. 3607 as reported. The expected date for certification has been postponed several times. In February 2010, DHS decided that it will no longer pursue the use of ASPs for primary screening, although it will continue developing and testing them for use in secondary screening. Global Nuclear Detection Architecture The global nuclear detection architecture overseen by DNDO remains an issue of congressional interest. According to the FY2011 congressional budget justification, the proposed reduction in funding for Systems Development reflects "a shift in DNDO priorities to developing a wider range of potential solutions to enduring vulnerabilities in the global nuclear detection architecture" and will result in increased funding for "systems studies, as well as testing and piloting existing technologies in new operational environments." Congress may consider the basis for and implications of these changes in priorities, including how they may affect other elements of the global architecture. Other agencies with a role in the architecture, in addition to DHS, include DOD, DOE, the Department of State, and the intelligence community. DNDO Role in Research and Acquisition The mission of DNDO, as established by Congress in the SAFE Port Act ( P.L. 109-347 , Title V), includes serving as the primary federal entity "to further develop, acquire, and support the deployment of an enhanced domestic system" for detection of nuclear and radiological devices and material (6 U.S.C. 592). The act also eliminated any explicit mention of radiological and nuclear countermeasures from the statutory duties and responsibilities of the Under Secretary for S&T. Congress may consider whether the proposed transfer of DNDO's research activities to the S&T Directorate is consistent with its intent in the SAFE Port Act. It may also consider the acquisition portion of DNDO's mission. Most of DNDO's funding for Systems Acquisition was eliminated in FY2010, and that year's budget stated that "funding requests for radiation detection equipment will now be sought by the end users that will operate them." In contrast, the FY2011 request for Systems Acquisition includes more funding than ever before for DNDO's procurement of human-portable radiation detectors on behalf of the Coast Guard, Customs and Border Protection, and the Transportation Security Administration. The reasons for this apparent reversal of policy are not explained in the FY2011 congressional budget justification for DNDO. Appendix A. FY2010 Supplemental Appropriations P.L. 111-212 On July 29, 2010, the President signed into law P.L. 111-230 , making $5,177 million in supplemental FY2010 appropriations available to DHS. The supplemental appropriations include the following amounts: $66 million for the Coast Guard ($50 million for Operating Expenses, and $16 million for Acquisition, Construction, and Improvements); $5,100 million for FEMA's Disaster Relief Fund (of which $5 million is transferred to the DHS OIG); and $11 million for USCIS. P.L. 111-230 On August 13, 2010, the President signed into law P.L. 111-230 , making $600 million emergency supplemental appropriations available for border security, of which $394 million is allocated to DHS, $196 million to the Department of Justice (DOJ), and $10 million to the Federal Judiciary. Within DHS, P.L. 111-230 provides CBP with a total of $306 million, including $176 million for additional Border Patrol agents, $39 million for CBP officers at ports of entry on the Southwest border, $10 million to support integrity and background investigation programs, $14 million for tactical communications, $32 million for UAV acquisition and deployment, and $6 million for the construction of forward-operating bases for the Border Patrol. P.L. 111-230  also includes $80 million for ICE, of which $30 million is directed toward efforts to reduce the threat of violence along the Southwest border, and $50 million for additional ICE personnel; and $8 million for the CBP, BP, and ICE basic training at the Federal Law Enforcement Training Center (FLETC). Administration Budget Amendment In a June 22, 2010, budget amendment the Administration requested an additional $600 million for border security along the Southwest border of the United States, including added funding to the U.S. Border Patrol (USBP). This funding would be partially offset by rescinding $100 million in DHS funds for SBInet (commonly known as the "virtual border fence"), which has been suspended pending the outcome of a technical and cost review. The Administration requested that the remainder be designated as emergency requirements. Of the total, $399 million would have been for DHS and $201 million would go to DOJ. Within the DHS total, $297 million would have been used to hire 1,000 new Border Patrol agents, $37 million for two new unmanned aerial detection systems, $53 million for 160 new Immigration and Customs Enforcement (ICE) agents, $6.5 million for 30 new Customs and Border Patrol (CBP) officers, and $6 million for 20 new Customs and Border Protection (CBP) canine teams to improve border enforcement operations along the Southwest border. The $201 million that was requested for DOJ would have increased the presence of federal law enforcement in the Southwest border districts by adding seven Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) Gunrunner Teams, five FBI Hybrid Task Forces, additional Drug Enforcement Administration (DEA) agents, equipment, operational support, and additional attorneys and immigration judges, and supporting additional detention and incarceration costs for criminal aliens in coordination with DHS enforcement activities. The amendment would also have provided funding to support Mexican law enforcement operations with ballistic analysis, DNA analysis, information sharing, technical capabilities, and technical assistance. Congressional Action on Border Security The budget amendment by the Administration was initially included in the House-passed version of  H.R. 4899 , but the border security provisions were dropped prior to final passage and the identical provisions were re-introduced as a separate bill—the Emergency Border Security Supplemental Appropriations Act of 2010 ( H.R. 5875 ).  H.R. 5875  included $701 million for border security, $100 million more than the Administration's request. Both the Administration and the House-amended version included $201 million to DOJ for border security efforts, largely for more law enforcement personnel, as discussed above.  H.R. 5875  was passed in the House on July 28, 2010. For CBP, House-passed  H.R. 5875  would have provided a total of $412 million, $13 million more than the request, including $208 million for new Border Patrol agents, $32 million for two new unmanned aerial detection systems, $136 million to hire and retain new CBP officers, and $36 million for tactical communications and infrastructure, as well as for corruption investigations, and $8 million for training. Additionally, the House-passed version would have provided $30 million for ICE, $23 million less than requested, to reduce narcotics smuggling and border violence, and it puts $50 million toward supporting state and local law enforcement through Operation Stonegarden (distributed through FEMA). Also, the Administration's request would have provided fewer Border Patrol agents and CBP officers than the House July-amended version. On August 5, 2010, the Senate took up  S. 3721  as a substitute amendment to House-passed  H.R. 5875 . The bill was passed by unanimous consent. Senate-passed  H.R. 5875  includes $600 million for border security ($101 million less than House-passed  H.R. 5875  would provide), of which $394 million is allocated to DHS and $196 million to DOJ. In contrast to the House version of the bill, Senate-passed  H.R. 5875  was reportedly completely offset by increases to H1-B and L visa fees and a rescission. For CBP, Senate-passed  H.R. 5875  would have provided a total of $306 million, including $176 million for additional Border Patrol agents, $39 million for CBP officers at ports of entry on the Southwest border, $10 million to support integrity and background investigation programs, $14 million for tactical communications, $32 million for UAV acquisition and deployment, and $6 million for the construction of forward-operating bases for the Border Patrol. Senate-passed  H.R. 5875  also included $80 million for ICE, of which $30 million was directed toward efforts to reduce the threat of violence along the Southwest border, and $50 million for additional ICE personnel; and $8 million for the CBP, BP, and ICE basic training at the Federal Law Enforcement Training Center (FLETC). On August 9, the House introduced a new border security supplemental bill— H.R. 6080 —which was subsequently passed by the House on August 10.  H.R. 6080  contained identical language to Senate-passed H.R. 5875 . Reportedly, the House took up the bill with a new number to avoid a dispute related to its constitutional obligation to originate all revenue measures.  This dispute arose with the addition of funding provisions in Senate-passed  H.R. 5875  that were not included in the House-passed version. On August 12, the Senate passed H.R. 6080  without amendment by unanimous consent. Appendix B. DHS Appropriations in Context Federal-Wide Homeland Security Funding Since the terrorist attacks of September 11, 2001, there has been an increasing interest in the levels of funding available for homeland security efforts. The Office of Management and Budget, as originally directed by the FY1998 National Defense Authorization Act, has published an annual report to Congress on combating terrorism. Beginning with the June 24, 2002, edition of this report, homeland security was included as a part of the analysis. In subsequent years, this homeland security funding analysis has become more refined, as distinctions (and account lines) between homeland and non-homeland security activities have become more precise. This means that while Table B -1 is presented in such a way as to allow year to year comparisons, they may in fact not be strictly comparable due to the increasing specificity of the analysis, as outlined above. With regard to DHS funding, it is important to note that DHS funding does not comprise all federal spending on homeland security efforts. In fact, while the largest component of federal spending on homeland security is contained within DHS, the DHS homeland security request for FY2011 accounts for approximately 51% of total federal funding for homeland security. The Department of Defense comprises the next highest proportion at 26% of all federal spending on homeland security. The Department of Health and Human Services at 6%, the Department of Justice at 6% and the Department of Energy at 3% round out the top five agencies in spending on homeland security. These five agencies collectively account for nearly 93% of all federal spending on homeland security. It is also important to note that not all DHS funding is classified as pertaining to homeland security activities. The legacy agencies that became a part of DHS also conduct activities that are not homeland security related. Therefore, while the FY2011 request included total homeland security budget authority of $37.1 billion for DHS, the requested total budget authority for DHS was $52.6 billion. Moreover, the amounts shown in Table B -1 will not be consistent with total amounts shown elsewhere in the report. This same inconsistency between homeland security budget authority and requested total budget authority is true of the other agencies listed in the table.

This report describes the FY2011 appropriations for the Department of Homeland Security (DHS). The Administration requested a net appropriation of $45.0 billion in budget authority for FY2011. This amounts to a $1.1 billion, or a 2.4% increase from the $43.9 billion enacted for FY2010. Total budget authority requested by the Administration for DHS for FY2011 amounts to $52.6 billion as compared to $51.7 billion enacted for FY2010. Net requested appropriations for major agencies within DHS were as follows: Customs and Border Protection (CBP), $9,809 million; Immigration and Customs Enforcement (ICE), $5,524 million; Transportation Security Administration (TSA), $5,729 million; Coast Guard, $9,867 million; Secret Service, $1,570 million; National Protection & Programs Directorate, $2,362 million; Federal Emergency Management Administration (FEMA), $7,294 million; Science and Technology, $1,018 million; and the Domestic Nuclear Detection Office, $306 million. The Senate Committee on Appropriations reported its version of the FY2010 DHS Appropriations bill on July 15, 2010. This report uses Senate-reported S. 3607 and the committee report (S.Rept. 111-222) accompanying S. 3607 as the source for the Senate-reported numbers. The Senate-reported S. 3607 recommends a net appropriation of $45.2 billion for DHS for FY2011. This amounts to a $195 million increase as compared to the Administration's request, and a nearly $1.3 billion increase as compared to the $43.9 billion enacted for FY2010 (not including FY2010 supplemental funding). The House did not mark up its bill in the full Appropriations Committee, and therefore did not make public its official position on funding levels and direction for DHS. Congress did not enact the 12 regular appropriations bills for FY2011 before the start of the fiscal year. As a result, seven interim continuing resolutions for FY2011 became law: P.L. 111-242 (124 Stat. 2607), P.L. 111-290 (124 Stat. 3063), P.L. 111-317 (124 Stat. 3454), and P.L. 111-322 (124 Stat. 3518) in the 111th Congress, and P.L. 112-4 (125 Stat. 6), P.L. 112-6 (125 Stat. 23), and P.L. 112-8 (125 Stat. 34). P.L. 112-4 and P.L. 112-6 rescinded unobligated funds from several specific DHS programs as they continued to fund the department. On April 15, 2011, the President signed H.R. 1473 into law as P.L. 112-10. This public law represents the final appropriations act for FY2011. P.L. 112-10 includes roughly $41.6 billion in non-emergency discretionary spending for the Department of Homeland Security, while mandating a 0.2% across-the-board rescission for all departmental appropriations except for narrowly delineated funding for Coast Guard "overseas contingency operations directly related to the global war on terrorism." As is often the case with continuing resolutions, P.L. 112-10 provides more limited direction than is given through a traditional bill and conference report as to how appropriations should be divided among individual programs, projects, and activities, but instead requires the department to provide spending plans to outline how DHS chooses to allocate those funds. This report will not be updated further.

Background Congressional interest in stimulating innovation within the pharmaceutical industry has been reflected in legislative activity in the areas of patent law and regulatory exclusivities. In particular, the 112 th Congress enacted the Leahy-Smith America Invents Act, P.L. 112-29 , which made numerous changes to the nation's patent laws. The 112 th Congress also enacted the Food and Drug Administration Safety and Innovation Act, P.L. 112-144 . That statute in part addressed so-called pediatric exclusivity and also allowed a "qualified infectious disease product" to be eligible for an extended period of regulatory exclusivity. In combination, patents and regulatory exclusivities create a relatively complex landscape of intellectual property rights intended to encourage firms to develop and market new drugs. Patents, which are administered by the U.S. Patent and Trademark Office (USPTO), provide firms with exclusive rights to an invention for a limited time in exchange for disclosure of the invention to the public. In contrast, regulatory exclusivities are administered by the Food and Drug Administration (FDA). They consist of a period of time during which the FDA affords an approved drug protection from competing applications for marketing approval. Although regulatory exclusivities have been available within the healthcare industry for three decades, commentators have raised a number of innovation policy issues in this context. Some observers question the need for innovators to obtain both regulatory exclusivities and patents. Others have expressed concern over the duration of particular regulatory exclusivities. Issues have also arisen with respect to the use of regulatory exclusivities to encourage specific sorts of innovation and with the obligations of other nations to grant regulatory exclusivities in the manner of U.S. law. This report introduces and analyzes innovation policy issues concerning intellectual property rights in pharmaceutical innovation. It begins with a review of the policy and procedures relating to both patents and regulatory exclusivities. The report then discusses current domestic and international issues that exist at the intersection of these two proprietary rights. The report closes with a summary of congressional issues and potential alternatives. Fundamentals of the Patent System The Patent Act of 1952 (also known as the Patent Act) requires innovators to prepare and submit applications to the USPTO if they wish to obtain patent protection. USPTO officials known as examiners then assess whether the application merits the award of a patent. In deciding whether to approve a patent application, a USPTO examiner considers whether the submitted application fully discloses and distinctly claims the invention. The examiner will also determine whether the invention itself fulfills certain substantive standards set by the patent statute. To be patentable, an invention must consist of a process, machine, manufacture, or composition of matter that is useful, novel, and nonobvious. The requirement of usefulness, or utility, is satisfied if the invention is operable and provides a tangible benefit. To be judged novel, the invention must not be fully anticipated by a prior patent, publication, or other knowledge within the public domain. A nonobvious invention must not have been readily within the ordinary skills of a competent artisan at the time the invention was made. If the USPTO allows the patent to issue, the patent proprietor obtains the right to exclude others from making, using, selling, offering to sell or importing into the United States the patented invention. The term of the patent is ordinarily set at twenty years from the date the patent application was filed. Once a patent issues, its proprietor bears responsibility for monitoring its competitors to determine whether they are using the patented invention or not. Patent owners who wish to compel others to observe their intellectual property rights must usually commence litigation in the federal district courts. The U.S. Court of Appeals for the Federal Circuit ("Federal Circuit") possesses exclusive national jurisdiction over all patent appeals from the district courts, while the U.S. Supreme Court possesses discretionary authority to review cases decided by the Federal Circuit. Fundamentals of Regulatory Exclusivity The U.S. government regulates the marketing of pharmaceuticals and agricultural chemicals in the interest of public health. Under this regime, the developer of a new drug—known as its "sponsor"—must demonstrate that the product is safe and effective before it can be distributed to the public. This showing requires a sponsor to conduct both preclinical and clinical investigations of drugs that have not been previously tested. In deciding whether to issue marketing approval or not, the FDA evaluates the test data that the sponsor submits in a so-called New Drug Application (NDA). The FDA maintains the test data incorporated into an NDA in confidence. In addition, because the required test data is usually quite costly to generate, sponsors of new pharmaceuticals ordinarily do not disclose them to the public. Otherwise the sponsor's competitors could file their own NDAs using that test data, and thereby avoid the expenses of developing the information themselves. Until 1984, federal law contained no separate provisions addressing generic versions of brand-name drugs that the FDA had previously approved for marketing. The result was that a would-be generic drug manufacturer had to file its own NDA in order to market its drug. Some generic manufacturers could rely on published scientific literature demonstrating the safety and efficacy of the drug. Because these sorts of studies were not available for all drugs, however, not all generic firms could file these so-called "paper NDAs." Further, at times the FDA would request additional studies to address safety and efficacy questions that arose from experience with the drug following its initial approval. The result was that some generic manufacturers were forced to prove independently that their pharmaceuticals were safe and effective, even though their products were chemically identical to those of previously approved drugs. Some commentators believed that the approval of a generic drug was a needlessly costly, redundant, and time-consuming process under this system. These observers noted that although patents on important drugs had expired, manufacturers were not moving to introduce generic equivalents for these products due to the level of resource expenditure required to obtain FDA marketing approval. As the introduction of generic equivalents often causes prices to decrease, the interest of consumers was arguably not being served through these observed costs and delays. In response to these concerns, Congress enacted the Drug Price Competition and Patent Term Restoration Act of 1984, more commonly known as the Hatch-Waxman Act. This legislation created a new type of application for market approval of a generic drug. This application, termed an "Abbreviated New Drug Application" (ANDA), may be filed at the FDA. An ANDA may be filed if the active ingredient of the generic drug is the bioequivalent of the approved drug. An ANDA allows a generic drug manufacturer to rely upon the safety and efficacy data of the original manufacturer. The availability of the ANDA mechanism often allows a generic manufacturer to avoid the costs and delays associated with filing a full-fledged NDA. ANDAs also allow a generic manufacturer, in many cases, to place its FDA-approved bioequivalent drug on the market as soon as any relevant patents expire. The Hatch-Waxman Act placed certain limits upon the ability of generic competitors to reference the data generated by the manufacturers of brand-name drugs. These limitations—termed regulatory exclusivities—consist of a period of time during which a competitor's ability to obtain FDA permission to sell a generic version of a previously approved brand-name drug is restricted. The federal food and drug laws establish several different sorts of regulatory exclusivities relating to new chemical entities, new clinical studies, orphan drugs, pediatric studies, generic drugs, and biologics. This report will describe each of these regulatory exclusivities below. Data Exclusivity Versus Market Exclusivity Regulatory exclusivities are, regrettably, not subject to a standard terminology. Some commentators employ terms such as "statutory exclusivity," "data protection," and "marketing exclusivity" synonymously with the term "regulatory exclusivity." This report will instead follow the approach of a second group of writers who ascribe distinct meanings to these terms. Under this latter approach, "regulatory exclusivity" is an umbrella term that refers to any FDA-administered proprietary right. Regulatory exclusivities may in turn be divided into two categories: (1) those that provide data exclusivity, alternatively known as data protection, and (2) those that provide marketing exclusivity. The distinction between data and marketing exclusivity lies in the scope of protection that each proprietary right affords. Data exclusivity protects the safety and efficacy information—often termed the "data package"—submitted by the brand-name firm from use by generic firms. As a result, a generic firm may not rely upon that data in support of its own application for FDA marketing approval for a period of years. Data exclusivity does not prevent a generic firm from submitting its own data package. In contrast, a marketing exclusivity prevents a competing firm from obtaining FDA approval whether or not it has generated its own safety and efficacy data. For many firms the distinction between a data exclusivity and marketing exclusivity may be more apparent than real. The expense of generating clinical data and other information needed to obtain marketing approval from the FDA is prohibitive for many firms. The difference between data and marketing exclusivity is of greater moment to firms that can afford to generate their own data packages for submission to the FDA. New Chemical Entity Exclusivity The Hatch-Waxman Act established a five-year data exclusivity that is available to drugs that qualify as a new chemical entity (NCE). The purpose of this "NCE exclusivity" is to encourage the development of innovative drug products that include an entirely new active ingredient (commonly termed the "active moiety"), in contrast to "me-too" drugs that incorporate chemical variants of previously known compounds. NCE exclusivity prevents a subsequent generic applicant from relying upon the data submitted by the innovative drug company during a five-year period. As a result, generic firms are precluded from relying upon this data for five years from the date of the approval of the NDA for that active moiety. A drug is judged to be an NCE if the FDA has not previously approved that drug's active ingredient. During that five-year period of NCE exclusivity, the FDA may not accept a generic drug company's application to market a drug product containing the same active moiety protected under the NCE exclusivity. This prohibition holds even if these applications are directed toward a different use, dosage form, or ester or salt of the active ingredient. As noted, NCE exclusivity acts as data exclusivity. It therefore does not preclude the FDA from accepting an application submitted by an entity that has performed all the required preclinical and clinical studies itself. The Hatch-Waxman Act allows the five-year term of NCE exclusivity to be decreased to four years under one circumstance. If the NDA holder owns patents that the generic applicant believes are invalid or not infringed, then the generic applicant is allowed to file its application one year early—upon the expiration of four, rather than five years from the date the NDA was approved. The apparent purpose of this provision is to allow additional time for brand-name and generic pharmaceutical firms to put their patent affairs in order prior to generic marketing. The practical effect of NCE exclusivity is to restrict a potential generic manufacturer from bringing a product to market for five years plus the length of the FDA review of the generic application. If, for example, the FDA requires two years to approve a particular generic application, the real-world impact of the NCE exclusivity has been seven years of protection. In this respect NCE exclusivity operates differently from other forms of FDA-administered exclusivities. These exclusivities generally prevent the FDA from approving applications, rather than accepting them in the first instance. New Clinical Study Exclusivity In order to encourage improvements upon drugs that are already in use, the Hatch-Waxman Act also provided for a three-year new clinical study exclusivity period. New clinical study exclusivity may be awarded with respect to an NDA that contains reports of new clinical studies conducted by the sponsor that are essential to FDA approval of that application. The FDA has granted new clinical study exclusivity for such changes as new dosage forms, new indications, or for a switch from prescription to over-the-counter status for the drug. The Hatch-Waxman Act imposes four requirements that an investigation must fulfill in order to qualify for new clinical study exclusivity. First, the study must be new, in that it could not have been previously used for another FDA drug approval proceeding. Second, the study must be a clinical study on humans, as compared to a preclinical or other sort of study. Third, the study must have been "conducted or sponsored" by the applicant. FDA regulations stipulate that an applicant that has provided "substantial support" for the investigation fulfills this requirement. The statement of a certified public accountant that the applicant provided 50% or more of the cost of conducting the study qualifies as substantial support, and the FDA will also entertain explanations of why the applicant should be considered to have "conducted or sponsored" the study if the applicant provided less than half of the funding for that study. Finally, the study must be "essential to the approval" of the application or supplement. The FDA has defined the term "essential to approval" as meaning "that there are no other data available that could support approval of the application." A study that provides useful background information, but is not essential to approving the change in the drug, does not provide sufficient basis for an FDA award of new clinical study exclusivity. As with NCE exclusivity, new clinical study exclusivity acts as data exclusivity. It therefore does not preclude the FDA from approving a full NDA. If the sponsor of that subsequent NDA has performed all the required preclinical and clinical studies itself, the FDA may approve the NDA without regard to the new clinical trial exclusivity. In contrast to NCE exclusivity, new clinical study exclusivity does not prevent the FDA from accepting a generic application with respect to the drug. If the new clinical study exclusivity continues to bar the issuance of marketing approval at the close of FDA review, the FDA will issue a tentative approval for the generic product that will become effective once the new clinical study exclusivity has run its course. In addition, new clinical study exclusivity only applies to the use of the product that was supported by the new clinical study. If, for example, the new studies support a new indication or dosage form of the previously approved ingredient, then the three-year exclusivity applies only to that particular use or dosage form. The FDA is not barred from approving generic drugs for other indications or dosage forms. A drug product may be subject both to NCE exclusivity and new clinical study exclusivity during the life of that product. Commonly, a new drug will initially enjoy a five-year NCE exclusivity. Later in the life of that product, the sponsor of the drug may perform additional clinical trials to qualify the drug for additional three-year exclusivities. Orphan Drug Exclusivity In 1982, Congress enacted the Orphan Drug Act in order to encourage firms to develop pharmaceuticals to treat rare diseases and conditions. Such drugs are called "orphan drugs" because firms may lack the financial incentives to sponsor products to treat small patient populations. Congressional encouragement takes a number of forms under the Orphan Drug Act, including FDA protocol assistance, tax breaks, and a grants program through which researchers may compete for grants to conduct clinical trials to support the approval of orphan drugs. The most commercially significant of all of these benefits is a seven-year term of marketing exclusivity. This period commences from the date the FDA issues marketing approval on the drug. The original version of the Orphan Drug Act extended marketing approval only to drugs that were not patented. However, Congress amended the statute in 1985 to provide for regulatory exclusivity both for patented and unpatented products. Because it acts as a marketing exclusivity, orphan drug exclusivity blocks competitors from obtaining FDA approval whether or not they have generated their own data. Orphan drug regulatory exclusivity applies only to the indication for which the drug is approved, however. As a result, the FDA could approve a second application of the same drug for a different use. The FDA cannot approve the same drug made by another manufacturer for the same use, however, unless the original sponsor approves or the original sponsor is unable to provide sufficient quantities of the drug to the market. As originally enacted, the Orphan Drug Act defined an orphan drug as one for which there was no "reasonable expectation that the cost of developing ... will be recovered from sales in the United States of such drug." In 1984, Congress changed the definition to its present form. Currently, in order to qualify for orphan drug status, the drug must treat a rare disease or condition (1) affecting less than 200,000 people in the United States, or (2) affecting more than 200,000 people in the United States, but for which there is no reasonable expectation that the sales of the drug would recover the costs. As can be appreciated, the effect of this change was to allow drug sponsors to avoid making a showing of unprofitability if the target population consisted of less than 200,000 persons. The original version of the Orphan Drug Act allowed a sponsor to request orphan drug status at any time prior to FDA marketing approval. Congress amended the statute in 1988, however, to require that the sponsor make this designation request prior to the submission of an application for marketing approval. Biologics Exclusivity The Biologics Price Competition and Innovation Act of 2009 (BPCIA), which was enacted as Title VII of the Patient Protection and Affordable Care Act, introduced new regulatory exclusivities for a category of biologically derived preparations known as "biologics." Biologics consist of such products as vaccines, antitoxins, blood components, and therapeutic serums. For the most part, the FDA regulates biologics under Section 351 of the Public Health Service Act, as compared to the Federal Food, Drug, and Cosmetic Act which applies to small-molecule, traditional pharmaceuticals. The BPCIA established two periods of regulatory exclusivity applicable to brand-name biologics, one with a duration of 4 years and the other with a duration of 12 years. The BPCIA specifically provides: (7) EXCLUSIVITY FOR REFERENCE PRODUCT.— (A) EFFECTIVE DATE OF BIOSIMILAR APPLICATION APPROVAL.—Approval of an application under this subsection may not be made effective by the Secretary until the date that is 12 years after the date on which the reference product was first licensed under subsection (a). '(B) FILING PERIOD.—An application under this subsection may not be submitted to the Secretary until the date that is 4 years after the date on which the reference product was first licensed under subsection (a). Some discussion has occurred about whether the 12-year regulatory exclusivity period identified in the statute operates as a data or marketing exclusivity. In the FDA's public hearing notice, the agency referred to a "12-year period of marketing exclusivity." Several Members of Congress drafted letters to the FDA explaining that the 12-year period instead acted as a data exclusivity. One letter explained: The Act does not provide market exclusivity for innovator products. It provides data exclusivity, which prohibits FDA from allowing another manufacturer of a highly similar biologic to rely on the Agency's prior finding of safety, purity and potency for the innovator product for a limited period of time. It does not prohibit or prevent another manufacturer from developing its own data to justify FDA approval of a full biologics license application rather than an abbreviated application that relies on the prior approval of a reference product. Similarly, other Members of Congress explained that the 12-year regulatory exclusivity acts as data exclusivity that "only protects the FDA from allowing another manufacturer to rely on the data of an innovator to support another product. Importantly, it does not prohibit or prevent another manufacturer from developing its own data to justify FDA approval of a similar of competitive product." A third letter from Members of Congress stated their belief that "the statute is clear that the FDA can begin reviewing biogeneric applications during the 12 year exclusivity period." The FDA subsequently issued a draft guidance document that appeared to align the agency's view with that of the congressional correspondents. Pediatric Exclusivity Brand-name firms may qualify for a six-month pediatric exclusivity upon the completion of studies on the effects of a drug upon children. This six-month period begins on the date that the existing patent or data exclusivity protection on the innovator drug would otherwise expire. Pediatric exclusivity extends to any drug product with the same active ingredient (also known as the drug's "active moiety"). The purpose of the pediatric regulatory exclusivity is to improve the availability of appropriate pediatric labeling on drug products. Congress first established pediatric regulatory exclusivities with the Food and Drug Administration Modernization Act of 1997 (FDAMA). Although the FDAMA included a sunset provision, Congress subsequently reauthorized these provisions. In the 112 th Congress, the Food and Drug Administration Safety and Innovation Act, P.L. 112-144 , made the pediatric exclusivity permanent. In establishing pediatric exclusivity, Congress responded to concerns that many FDA-approved drugs had not yet been clinically tested upon children. Investigations upon a pediatric population tends to raise a number of complexities, including issues of informed consent, the changes that occur in children as they grow, and the inability of children to describe accurately the effect of a medication. As a result, most drugs are tested solely upon adults. By establishing a pediatric regulatory exclusivity, Congress hoped to encourage additional pediatric testing, which in turn could allow medications to be labeled for use by children. Pursuant to its statutory authority, the FDA issues written requests to NDA applicants and holders to perform pediatric studies with respect to the drug. An FDA written request contains such information as the indications and the number of patients to be studied, the labeling that may result from such studies, the format of the report to be submitted to the FDA, and the timeframe for completing the studies. Response to this written request is wholly voluntary. If the innovative drug company submits a report to the satisfaction of the FDA, however, then it will be awarded the six-month pediatric regulatory exclusivity. Notably, the food and drug laws do not condition pediatric exclusivity upon the success of the study. The six-month regulatory exclusivity period may be obtained whether or not the study successfully demonstrates safety and effectiveness in children. Thus, the pediatric exclusivity is intended to create incentives for drug sponsors to conduct research and submit their results to the FDA. The effect of a pediatric exclusivity is to extend the approved manufacturer's existing regulatory exclusivity or patent protection for an additional six months. If the pediatric exclusivity applied to an orphan drug, for example, the result would be seven years and six months of marketing exclusivity; if applied to an NCE exclusivity, the drug's sponsor would obtain five years and six months of data protection. If applied to a patent, that pediatric exclusivity does not actually extend the term of a patent; rather, it is a regulatory exclusivity administered by the FDA. Qualified Infectious Disease Products Congressional concern over the spread of antibiotic-resistant "superbugs" recently led to the enactment of the Generating Antibiotic Incentives Now (GAIN) Act, enacted as Title VIII of the FDA Safety and Innovation Act, P.L. 112-144 . That statute allows the FDA to designate a drug as a "qualified infectious disease product" (QIDP) if it consists of an antibacterial or antifungal drug intended to treat serious or life-threatening infections. The GAIN Act stipulates that QIDPs include drugs that address drug-resistant tuberculosis, gram negative bacteria, and Staphylococcus aureus. Along with other measures intended to provide pharmaceutical and biotechnology companies with incentives to develop innovative antibiotics, the GAIN Act adds five years to the term of the new chemical entity, new clinical study, and orphan exclusivities for any QIDP. The statute stipulates that the five-year QIDP extension is cumulative with the pediatric exclusivity. As a result, a QIDP that qualified as a new chemical entity, and was also awarded a pediatric exclusivity, would be entitled to a data exclusivity period of ten years and six months. Generic and Follow-On Exclusivity Most of the regulatory exclusivities operate in favor of brand-name firms. However, federal law also establishes regulatory exclusivities designed to encourage generic and follow-on firms to market their products. The Hatch-Waxman Act allows generic firms to obtain a 180-day period of "generic exclusivity" if they are the first to file an ANDA challenging a brand-name firm's patents. Generally speaking, this regulatory exclusivity precludes the FDA from approving another ANDA for the same product for the 180-day period. In addition, the Biologics Price Competition and Innovation Act of 2009 establishes a regulatory exclusivity that operates in favor of manufacturers of follow-on biologics. Under the BPCIA, the first follow-on product deemed to be interchangeable with the brand-name product is entitled to a period of exclusivity before the FDA will make a determination of interchangeability for a competing product. Follow-on exclusivity ends at the earlier of one year after first commercial marketing, 18 months after a final court decision in a patent infringement action against the applicant or dismissal of such an action, 42 months after approval if the applicant has been sued and the litigation is still ongoing, or 18 months after approval if the applicant has not been sued. Innovation Policy Issues The Term of Regulatory Exclusivities The Obama Administration has proposed a reduction in the regulatory exclusivity offered to brand-name biologic drugs to seven years, down from the 12 years incorporated in the Biologics Price Competition and Innovation Act of 2009. The Obama Administration's Fiscal Year 2013 Budget asserted that the shorter periods of data exclusivity will "encourage faster development of generic biologics while retaining appropriate incentives for research and development for the innovation of breakthrough products." This change would purportedly result in $4 billion in savings over 10 years to federal health programs including Medicare and Medicaid. This proposal has yet to be enacted. Regulatory Exclusivity for Colchicine Controversy surrounded the award of regulatory exclusivities to colchicine, an ancient remedy for gout that had been marketed for decades in the United States without FDA approval. In 2006, the FDA launched an Unapproved Drugs Initiative to encourage manufacturers of old drugs that were sold prior to current premarket approval requirements to test the drugs for safety and efficacy and to seek formal agency approval. The FDA had previously approved two combination products including colchicine as one of multiple ingredients, but had never approved a single-ingredient colchicine product. In response to the FDA request, one firm submitted NDAs for the use of colchicine to treat familial Mediterranean fever and acute gout flares. The FDA approved both applications and awarded seven years of orphan drug exclusivity for the use of colchicine to treat familial Mediterranean fever and three years of new clinical study exclusivity for the treatment of acute gout flares. The FDA subsequently announced its intention to take enforcement action against unapproved single-ingredient colchicine products. With other suppliers removed from the market, the new sole provider reportedly increased the price of its colchicine product, Colcrys®, from $0.09 to $4.85 per tablet. As a practical matter, regulatory exclusivities ordinarily apply only to products that are coming to the market for the first time. The colchicine incident nonetheless illustrates that, unlike patent protection, regulatory exclusivities may be awarded to products that are not necessarily new or innovative. This case also illustrates the costs that regulatory exclusivities may impose upon patients and payors for drugs that might have been sold far more cheaply in a competitive market. The MODDERN Cures Act As a historical matter, patents have long served as a primary incentive for health care innovation in the United States. Regulatory exclusivities are a relatively more recent form of intellectual property right, first coming into being in the 1980s with the Orphan Drug and Hatch-Waxman Acts. Because regulatory exclusivities have traditionally offered shorter periods of protection than the 20-year patent term, patents are often viewed as the principal R&D incentive mechanism for the pharmaceutical and biotechnology sectors. However, legislation has been introduced in the 112 th Congress that would establish a distinct framework of innovation incentives that emphasizes regulatory exclusivity over patents. Under the proposed Modernizing Our Drug & Diagnostics Evaluation and Regulatory Network Cures Act (MODDERN Cures Act) (introduced both as H.R. 3901 and H.R. 3116 ), a drug sponsor could submit a request to FDA for "dormant therapy" designation for a therapy that fulfills "one or more unmet medical needs." The request must include a list of patents covering the therapy and a conditional waiver of the right to enforce those patents after the termination of regulatory exclusivity. If the FDA agrees that the indication for which approval is sought addresses an unmet medical need, it will grant the dormant therapy designation and the patent waiver will become effective. The sponsor then obtains 15 years of marketing exclusivity. All of the identified patents are given an extended term of up to 15 years after the product is approved, but pursuant to the patent waiver, the sponsor of the drug disclaims any patent term after the 15-year exclusivity period. The MODDERN Cures Act confronts policy makers with a debate previously conducted by legal academics over the relative role of patents and regulatory exclusivities in promoting pharmaceutical and biotechnology R&D. Regulatory exclusivity arguably provides a better temporal fit with the life cycle of a pharmaceutical or biologic product than does a patent. Regulatory exclusivity periods typically do not begin until a drug is on the market, while much or all of a patent term may run before the FDA grants marketing approval. The scope of regulatory exclusivities may also correspond more closely to relevant product markets than do patents. Regulatory exclusivity tracks the terms of FDA product approvals, while patent claims, drafted to distinguish an invention from the prior art, may not correspond as closely to any actual commercial product. In addition, patents provide not so much the right to exclude as the right to sue to exclude. Generic firms frequently make successful arguments that the brand-name firm's patents are invalid or not infringed. In contrast, regulatory exclusivity keeps competitors off the market without the need for patent owners to bring expensive and uncertain infringement lawsuits. On the other hand, regulatory exclusivities arguably possess disadvantages in comparison to patents. For example, the U.S. Supreme Court recently explained that "the results of ordinary innovation are not the subject of exclusive rights under the patent laws. Were it otherwise patents might stifle, rather than promote, the progress of useful arts." Yet as suggested by the colchicine incident, regulatory exclusivities are available for old products based upon the completion of routine clinical trials that would not qualify for additional patent rights. Denying patent rights to "ordinary innovation" in order to promote progress seems inconsistent with granting analogous protection via regulatory exclusivity in the context of drug testing. Regulatory exclusivities may also place public health officials in the potentially uncomfortable position of denying patients access to safe and effective generic substitutes for unpatented medications. They require the FDA to devote considerable time and effort towards drafting regulations, issuing guidance documents, and adjudicating disputes involving multiple regulatory exclusivity regimes. These resources might be more effectively spent in pursuit of the agency's core mission of protecting public health. International Issues The agreements comprising the World Trade Organization (WTO) impose certain requirements with respect to both patents and regulatory exclusivities. The WTO Agreement on Trade-Related Aspects of Intellectual Property (TRIPS Agreement) requires signatories to provide patent protection "without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced." This provision in part required WTO member states to eliminate provisions in their national laws that disallowed patents on pharmaceutical products. But the TRIPS Agreement apparently prohibits discrimination in favor of pharmaceutical patents as well as against them. The TRIPS Agreement also requires each WTO member state to establish protections for pharmaceutical test data under certain conditions. Article 39.3 of the TRIPS Agreement specifically provides: Members, when requiring as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilize new chemical entities, the submission of undisclosed test or other data, the origination of which involves a considerable effort, shall protect such data against unfair commercial use. In addition, Members shall protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that the data are protected against unfair commercial use. Some commentators have observed that Article 39.3 establishes broad parameters using vague language. In particular, terms such as "new chemical entities," "considerable effort," and "unfair commercial use" receive no further definition within the TRIPS Agreement. As a result, some debate has occurred over the precise nature of the obligations Article 39.3 imposes upon WTO member states. Perhaps given the uncertainties with respect to Article 39.3 of the TRIPS Agreement, the United States has entered into certain Free Trade Agreements (FTAs) that require signatories to provide five years of regulatory exclusivity for pharmaceuticals that utilize new chemical entities. For example, Article 15.10:1(a) of the Dominican Republic-Central America-United States FTA provides: If a Party requires, as a condition of approving the marketing of a new pharmaceutical or agricultural chemical product, the submission of undisclosed data concerning safety or efficacy, the Party shall not permit third persons, without the consent of the person who provided the information, to market a product on the basis of (1) the information, or (2) the approval granted to the person who submitted the information for at least five years for pharmaceutical products and ten years for agricultural chemical products from the date of approval in the Party. The term "new product" is generally defined as "one that does not contain a chemical entity that has been previously approved in the territory of the Party." More recently, the United States has entered into negotiations with respect to the Trans-Pacific Partnership (TPP), a multilateral free trade agreement that aims to liberalize trade within the Asia-Pacific region. The TPP reportedly calls for its signatories to adopt a period of exclusivity for biologics. Some Members of Congress have encouraged U.S. negotiators to incorporate a 12-year period of exclusivity that would align the TPP with the Biologics Price Competition and Innovation Act of 2009. However, other Members of Congress have expressed concern over the impact of regulatory exclusivity provisions in the TPP on healthcare in developing countries. Concluding Observations In combination, patents and regulatory exclusivities provide the fundamental framework of intellectual property incentives for pharmaceutical innovation in the United States. Due to the TRIPS Agreement's obligation of technological neutrality with respect to the patent system, regulatory exclusivities provide Congress with a more adaptable option for stimulating specific sorts of hoped-for private activity than do patents. As such, regulatory exclusivities have been, and likely will continue to be, the most widely used option for encouraging the development of discrete classes of products regulated by the FDA. The potential for expanded use of regulatory exclusivities in turn raises a number of innovation policy issues. In the United States, regulatory exclusivities are viewed primarily as supplementing patent protection, in that they provide more limited protections for inventions that do not meet Patent Act requirements, or effectively delay the onset of patent litigation for inventions that do. Expanding the availability of regulatory exclusivities, in addition to lengthening their term, increases the possibility that regulatory exclusivities will trump patents as the primary form of intellectual property protection for certain FDA-regulated products. The decision to supplant the primacy of the current regime of USPTO-procured and judicially enforced patent rights with a system of automatic, FDA-administered regulatory exclusivities presents a number of trade-offs that policy makers may wish to consider. Among them are the impact of the contemplated exclusivity periods upon incentives for pharmaceutical innovation; the cost and availability of medications to consumers; the desirability of individualized determinations about the technical merits of the pharmaceutical invention; the expense and uncertainty of patent enforcement proceedings; and whether the USPTO or FDA is the better institution for awarding proprietary rights to pharmaceutical innovators. International harmonization provides another significant issue with respect to regulatory exclusivities. While some observers have expressed concerns over the use of free trade agreements to encourage trading partners to establish longer regulatory exclusivity periods, others believe that doing so lies in the best interest of the United States. Future dialogue may concern setting global regulatory exclusivity standards in view of national goals and priorities.

In combination, patents and regulatory exclusivities provide the fundamental framework of intellectual property incentives for pharmaceutical innovation in the United States. Patents, which are administered by the United States Patent and Trademark Office (USPTO), provide their owner with the ability to exclude others from practicing the claimed invention for a limited time. In contrast, regulatory exclusivities are administered by the Food and Drug Administration (FDA). Alternatively known as marketing exclusivities, data exclusivities, or data protection, regulatory exclusivities establish a period of time during which the FDA affords an approved drug protection from competing applications for marketing approval. Although patents and regulatory exclusivities are separate entitlements that are administered by different federal administrative agencies and that depend upon distinct criteria, they both create proprietary rights in pharmaceutical and biologics innovation. These rights allow innovators to receive a return on the expenditure of resources leading to a discovery. Once these proprietary interests expire, the marketplace for that drug is open to generic or follow-on competition. Congressional interest in promoting both innovation and competition in the pharmaceutical industry has focused attention on both patents and regulatory exclusivities. For example, the 112th Congress proposed but did not enact the Modernizing Our Drug and Diagnostics Evaluation and Regulatory Network Cures Act, or MODDERN Cures Act (introduced both as H.R. 3901 and H.R. 3116). This bill confronted policy makers with a debate previously conducted by legal academics over the relative role of patents and regulatory exclusivities in promoting pharmaceutical and biotechnology R&D. In addition, the Obama Administration has proposed a reduction in the regulatory exclusivity offered to brand-name biologic drugs to seven years, down from the 12 years incorporated in the Biologics Price Competition and Innovation Act of 2009 (enacted as Title VII of the Patient Protection and Affordable Care Act). Controversy has surrounded the award of regulatory exclusivities to colchicine, an ancient remedy for gout that was subject to the FDA's Unapproved Drugs Initiative. International agreements require each World Trade Organization (WTO) member state to treat all patented inventions in the same manner. This rule seemingly prohibits discrimination both against and in favor of patents on drugs as compared to other technologies. As a result, regulatory exclusivities provide Congress with a more flexible option for stimulating specific sorts of desirable private activity than do patents. The WTO Agreements, as well as certain Free Trade Agreements to which the United States is a signatory, also obligate nations to provide some manner of protection to pharmaceutical test data. Discussion over the inclusion of regulatory exclusivity requirements within the Trans-Pacific Partnership (TPP) is ongoing.

Department of Veterans Affairs Overview The Department of Veterans Affairs (VA) provides a range of benefits and services to veterans and eligible dependents who meet certain criteria as authorized by law. These benefits include medical care, disability compensation and pensions, education, vocational rehabilitation and employment services, assistance to homeless veterans, home loan guarantees, administration of life insurance as well as traumatic injury protection insurance for servicemembers, and death benefits that cover burial expenses. The VA carries out its programs nationwide through three administrations and the Board of Veterans Appeals (BVA). The Veterans Benefits Administration (VBA) is responsible for, among other things, providing compensation, pensions, education assistance, and vocational rehabilitation and employment services. The National Cemetery Administration (NCA) is responsible for maintaining national veterans' cemeteries; providing grants to states for establishing, expanding, or improving state veterans' cemeteries; and providing headstones and markers for the graves of eligible persons, among other things. The Veterans Health Administration (VHA) is responsible for health care services and medical and prosthetic research programs. The VHA is primarily a direct service provider of primary care, specialized care, and related medical and social support services to veterans through the nation's largest integrated health care system. Inpatient and outpatient care are also provided in the private sector to eligible dependents of veterans under the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA). The VA Budget The VA budget includes both mandatory and discretionary funding. Mandatory accounts fund disability compensation, pensions, vocational rehabilitation and employment, education, life insurance, housing, and burial benefits (such as graveliners, outer burial receptacles, and headstones), among other benefits and services. Discretionary accounts fund medical care, medical research, construction programs, information technology, the Office of Inspector General, the Board of Veterans Appeals (BVA), and general operating expenses, among other things. These accounts are further supplemented by revolving funds, such as the Canteen Service Revolving Fund and the Pershing Hall Revolving Fund; trust funds, such as the Department of Veterans Affairs Cemetery Gift Fund and the General Post Fund; and special funds, such as the Medical Care Collections Fund, and the Capital Asset Fund. Advance Appropriations9 In 2009, Congress enacted the Veterans Health Care Budget Reform and Transparency Act of 2009 ( P.L. 111-81 ), authorizing advance appropriations for three of the four VHA accounts: medical services, medical support and compliance, and medical facilities. In 2014, Congress passed the Consolidated and Further Continuing Appropriations Act, 2015 ( H.R. 83 ; P.L. 113-235 ), which amended 38 U.S.C §117 and included three more accounts in the advance appropriations list of accounts. This act authorizes advance appropriations for three mandatory VA benefits programs within the Veterans Benefits Administration: compensation and pensions, readjustment benefits, and veterans insurance and indemnities. Beginning with the FY2016 Military Construction and Veterans Affairs, and Related Agencies Appropriations Act (MILCON- VA; P.L. 114-113 ), those accounts received advance appropriations for FY2017 in addition to the three VHA accounts already authorized to receive advance appropriations. Section 4003 of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 ( P.L. 114-41 ) required the establishment of a separate new account for medical community care, beginning with the FY2017 appropriations cycle. The FY2017 MILCON-VA Act (Division A of P.L. 114-223 ) provides advance appropriations for FY2018 to the new medical community care account while funding the FY2017 requirements for this new account by rescinding from the 2017 advance appropriation amounts in the medical services account enacted in the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) and reappropriating them. Congress has authorized advance appropriations of new budget authority for these VBA and VHA accounts to prevent potential delays in the delivery of care and benefits to veterans that may arise in the event of a lapse in funding. Under present budget scoring guidelines, advance appropriations are scored as new budget authority in the fiscal year in which the funds become available for obligation, not in the fiscal year the appropriations are enacted. Therefore, throughout the funding tables in this report, advance appropriations numbers are shown under the label "memorandum" and in the corresponding fiscal year column. For example, the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), provides advance appropriations for the compensation and pensions, readjustment benefits, veterans insurance and indemnities, medical services, medical support and compliance, and medical facilities accounts for FY2017. Funding shown for FY2016 does not include advance appropriations provided in FY2017 by P.L. 114-113 for use in FY2017. Instead, the advance appropriation provided in FY2016 for use in FY2017 is shown in the FY2017 column under the label "memorandum." Similarly, FY2018 advance appropriations provided in the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, and Zika Response and Preparedness Act ( H.R. 5325 ; P.L. 114-223 ) appear in the FY2018 column under the label "memorandum." The Veterans Access, Choice, and Accountability Act of 2014 (Choice Act) In response to the crisis of access to medical care at many VA hospitals and clinics across the country reported in 2014, Congress passed the Veterans Access, Choice, and Accountability Act of 2014 ( P.L. 113-146 as amended by P.L. 113-175 , P.L. 113-235 , P.L. 114-19 , P.L. 114-41 , and P.L. 115-26 ). On August 7, 2014, President Obama signed the bill into law. The act, as amended, makes a number of changes to programs and policies of the VHA that aim to increase access and lower wait times for veterans who seek care at VA facilities. Among other things, the act establishes a new program (the Veterans Choice Program) that would allow the VA to authorize care for veterans outside the VA health care system if they meet certain criteria. Congress also provided mandatory funding for the Choice Program, with a total of $10 billion over three years by establishing the Veterans Choice Fund (Section 802 (a) of P.L. 113-146 as amended). Since it was estimated that not all the funds in the Veterans Choice Fund would be exhausted by August 7, 2017, on April 19, 2017, President Trump signed into law P.L. 115-26 (an act to amend the Veterans Access, Choice, and Accountability Act of 2014 to modify the termination date for the Veterans Choice Program, and for other purposes) and eliminated the sunset date of the Veterans Choice Program and allowed any unobligated funds in the Veterans Choice Fund to be used until expended. However, in mid-June 2017, VA notified Congress that due to the increased authorization of appointments, there had been higher rate of usage of VCP funds and VCP would not be able to continue past August 15, 2017, since all the remaining funds for VCP would be fully obligated by then. According to the VA, at least $3.5 billion in new mandatory budget authority would be needed to continue VCP through FY2018. On August 12, 2017, President Trump signed into law the VA Choice and Quality Employment Act of 2017 ( P.L. 115-46 ), which authorized and appropriated $2.1 billion for the Veterans Choice Fund (§802 (a) P.L.113-146; 38 U.S.C.§1701 note). These funds would remain available until expended. In addition, Section 801(a) of the Choice Act (P.L.113-146; 38 U.S.C.§1701 note), provided an additional mandatory funding of $5 billion to increase veterans' access to health care by hiring more physicians and staff and to improve VA's physical infrastructure. These mandatory funds are not part of the regular annual appropriations provided in the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, and Zika Response and Preparedness Act ( H.R. 5325 ; P.L. 114-223 ) and the Military Construction and Veterans Affairs—Additional Appropriations Act, 2017 (Division L of P.L. 115-31 ). Therefore, the Veterans Choice Fund is beyond the scope of this report, and those funds are not shown in the tables of this report. The President's Budget Request for FY2017 and Congressional Action President's Request The President's FY2017 budget request for the Department of Veterans Affairs was submitted to Congress on February 9, 2016. The President's FY2017 VA request is approximately $177.54 billion. This amount, which includes $102.53 billion in mandatory funding and $75.01 billion in discretionary appropriations ( Table 1 ), is a 9.14% increase over the FY2016-enacted level of $162.67 billion. For the Veterans Benefits Administration mandatory programs such as disability compensation, readjustment benefits, and veterans insurance and indemnities, the FY2017 request is $102.73 billion. This amount includes $16.60 million over the FY2017 advance appropriations (provided in the Consolidated Appropriations Act, 2016; P.L. 114-113 ) for the veterans insurance and indemnities programs ( Table 2 ). For the Veterans Health Administration, the Administration's FY2017 request is $65.66 billion, without collections ( Table 2 ). This amount is a 6.30% increase over the FY2016-enacted amount of $61.76 billion, and includes an additional $1.72 billion over the FY2017 advance appropriations (provided in the Consolidated and Further Continuing Appropriations Act, 2015; P.L. 113-235 ) for the three medical care accounts (medical services, medical support and compliance, and medical facilities). The additional resources are for Hepatitis C treatment costs, caregiver programs, infrastructure improvements, and leasing of major medical facilities. As required by Section 4003 of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 ( P.L. 114-41 ), the President's FY2017 budget request includes a new account for VHA: medical community care. This account would fund care that VA provides to eligible veterans through community providers. Funding for this account would be derived from amounts appropriated in FY2017 for the medical services, medical support and compliance, or medical facilities accounts. As required by P.L. 111-81 and P.L. 113-235 , the President's budget request includes $170.32 billion in advance appropriations for FY2018 for VHA and VBA ( Table 2 ). Among other budget request highlights, the President's budget request for construction major projects is $528.11 million, a decrease of 57.54% compared with the FY2016-enacted amount of $1.24 billion; for information technology (IT) programs, the request is $4.27 billion, an increase of 3.50% over the FY2016-enacted amount of $4.13 billion. House and Senate Committee Action This section of the report provides a chronological overview of the House and Senate action on the FY2017 Military Construction, Veterans Affairs, and Related Agencies (MILCON-VA) appropriations bill. It begins with House action in April 2016 and concludes with the enactment of the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, and Zika Response and Preparedness Act ( H.R. 5325 ; P.L. 114-223 ) on September 29, 2016. House Action On April 13, 2016, the House Appropriations Committee approved its version of the FY2017 MILCON-VA appropriations bill ( H.R. 4974 ; H.Rept. 114-497 ). The House passed the measure on May 19. The House-passed measure provides a total of $176.06 billion for the VA, a slight decrease (0.83%) from the President's request of $177.54 billion and an 8.23% increase from the FY2016-enacted amount ( Table 1 ). This amount includes $102.53 billion in mandatory appropriations and $73.53 billion in discretionary appropriations. Of the total amount provided for VA, $64.79 billion (without collections) is for VHA. The House-passed measure includes $864 million over the FY2017 advance appropriations (provided in the Consolidated Appropriations Act, 2016; P.L. 114-113 ) compared with the Administration's request of $1.72 billion ( Table 2 ). The additional resources would fund Hepatitis C treatment costs, veterans homeless programs, the post-9/11 caregiver program, long-term services and supports, and the staffing costs VHA would need to absorb as the Veterans Access, Choice, and Accountability Act of 2014 ( P.L. 113-146 ) Section 801 funds run out. H.R. 4974 ( H.Rept. 114-497 ) provides $7.24 billion for a new medical community care account. Funding for this account is derived by transferring funds from amounts appropriated in FY2017 for the medical services, medical support and compliance, or medical facilities accounts ( Table 2 ). This account was required to be established by P.L. 114-41 , and was intended to track funding for all community care programs under a single appropriation account. The House-passed bill funds the medical and prosthetic research account at the same level as the President's request ( Table 2 ). Furthermore, the House-passed measure ( H.R. 4974 ; H.Rept. 114-497 ) provides $102.70 billion for VBA programs, a 12.33% increase over the FY2016-enacted amount of $91.42 billion, and a slight decrease from the President's request of $102.73 billion. For the National Cemetery Administration, the House-passed measure provides $14.97 million less than the President's request of $286.19 million. For information technology programs, H.R. 4974 provides $4.22 billion, a 1.22% decrease from the requested amount of $4.27 billion. According to the committee report ( H.Rept. 114-497 ) accompanying the bill: "Although funding constraints require the Committee to provide a funding level below the request, the level provided includes an $87,506,000, or a 2.1 percent, increase over fiscal year 2016, which will permit investment in high priority areas." These priority areas include the Veterans Benefits Management System, the Board of Veterans Appeals modernization effort, electronic health record (EHR)—VistA Evolution modernization, and interoperability and Virtual Lifetime Electronic Record (VLER) health. It should be noted that during House floor debate, the IT account was increased by $5 million by decreasing the general administration account by a similar amount (as reflected in the amounts shown in Table 2 ). The House-passed bill provides $66.38 billion in advance appropriations for the four medical care accounts (medical services, medical community care, medical support and compliance, and medical facilities) and $103.93 billion in advance appropriations for mandatory benefit program accounts (compensation and pensions, readjustment benefits, and veterans insurance and indemnities) for FY2018, the same as the President's request for these accounts for FY2018. Senate Action On April 14, the Senate Appropriations Committee approved its version of the FY2017 MILCON-VA appropriations bill ( S. 2806 ; S.Rept. 114-237 ). The Senate passed the FY2017 MILCON-VA appropriations bill on May 19 as an appropriations package that included the FY2017 Transportation, Housing and Urban Development, and Related Agencies (THUD) appropriations bill (Division A), the FY2017 MILCON-VA bill (Division B), and the Zika Response Appropriations bill (Title V of Division B). Because appropriations legislation generally originates in the House, and because the House had not yet taken up a FY2017 THUD appropriations bill as of May, the Senate used the FY2016 THUD appropriations bill ( H.R. 2577 ) as the vehicle for this package. The Senate-passed version of the FY2017 MILCON-VA appropriations bill (Division B of H.R. 2577 ) provides a total of $177.39 billion for VA, a 9.04% increase over the FY2016-enacted level of $162.67 billion and slightly less than the President's request for FY2017. This amount includes $102.53 billion in mandatory appropriations and $74.85 billion in discretionary appropriations ( Table 1 ). The Senate-passed version (Division B of H.R. 2577 ) provides $105.58 billion for VBA programs. This amount includes $2.85 billion in VBA general operating expenses moved from the departmental administration to VBA programs ( Table 2 ). Of note, prior to passage of the FY2012 MILCON-VA appropriations bill ( P.L. 112-74 ), VBA general operating expenses were included with the departmental general operating expenses. With the enactment of P.L. 112-74 , VBA general operating expenses were separated into general administration and general operating expenses. Division B of H.R. 2577 provides $65.52 billion for VHA (without collections), which includes $1.57 billion over the FY2017 advance appropriations (provided in the Consolidated Appropriations Act, 2016; P.L. 114-113 ) for the three medical care accounts (medical services, medical support and compliance, and medical facilities), and $675.36 million for the medical and prosthetic research account—a 1.80% increase over the President's request of $663.36 million. Division B of H.R. 2577 provides $7.24 billion for a new medical community care account. Funding for this account is derived by rescinding amounts appropriated in FY2017 for the medical services account. The House-passed measure ( H.R. 4974 ; H.Rept. 114-497 ) and the President's request would fund this account by transferring funds from the medical services, medical support and compliance, or medical facilities accounts. Among other highlights, the Senate-passed version of the MILCON-VA appropriations bill includes an administrative provision that allows FY2017 and FY2018 advance appropriations funds to provide "fertility treatment and counseling, including treatment using assisted reproductive technology, to veterans and their spouses if the veteran has a service-connected condition that results in the veteran being unable to procreate without the use of such fertility treatment." The bill also contains numerous authorization provisions of veterans programs as administrative provisions. The Senate-passed bill provides $66.38 billion in advance appropriations for the four medical care accounts (medical services, medical community care, medical support and compliance, and medical facilities) and $103.93 billion in advance appropriations for mandatory benefit program accounts (compensation and pensions, readjustment benefits, and veterans insurance and indemnities) for FY2018, the same as the President's request for these accounts for FY2018. Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, and Zika Response and Preparedness Act. (H.R. 5325; P.L. 114-223) On May 26, 2016, the House concurred with the Senate amendment with an amendment consisting of the text of H.R. 4974 , H.R. 5243 , and H.R. 897 , as passed by the House ( H.Res. 751 ). On June 22, the chairman of the House Appropriations Committee filed a conference agreement reached between House and Senate Republican Members ( H.R. 2577 ; H.Rept. 114-640 ). The conference agreement to accompany the FY2017 MILCON-VA appropriations bill and the Zika Response and Preparedness Act was approved by the House on June 23; on June 28, July 14, and September 6, 2016, the Senate voted not to invoke cloture on the conference agreement. On September 22, 2016, S.Amdt. 5082 to H.R. 5325 was proposed by Senator McConnell, and H.R. 5325 (the Legislative Branch Appropriations bill, 2017), as amended, became the legislative vehicle that included the full year FY2017 MILCON-VA appropriations Act. Division A of the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, and Zika Response and Preparedness Act ( H.R. 5325 ; P.L. 114-223 ) contains the FY2017 MILCON-VA appropriations act (which incorporated language from H.R. 2577 ; H.Rept. 114-640 ). Division A of P.L. 114-223 provides $176.89 billion for VA programs and services. This included $102.53 billion for mandatory benefits and services and $74.36 billion for discretionary programs and services. For VBA programs, P.L. 114-223 provided $105.58 billion. This amount included $2.85 billion for VBA general operating expenses moved from under the departmental administration accounts to VBA program accounts. For the NCA, the MILCON-VA Appropriations Act provided $286.19 million. For the VHA, the MILCON-VA Appropriations Act (Division A of P.L. 114-223 ) provides $65.27 billion without collections. Beginning with FY2017, VA programs that provide care in the community (non-VA care) will be funded through a separate medical community care account. This account was established as required by the Surface Transportation and Veterans Health Care Choice Improvement Act ( P.L. 114-41 ) "to consolidate all the VA programs that provide care for veterans in the community from non-VA providers." For FY2017, the medical community care account is funded at $7.25 billion and for FY2018 (advance appropriations) it is funded at $9.41 billion ( Table 2 ). The FY2017 MILCON-VA Appropriations Act provided $4.28 billion for information technology programs ( Table 2 ). Due to issues surrounding interoperability and seamless exchange of medical information among DOD, VA, and private sector health care providers, the FY2017 MILCON-VA Appropriations act—similar to previous MILCON-VA appropriations acts (FY2013-FY2016)—prohibits an obligation or expenditure of more than 25% of FY2017 funds provided for VistA Evolution, or any successor electronic medical records program until VA meets reporting requirements stipulated in the act. For construction, major projects Division A of P.L. 114-223 provided $528.11 million ( Table 2 ). Among other provisions, the FY2017 MILCON-VA appropriations act withholds $222.62 million for VHA major construction projects until the VA enters into an agreement with a non-VA federal entity to serve as the design and/or construction agent for each major construction project with a total estimated cost of $100 million or above. This provision is intended to prevent cost overruns of major construction projects. VA Patient Protection Act of 201627 The FY2017 MILCON-VA appropriations act also includes the VA Patient Protection Act of 2016 as an administrative provision. Section 247 of the FY2017 MILCON-VA appropriations act would establish another process for VA employees to file whistleblower complaints. While it appears that the process for seeking relief under the Whistleblower Protection Act ( P.L. 101-12 , 103 Stat. 16; P.L. 103-424 , 108 Stat. 4361; codified, as amended, in various sections of Title 5, U.S. Code ) would remain available, such employees could also seek relief pursuant to the provisions added by Section 247. Unlike the Whistleblower Protection Act (WPA), the new process allows VA employees to file whistleblower complaints with their immediate supervisors, with the ability to file a complaint with a next-level supervisor if an immediate supervisor does not make a timely determination or a complaint is not adequately addressed. The new process provides for a central whistleblower office to investigate all of the VA's whistleblower complaints, including those brought pursuant to the WPA. If it is determined that a supervisor has engaged in retaliation against a VA whistleblower, for a first offense, the supervisor will be subject to punishment that is not less than a 12-day suspension, but not more than removal. A supervisor will be subject to removal for a second offense. Under the new provisions added by Section 247, a VA supervisor's treatment of whistleblower complaints will be considered as part of the individual's performance evaluation. Fertility Treatment and Adoption Reimbursement Section 260 of the FY2017 MILCON-VA appropriations act (Division A of P.L. 114-223 ) also allows VA to use current FY2017 and FY2018 (advance appropriations) funds in the medical services account to provide fertility treatment using assisted reproductive technology (ART), such as in-vitro fertilization (IVF), and "adoption reimbursement for veterans and their spouses if the veteran has a service-connected disability that results in being unable to procreate without such fertility treatment." According to the Explanatory Statement accompanying the act, the VA must "develop and publish implementing guidance within 120 days of enactment of this Act [that is by January 27, 2017]." The VA published interim-final regulations on January 19, 2017. Under this authority as codified in 38 C.F.R. §17.380 and 38 C.F.R. §17.412, VA may provide IVF treatment to eligible veterans and fertility counseling and IVF treatments to spouses of eligible veterans. Authority to provide these fertility counseling and treatment services using assisted reproductive technology (ART) would end on September 30, 2018. Jason Simcakoski Memorial and Promise Act (title IX of Comprehensive Addiction and Recovery Act of 2016; P.L. 114-198) Division C of P.L. 114-223 included Section 116(c) that would require the VA to use FY2017 advance appropriations provided in the medical services account of the Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2016 ( P.L. 114-113 ), to implement the numerous provisions contained in the Jason Simcakoski Memorial and Promise Act (Title IX of P.L. 114-198 ). The purpose of the act, among other things, is to improve opioid safety and reduce the use of opioids among veterans with chronic pain. Furthermore, the Jason Simcakoski Memorial and Promise Act would establish an office of patient advocacy within the office of the Under Secretary for Health. The office would be required to carry out patient advocacy programs within the VA health care system. No new additional funding was provided by this provision for implementation purposes. Consolidated Appropriations Act, 2017 (Military Construction and Veterans Affairs—Additional Appropriations Act, 2017; P.L. 115-31, Division L) On May 5, 2017, President Trump signed into law the Consolidated Appropriations Act, 2017 ( H.R. 244 ; P.L. 115-31 ). Among other things, Division L of P.L. 115-31 contained the Military Construction and Veterans Affairs—Additional Appropriations Act, 2017. The act provides $50 million for the medical services account for opioid and substance abuse prevention and treatment, and for implementation expenses related to the Jason Simcakoski Memorial and Promise Act ( P.L. 114-198 ). With this additional appropriation, the total amount provided for VA by Division A of P.L. 114-223 and Division L of P.L. 115-31 for FY2017 is approximately $176.94 billion. Of this amount, $74.40 billion is discretionary appropriations and $102.53 billion is mandatory appropriations ( Table 1 ). The total FY2017-enacted amount provided for VHA is $65.32 billion ( Table 2 ).

The Department of Veterans Affairs (VA) provides a range of benefits and services to veterans and eligible dependents who meet certain criteria as authorized by law. These benefits include medical care, disability compensation and pensions, education, vocational rehabilitation and employment services, assistance to homeless veterans, home loan guarantees, administration of life insurance as well as traumatic injury protection insurance for servicemembers, and death benefits that cover burial expenses. The President's FY2017 budget request for the VA was submitted to Congress on February 9, 2016. The President's FY2017 request for VA is approximately $177.54 billion. This amount, which includes $102.53 billion in mandatory funding and $75.01 billion in discretionary appropriations, is a 9.14% increase over the FY2016-enacted level of $162.67 billion. On April 13, 2016, the House Appropriations Committee approved its version of the FY2017 Military Construction and Veterans Affairs, and Related Agencies (MILCON-VA) appropriations bill (H.R. 4974; H.Rept. 114-497). The House passed the measure on May 19. The House-passed measure provides a total of $176.06 billion for the VA, a slight decrease (0.83%) from the President's request of $177.54 billion and an 8.23% increase from the FY2016-enacted amount. This amount includes $102.53 billion in mandatory appropriations and $73.53 billion in discretionary appropriations. On April 14, the Senate Appropriations Committee approved its version of the FY2017 MILCON-VA appropriations bill (S. 2806; S.Rept. 114-237). The Senate passed the FY2017 MILCON-VA appropriations bill on May 19 as an appropriations package that included the FY2017 Transportation, Housing and Urban Development, and Related Agencies (THUD) appropriations bill (Division A); the FY2017 MILCON-VA appropriations bill (Division B), and the Zika Response appropriations bill (Title V of Division B). The Senate-passed version of the FY2017 MILCON-VA appropriations bill (Division B of H.R. 2577) provides a total of $177.39 billion for VA, a 9.04% increase over the FY2016-enacted level of $162.67 billion and slightly less than the President's request for FY2017. This amount includes $102.53 billion in mandatory appropriations and $74.85 billion in discretionary appropriations. On September 29, 2016, President Obama signed the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, and Zika Response and Preparedness Act (H.R. 5325; P.L. 114-223). Division A of this act contained the FY2017 MILCON-VA appropriations act. P.L. 114-223 would provide $176.89 billion for VA for FY2017. This includes $102.53 billion in mandatory funding and $74.36 billion in discretionary funding. The act also contained several administrative provisions including, among others, fertility counseling and treatment using assisted reproductive technology (e.g., in vitro fertilization, IVF) for eligible veterans and their spouses or adoption reimbursement. It also included the VA Patient Protection Act of 2016, which would establish another process for VA employees to file whistleblower complaints in addition to the relief under the Whistleblower Protection Act (P.L. 101-12, 103 Stat. 16; P.L. 103-424, 108 Stat. 4361). On May 5, 2017, President Trump signed the Consolidated Appropriations Act, 2017, which included the Military Construction and Veterans Affairs—Additional Appropriations Act, 2017 (P.L. 115-31, Division L). This act provides an additional $50 million for implementation costs associated with the Jason Simcakoski Memorial and Promise Act (Title IX of P.L. 114-198). Thus the total enacted amount provided for VA for FY2017 is $176.94 billion. This report provides an overview of VA appropriations; for a discussion on military construction appropriations, see CRS Report R44639, Military Construction: FY2017 Appropriations.

Introduction The 115 th Congress has continued to debate the role of the Organization of American States (OAS) in the Western Hemisphere and its utility for advancing U.S. objectives in the region. The United States helped found the OAS in 1948 to establish a multilateral forum in which the nations of the hemisphere could engage one another and address issues of mutual concern. In subsequent decades, OAS decisions often reflected U.S. policy as other member states sought to maintain close relations with the dominant economic and political power in the hemisphere. This was especially true during the early Cold War period, when the United States was able to secure OAS support for initiatives that were controversial in the region, such as a 1962 resolution to exclude Cuba from active participation as a result of its association with the communist bloc. OAS actions again aligned closely with U.S. policy in the 1990s following the end of the Cold War as a result of strong consensus among member states in support of initiatives designed to liberalize markets and strengthen democratic governance. According to many foreign policy analysts, the ability of the United States to exert authority and shape outcomes in the Western Hemisphere has declined over the past 15 years. This is the result of a number of trends. Citizens throughout Latin America and the Caribbean have elected ideologically diverse leaders, bringing an end to the post-Cold War policy consensus. At the same time, many countries in the region have enjoyed considerable economic growth, grown more confident in addressing their challenges, and diversified their commercial and diplomatic relations. These developments have enabled countries in the region to pursue more independent foreign policies that are less deferential to the United States. U.S. policymakers have responded to the United States' declining ability to advance its policy preferences within the OAS in a number of ways. Some Members of Congress, frustrated by the organization's inaction on the political crisis in Venezuela, contend that the OAS is failing in its mission to support democracy and human rights in Latin America. They have called on the U.S. government to use its influence in the organization to compel stronger action on these issues and occasionally have sought to withhold funding from the organization. Others argue that OAS actions continue to align closely with U.S. priorities in many cases and that the OAS should not be deemed ineffective solely based on its inability to resolve a few high-profile challenges. They have called for reforms to strengthen the organization. As Congress continues to debate the utility of the OAS for advancing U.S. policies and considers appropriations and other legislation related to the organization, it might examine OAS activities in the hemisphere and the extent to which those activities align with U.S. objectives. This report briefly discusses the history of the OAS and its principal institutional bodies; examines the organization's funding and current priorities; and analyzes a number of policy issues that have drawn congressional interest in recent years, including the application of the Inter-American Democratic Charter, the challenges facing the inter-American human rights system, the management and budget of the OAS, and the potential reintegration of Cuba into the inter-American system. Background History and Purpose The OAS charter was adopted on April 30, 1948, in Bogotá, Colombia, though multilateral relations among the countries of the Western Hemisphere go back much further. The International Conference of American States, held in Washington, DC, from October 1889 to April 1890, was the first in a series of periodic meetings among the nations of the Americas to establish norms and institutions to govern hemispheric relations and promote cooperation. The participating nations agreed to establish the International Union of American Republics, which was renamed the Pan American Union in 1910. In 1933, following the launch of President Franklin Roosevelt's "Good Neighbor" policy, the United States and other nations in the hemisphere signed the Convention on the Rights and Duties of States, which formally recognized the equality of states and the principle of nonintervention in one another's internal affairs. Close cooperation during World War II considerably strengthened hemispheric ties, which were reinforced in the postwar period with the adoption of the Inter-American Treaty of Reciprocal Assistance (Rio Treaty) in 1947. The OAS Charter and American Declaration of the Rights and Duties of Man were signed a year later by the United States and 20 other countries in the region to legally codify the institutions and principles that had come to form the inter-American system. Although the OAS initially sought to address border disputes and collective security issues, it has expanded its activities into other areas over time. In 1959, the Inter-American Commission on Human Rights was created to carry out the provisions of the American Declaration of the Rights and Duties of Man. During the 1960s, the OAS greatly expanded its economic, social, cultural, scientific, and technological programs, placing a strong emphasis on development following the 1961 launch of President Kennedy's "Alliance for Progress." Abuses by authoritarian governments prompted the creation of the Inter-American Court of Human Rights in 1979, and growing concern over narcotics trafficking led to the establishment of the Inter-American Drug Abuse Control Commission in 1986. The OAS acknowledged the challenges posed by regional and international terrorism by creating the Inter-American Committee Against Terrorism in 1999, and recognized the near-universal commitment to democracy in the region through the adoption of the Inter-American Democratic Charter in 2001. According to the OAS Charter, as amended, the purpose of the organization is to strengthen the peace and security of the continent; promote and consolidate representative democracy, with due respect for the principle of nonintervention; prevent possible causes of difficulties and ensure the pacific settlement of disputes that may arise among member states; provide for common action on the part of those states in the event of aggression; seek the solution of political, juridical, and economic problems that may arise among them; promote, by cooperative action, their economic, social, and cultural development; eradicate extreme poverty, which constitutes an obstacle to the full democratic development of the peoples of the hemisphere; and achieve an effective limitation of conventional weapons that will make it possible to devote the largest amount of resources to the economic and social development of member states. Institutional Bodies The OAS is composed of a variety of councils, committees, and other institutional organs, some of which are autonomous. There are three primary bodies, however, that are responsible for setting and carrying out the agenda of the OAS: the General Assembly, the Permanent Council, and the General Secretariat. General Assembly The General Assembly is the principal policymaking organ of the OAS. It meets annually to debate current issues, approve the organization's budget, and set policies to govern the other OAS bodies. The General Assembly is composed of the delegations of each of the 34 participating member states, with each state having a single vote. It is empowered to adopt most decisions with the affirmative votes of an absolute majority of the member states; however, some decisions, including the adoption of the agenda and the approval of budgetary matters, require the affirmative votes of two-thirds of the member states. In practice, the General Assembly tends to operate by consensus. The 47 th regular session of the General Assembly was held in Cancún, Mexico, in June 2017. The next regular session of the General Assembly is scheduled to be held in Washington, DC, on June 4-5, 2018. Permanent Council The day-to-day governance of the OAS is conducted by the Permanent Council, which meets regularly throughout the year at the organization's headquarters in Washington, DC. Among other activities, the Permanent Council works to maintain friendly relations among member states, assists in the peaceful settlement of disputes, carries out decisions assigned to it by the General Assembly, regulates the General Secretariat when the General Assembly is not in session, receives reports from the various bodies of the inter-American system, and submits recommendations to the General Assembly. Additionally, the Permanent Council is empowered by the Inter-American Democratic Charter to undertake necessary diplomatic initiatives in the event of an unconstitutional alteration of government in a member state. Each member state appoints one representative to the Permanent Council, and each member state has a single vote. The affirmative votes of two-thirds of the member states are required for most Permanent Council decisions. Like the General Assembly, however, the Permanent Council tends to operate by consensus. General Secretariat The General Secretariat, directed by the Secretary General and the Assistant Secretary General, is the permanent bureaucracy charged with implementing the policies set by the General Assembly and the Permanent Council. The Secretary General and the Assistant Secretary General are elected by the General Assembly and serve five-year terms with the possibility of one reelection. According to the OAS Charter, the Secretary General serves as the legal representative of the organization and is allowed to participate in all OAS meetings but does not have a vote. The Secretary General is also empowered to establish offices and hire personnel to implement OAS mandates. Some analysts have argued that—given the virtual paralysis of the organization that can result from differences among member states and the need for consensus—"the effectiveness of the OAS critically depends on the consistent, vigorous, and sometimes risk-taking leadership of the Secretary General." The current Secretary General of the OAS is Luis Almagro, a former foreign minister of Uruguay. He was elected in March 2015 and took office on May 26, 2015. He succeeded José Miguel Insulza of Chile, who served two terms as Secretary General from 2005 to 2015. While Insulza generally focused his efforts on establishing consensus among the member states, Almago has taken on a more activist role, speaking out about democracy and human rights concerns and seeking to establish a larger role for the OAS in resolving the hemisphere's challenges. Almagro's leadership has won praise from U.S. policymakers, but his outspoken style has alienated some member states. Budget The OAS budget is expected to total $151 million in 2018 (see Table 1 ). The largest portion of the budget is the Regular Fund, which covers the day-to-day operating expenses of the organization. The Regular Fund is financed through the assessed contributions, or membership dues, of OAS member states. Quota assessments are calculated based on each member state's gross national income, with adjustments for debt burden and low per capita income. Since 1997, the OAS has sought to supplement the Regular Fund by collecting Specific Funds—voluntary contributions from member states and other international donors that are directed to specific projects or programs. Despite the addition of Specific Funds, the OAS has faced persistent strains on its budget (see " Management and Budget Concerns " below). The United States is the top source of funding for the OAS, contributing an estimated $68 million in FY2017, which was equivalent to 44% of the organization's approved budget. This figure included $50.4 million for the country's assessed contribution and an estimated $17.6 million in voluntary contributions to various Specific Funds (see Table 2 ). U.S. voluntary contributions are intended to advance U.S. strategic goals in the organization and region. In recent years, such contributions have funded democracy promotion and human rights protection efforts, OAS development assistance programs, humanitarian demining in Colombia, and security cooperation in the Caribbean, among other initiatives. The Multilateral Aid Review Act of 2017, S. 1928 , which was reported in the Senate in November 2017, would establish a multilateral review task force to assess the effectiveness of U.S. investments in the OAS and other multilateral institutions. A companion bill, H.R. 4502 , was introduced in the House in November 2017. After the United States, the largest member state contributors to the OAS in 2017 were Brazil ($18.4 million), Canada ($16.8 million), Mexico ($6.7 million), Argentina ($3.0 million), and Peru ($2.7 million). The largest nonmember donors were the United Kingdom ($3.7 million), Sweden ($2.2 million), Switzerland ($1.8 million), the Netherlands ($1.8 million), and Germany ($1.6 million). The Trump Administration requested $42 million for the OAS in FY2018, which is $8.5 million less than the $50.5 million quota assessment that the United States is obligated to pay as a condition of its membership. Congress has yet to adopt a full-year appropriations measure for FY2018 but has enacted a series of short-term continuing resolutions that have funded most foreign operations programs at slightly below the FY2017 level. The reports ( H.Rept. 115-253 and S.Rept. 115-152 ) accompanying the Department of State, Foreign Operations, and Related Programs appropriations measures for FY2018 that were passed by the House ( H.R. 3362 , included as Division G of House-passed H.R. 3354 ) and reported in the Senate ( S. 1780 ) recommend several U.S. voluntary contributions to the OAS. The House report recommends providing $4.5 million to the OAS-backed Mission to Support the Fight against Corruption and Impunity in Honduras (MACCIH by its Spanish acronym). The Senate report recommends providing $5.5 million for the MACCIH, $5 million for the Inter-American Commission on Human Rights, $4 million for democracy programs, and $0.5 million for OAS development assistance programs. The Administration's FY2019 budget request includes $41.9 million for the U.S. assessed contribution to the OAS. Like the Administration's FY2018 budget request, it does not propose any voluntary contributions to the organization. Current Priorities In 2014, the General Assembly adopted a "Strategic Vision of the OAS," which reiterates that the four core pillars of the organization's mission are strengthening democracy; promoting and protecting human rights; advancing integral development; and fostering multidimensional security. Those objectives are "predominantly aligned with the high-level strategic goals for the Western Hemisphere" of the U.S. Department of State and the U.S. Agency for International Development (USAID). Democracy Promotion The OAS has played an active role in promoting and defending democracy, particularly since the end of the Cold War and the return to civilian governance in most of the hemisphere. Member states approved a series of instruments designed to support democratic governance, culminating in the adoption of the Inter-American Democratic Charter on September 11, 2001. The charter asserts that the peoples of the Americas have a right to democracy and their governments have an obligation to promote and defend it. The OAS has sought to uphold these commitments through a number of activities, which include support for, and observation of, elections; technical assistance and other programs to foster institutional development and good governance; and the coordination of collective action when democratic institutions are threatened. Since it began observing electoral processes in 1962, the OAS has deployed more than 250 electoral observation missions in 27 countries. Over the years, the OAS has earned a reputation for impartiality and technical competence, playing an important role in the legitimization of electoral processes in many Latin American and Caribbean countries. The OAS observes several electoral processes every year, but each mission must be invited by the country holding the election and must solicit separate funding from the international donor community. Eight countries have invited the OAS to observe their elections in 2018, including Brazil, which has requested an observation mission for the first time as it prepares to elect a new president in the aftermath of widespread corruption scandals and a controversial presidential impeachment. Some analysts have been critical of OAS observation missions in certain instances, however, maintaining that the organization occasionally has offered legitimacy to flawed elections. The OAS also provides technical assistance to member states designed to strengthen institutions and improve good governance. In 1996, OAS member states adopted the Inter-American Convention against Corruption ( Treaty Doc. 105-39 ), which aims to improve government transparency by strengthening anticorruption laws and facilitating cooperation among member states. Under the follow-up mechanism on the implementation of the convention, member states submit themselves to a reciprocal review process that evaluates how well they are implementing the convention, formulates recommendations for improving anticorruption efforts, and facilitates the exchange of information to harmonize the region's anticorruption legal frameworks. Some countries have requested special OAS political missions to assist them with sensitive governance matters. In Colombia, for example, the OAS Mission to Support the Peace Process is providing verification and advisory support regarding the demobilization and reintegration of illegal armed groups. The OAS Mission to Support the Fight against Corruption and Impunity in Honduras is working with the Honduran government to develop a stronger anticorruption legal framework and investigate and prosecute high-profile corruption cases. The OAS has been less successful at mobilizing collective efforts to defend democracy. In many cases, the General Secretariat and other operational bodies of the OAS have highlighted threats to democratic governance but member states have been unwilling or unable to take action. For example, Secretary General Almagro and the Inter-American Commission on Human Rights have issued numerous reports detailing the collapse of democracy in Venezuela. The Secretary General also has repeatedly called on OAS member states to take whatever steps are necessary, including suspending Venezuela from the organization, to compel the government of Nicolás Maduro to restore the democratic order. Collective action has been stymied, however, by a small group of member states that are ideologically aligned with Venezuela and/or have received subsidized oil from the country. They have successfully exploited the organization's supermajority vote requirements to block nearly every resolution put forward by other member states that would condemn or pressure the Maduro government. The U.S. government and its allies also have been selective in their defense of democracy. An OAS electoral observation mission documented a series of irregularities during the November 2017 general election in Honduras and asserted that it could not be sure that the official results accurately represented the will of the Honduran people. Secretary General Almagro called for new elections to be held and requested a Permanent Council meeting to discuss the matter. OAS member states never collectively assessed the legitimacy of the elections, however, as the United States and several other nations opted to recognize the official results before a Permanent Council meeting could be convened. (For further analysis of the organization's efforts to defend democracy, see " Application of the Inter-American Democratic Charter " below.) Human Rights Protection Many analysts consider the inter-American human rights system, consisting of the Inter-American Commission on Human Rights (IACHR) and the Inter-American Court of Human Rights, to be the most effective part of the OAS. Unlike most of the organization's bodies, the IACHR and the Inter-American Court are autonomous, allowing them to execute their mandates without needing to establish consensus among member states on every action. Consequently, advocates maintain, the two bodies are able to take on the "pivotal role of condemnation and early warning in response to situations that undermine the consolidation of democracy and rule of law" in the hemisphere. The IACHR has a mandate to promote and protect human rights in the region. In the first decades after its 1959 inception, the IACHR's documentation of human rights violations brought international attention to the abuses of repressive regimes. Although the human rights situation in the hemisphere has changed considerably as a result of the spread of democracy, the IACHR continues to receive, analyze, and investigate more than 2,500 allegations of human rights violations annually. The IACHR also issues requests to governments to adopt "precautionary measures" in certain cases where individuals or groups are at risk of suffering serious and irreparable harm to their human rights. Additionally, the IACHR observes the general human rights situations in member states, conducts on-site visits to carry out in-depth analyses, publishes special reports when warranted, and notes in its annual report which countries' human rights situations deserve special attention, follow-up, and monitoring. In its most recent annual report (issued in April 2017 and covering 2016), the IACHR made special note of the human rights situations in Cuba, the Dominican Republic, and Venezuela. Since 1990, the IACHR has created rapporteurships to draw attention to emerging human rights issues and certain groups that are particularly at risk of human rights violations due to vulnerability and discrimination. There are currently 10 rapporteurships, which focus on freedom of expression; human rights defenders; economic, social, and cultural rights; and the rights of women, children, indigenous peoples, afro-descendants, prisoners, migrants, and lesbian, gay, bisexual, trans, and intersex (LGBTI) persons. The Inter-American Court of Human Rights, created in 1979, is an autonomous judicial institution charged with interpreting and applying the American Convention on Human Rights. Currently, 20 OAS member states accept the court's jurisdiction; the United States does not. According to a number of analysts, the Inter-American Court has played an important role in the development of international human rights case law, securing justice for individual victims while facilitating structural changes to prevent future violations. Nevertheless, some observers contend that the court has begun to compromise its credibility by weighing in on controversial matters, such as same-sex marriage, which they argue are outside the court's mandate. Economic and Social Development Although the region has made considerable strides in terms of economic growth and social inclusion, poverty and inequality levels remain high in many countries and the OAS continues to support development efforts. The organization's Department of Economic Development, for example, supports efforts to enhance the productivity and competitiveness of economic actors in the region, with particular emphasis on micro, small, and medium-sized enterprises. It also provides training to governments designed to strengthen their capacities to negotiate and implement trade and investment agreements, and take advantage of new trade opportunities. The Inter-American Agency for Cooperation and Development also supports development efforts through the OAS Development Cooperation Fund. Formerly known as the Special Multilateral Fund of the Inter-American Council for Integral Development, the fund was established in 1997 to address the most urgent needs of member states, especially those with smaller and more vulnerable economies. The Development Cooperation Fund supports efforts to strengthen institutions and build human capacity, with the majority of recent projects focused on social inclusion, social protection, and productive employment. Voluntary contributions to the Development Cooperation Fund have declined drastically over the last decade, falling from more than $6 million in 2008 to $290,000 in 2017. Nevertheless, the OAS Board of External Auditors maintains that the fund is still able to "bring much needed benefits to member states" by providing seed funding that can be leveraged through partnerships with other institutions. Some analysts argue that the OAS should transition out of the development sector. They contend that OAS development programs are "almost without exception, poor quality copies of those undertaken by other institutions," such as the Inter-American Development Bank and the U.N. Development Program, and that the OAS's limited resources should be focused on areas where the organization has a comparative advantage, such as democracy promotion, human rights protection, and conflict resolution. Member states, however, collectively rank economic and social development as the most important pillar of the organization's agenda. Regional Security Cooperation The OAS has dedicated greater attention to hemispheric security issues over the past two decades. In 2005, the OAS established the Secretariat for Multidimensional Security in an attempt to address transnational crime and other regional security threats in a more comprehensive manner. In addition to overseeing antidrug and counterterrorism efforts, as discussed below, the Secretariat supports a variety of activities, including programs to reduce gang violence, prevent human trafficking, and remove land mines. OAS member states coordinate antidrug efforts through the Inter-American Drug Abuse Control Commission (CICAD by its Spanish acronym). CICAD helps OAS member states strengthen their antidrug policies by developing and recommending legislation, providing technical assistance and specialized training, and conducting assessments of member states' progress. CICAD also helps build trust and establish common ground for cooperation between the United States and the rest of the hemisphere. For example, after several regional leaders expressed frustration with the results of U.S.-backed counternarcotics policies, the heads of government attending the 2012 Summit of the Americas called for the OAS to analyze the results of those policies and explore alternative approaches that may be more effective. CICAD prepared two reports, published in 2013, which suggested that member states could benefit from greater policy flexibility, potentially including decriminalization of marijuana. The reports' findings were incorporated into CICAD's 2016-202 0 Hemispheric Plan of Action on Drugs . The Inter-American Committee against Terrorism (CICTE by its Spanish acronym) serves as the primary regional forum through which OAS member states coordinate on counterterrorism issues. Among other efforts, CICTE helps member states implement the 2002 Inter-American Convention against Terrorism ( Treaty Doc. 107-18 ), through which they committed to take action against the financing of terrorism, ratify U.N. antiterrorism instruments, improve cooperation among law enforcement, and deny asylum to suspected terrorists. In 2016, CICTE conducted 68 training courses, technical assistance missions, and other activities that benefited nearly 3,700 participants from throughout the hemisphere. The programs focused on cybersecurity and critical infrastructure protection, border controls, terrorism finance prevention, and antiterrorism legal framework enhancements. Issues for Congress Congress plays an important role in determining U.S. policy toward the OAS. As noted previously, the United States provided more than 44% of the organization's funding in FY2017. Congress appropriates funds for the assessed contribution of the United States, as well as voluntary contributions to support specific projects in the hemisphere. Congress also is involved in the development of inter-American treaties, as any conventions negotiated by the executive branch must be submitted to the Senate for its advice and consent to ratification. Moreover, Congress is charged with providing oversight of how U.S. funds are spent. Members of Congress frequently voice concerns over OAS actions (or lack thereof) and recommend changes in policy. Policy issues that have drawn particular interest from some Members of Congress in recent years include the application of the Inter-American Democratic Charter, challenges to the inter-American human rights system, the management and budget of the OAS, and the potential reintegration of Cuba into the inter-American system. Application of the Inter-American Democratic Charter Background As noted previously, OAS member states adopted the Inter-American Democratic Charter in September 2001. The Democratic Charter begins by asserting that the peoples of the Americas have a right to democracy and their governments have an obligation to promote and defend it. It continues by noting that—in addition to free and fair elections—respect for human rights, the rule of law, political pluralism, and the separation of powers are all essential elements of representative democracy. The Democratic Charter calls on the OAS to promote democracy by carrying out electoral observation missions (when requested) and programs designed to promote democratic values and good governance. It also establishes mechanisms for collective action by member states when a nation's democratic institutions are under threat or have been overturned. Since its adoption, there has been considerable debate within the hemisphere about how the provisions of the Inter-American Democratic Charter should be applied. Although observers have called on the OAS to invoke the collective action mechanisms of the charter on numerous occasions, member states have been reluctant to do so. Analysts have identified three inter-related factors that have limited the operational scope of the Democratic Charter: tension between the principle of nonintervention enshrined in the OAS Charter and the obligation to defend democracy through collective action, the lack of precise criteria for defining when a country has experienced a breakdown in the democratic order, and the inability of powers outside the executive branch to effectively access the OAS. OAS member states acknowledged that democratic breakdowns justify collective action when they adopted the Democratic Charter, but they also placed limits on the Democratic Charter's application to defend the principle of nonintervention. The OAS is not allowed to intervene in situations where democratic institutions appear to be threatened unless the country requests assistance and collective action without a member state's consent can only take place after a rupture in the democratic order has already taken place. In 2009, for example, polarization between governmental institutions in Honduras had been building for several months before then-president Manuel Zelaya was arrested by the military and forced into exile. The Honduran government did not request OAS assistance until shortly before the June 2009 ouster, however, and Zelaya was removed from office a day before an OAS special commission was due to arrive in the country to assess the situation. Consequently, member states were unable to take collective action in Honduras until the country was already in crisis. The unanimous decision to suspend Honduras from the OAS and subsequent diplomatic efforts were incapable of reversing the situation. The Democratic Charter's failure to define what constitutes "an unconstitutional interruption of the democratic order or an unconstitutional alteration of the constitutional regime that seriously impairs the democratic order" has further limited its application. In several countries in the region, democratically elected leaders have engaged in actions that generally follow constitutional procedures but eliminate checks and balances to consolidate power. Since the Democratic Charter is not clear about whether such actions are violations, member states have been unwilling to respond, deferring instead to the principle of nonintervention. For example, the IACHR documented the Venezuelan government's steady erosion of democratic institutions for more than a decade before Secretary General Almagro invoked the Democratic Charter in May 2016, requiring the Permanent Council to undertake a collective assessment of the situation. Although most member states now support OAS efforts to restore democratic governance in Venezuela, a small group of countries aligned with Venezuela has been able to block nearly every resolution on the matter. The composition of the OAS has served as a third barrier to applying the Democratic Charter. The members of the Permanent Council, who are charged with assessing democratic crises, represent their nations' executive branches. Accordingly, they have interpreted the Democratic Charter's requirement that the OAS receive consent from "the government concerned" prior to intervention to mean consent from the nation's executive power. As a result, other branches of government and civil society groups are effectively unable to invoke the Democratic Charter's collective action mechanisms. In December 2004, for example, then-president Lucio Gutierrez of Ecuador dissolved the Supreme Court. Although some within the country called for the Democratic Charter to be invoked, OAS member states took no action. It was only in April 2005, after the Ecuadoran Congress had removed Gutiérrez and the new President, Alfredo Palacio, requested OAS assistance, that member states sent a mission to the country. Policy Considerations Democracy promotion has been a central goal of U.S. policy toward Latin America and the Caribbean since the end of the Cold War. Congress has supported successive administrations' efforts, appropriating foreign assistance intended to strengthen democratic governance and institutions as well as the ability of civil society organizations to hold governments accountable. In recent years, Members of Congress have lauded the advances that have occurred in most of the hemisphere while raising concerns about the declining quality of democracy in some nations. The role of the OAS in promoting democracy is more contested. Some Members of Congress have criticized the OAS for failing to address the erosion of democratic institutions in countries such as Venezuela and Nicaragua, and have questioned whether the organization is meeting its obligations. Others contend that the OAS has supported the spread of democratic governance throughout the hemisphere and argue that the organization's effectiveness in promoting democracy should not be judged solely on setbacks in a few countries. The 115 th Congress has sought to utilize the OAS as part of its broader efforts to address the deterioration of democracy in Venezuela. For example, S.Res. 35 , which the Senate approved by unanimous consent in February 2017, expresses support for Secretary General Almagro's invocation of the Inter-American Democratic Charter, calls on the Permanent Council to undertake a collective assessment of the situation in Venezuela, and urges the President to support OAS efforts to promote democratic solutions to the political impasse. Similarly, H.Res. 259 , passed by the House in December 2017, recognizes Almagro's leadership in promoting democracy in Venezuela, urges OAS member states to push for free and fair elections and the release of all political prisoners, and encourages the President to work with partners at the OAS to impose targeted sanctions against individuals responsible for the deterioration of democratic institutions in Venezuela. Despite agreement among many Members of Congress that the OAS should apply the Democratic Charter more broadly, there appears to be little appetite in the region—even among U.S. allies—for such actions. Given the asymmetrical power relations and the long history of U.S. intervention in the hemisphere, many nations are wary of establishing precedents for foreign involvement in internal affairs. Indeed, they have often used the OAS to engage in defensive multilateralism designed to constrain unilateral U.S. action. Given this aversion to intervention, member states are unlikely to invoke the collective action mechanisms of the Democratic Charter in the near term except in cases of democratic breakdowns that resemble traditional coups d'état. Challenges to the Inter-American Human Rights System Background The inter-American human rights system, which is widely viewed as one of the most effective parts of the OAS, has faced a number of challenges in recent years. In 2011, for example, the Permanent Council established a special working group to examine the IACHR after the commission made a series of decisions that rankled governments in the region. During the review process, some member states called for far-reaching changes to the IACHR, including proposals to adopt more stringent criteria for granting precautionary measures, shift the focus of the IACHR's work away from individual cases toward general human rights promotion, remove the independent budget and staff of the Special Rapporteur for Freedom of Expression, and end the practice of identifying countries that have human rights situations that deserve special attention in the IACHR's annual report. The IACHR ultimately rejected the most problematic recommendations and adopted a series of minor changes to its rules of procedure, policies, and practices. Although some member states have continued to push for more radical changes, they have been unsuccessful thus far. The inter-American human rights system also has struggled with a lack of resources. Roughly half of the IACHR's annual budget is drawn from the OAS Regular Fund, which is financed with member states' assessed dues. The remainder of the IACHR's budget depends on voluntary contributions from member states and international donors, which vary from year to year. In 2016, the IACHR was nearly forced to lay off 40% of its personnel and suspend a number of activities due to a sharp decline in voluntary contributions stemming from fiscal challenges among member states and a shift in priorities among European donors. The crisis ultimately was avoided after the IACHR received a late surge in donations. In 2017, the OAS General Assembly adopted a resolution to increase Regular Fund transfers to the IACHR and the Inter-American Court by 33% per year over the next three years, which will ensure that the inter-American human rights system is fully funded by 2020. This should place the system in a more sustainable financial position; however, it also could increase pressure on the rest of the OAS since member states did not pair the agreement with an increase in assessed contributions. Policy Considerations Congress has expressed considerable support for the inter-American human rights system. In the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ), Congress appropriated $4.5 million in voluntary contributions to the OAS for programs to promote and protect human rights. Similarly, the Senate Appropriations Committee, in the report ( S.Rept. 115-152 ) accompanying its FY2018 foreign operations appropriations bill ( S. 1780 ), noted that it "remains concerned with the budgetary challenges facing the ... Inter-American Commission on Human Rights and the Special Rapporteur for Freedom of Expression, which play important roles in providing access to justice for victims of crimes against humanity and other human rights violations and in defending freedom of the press." The committee recommended providing $5 million in voluntary contributions to the IACHR, including $500,000 for the Special Rapporteur for Freedom of Expression. Nevertheless, some analysts argue that the United States lacks credibility in defending the human rights system given its unwillingness to ratify the hemisphere's human rights treaties. The United States signed the American Convention on Human Rights ( Treaty Doc. 95-21 ) in 1977, but the Senate has never provided its advice and consent to ratification. While some U.S. policymakers have expressed support for ratification, others have raised concerns about potential conflicts with U.S. law and international interference in U.S. domestic affairs. The reluctance of the United States and several other nations to ratify the American Convention has created a multitiered human rights system in the hemisphere that the IACHR and many OAS member states view as problematic. Beyond ratifying the American Convention, some observers argue that the U.S. government could demonstrate greater support for the inter-American human rights system by doing more to comply with the IACHR's recommendations for improving human rights in the United States. The IACHR has issued recommendations to the United States in 27 cases since 2001; as of 2016, the United States was in full compliance in one case, partial compliance in 10 cases, and noncompliance in 16 cases. Among other recommendations, the IACHR repeatedly has called on the United States to halt the use of capital punishment and ensure foreign nationals who are detained in the United States are informed of their right to consular assistance. Although the United States is currently subject to the jurisdiction of the IACHR under the American Declaration of the Rights and Duties of Man (adopted in 1948 alongside the OAS Charter), the U.S. government argues that the declaration does not create legally binding obligations. Management and Budget Concerns Background The OAS has faced persistent budget problems over the past two decades. Member states' assessed contributions to the OAS Regular Fund, which covers day-to-day operating expenses, have stagnated for extended periods of time, resulting in a nearly 21% decline in the organization's purchasing power between 2001 and 2017. At the same time, member states have required the OAS to provide annual cost of living increases to its employees and have continued to assign new mandates to the organization. This combination of frozen funding levels and increased costs and responsibilities has created a structural deficit at the organization. The OAS initially used resources from its reserve fund and member state payments of back dues to bridge the gap, but those financial reserves were exhausted by 2010. To find additional savings, the OAS has delayed needed infrastructure investments and maintenance, postponed information technology upgrades, and reduced Regular Fund staff posts by nearly 31% over the past seven years. Nevertheless, the financial situation of the OAS remains precarious. According to the 2017 report of the organization's Board of External Auditors (covering 2016), "the OAS' budgetary structural imbalance continues to result in cash flow shortages in the Regular Fund and a programmatic agenda that is not financially sustainable." The board noted that 2016 was the sixth consecutive year that the OAS ended the fiscal year with a deficit in the Regular Fund, and asserted that member states need to identify programs to cut since "savings from administrative efficiencies and/or ad hoc revenues alone will not solve the problem." Some analysts contend that the organization's recurring budgetary problems have created a vicious circle in which the OAS is "unable to invest in the human and institutional capital necessary to meet its mandate, and therefore unable to demonstrate its true importance and potential" to member states, leading to further hollowing out of the organization. Policy Considerations Congress has expressed concerns about the management and budget of the OAS and has adopted legislation designed to strengthen the organization. The OAS Revitalization and Reform Act of 2013 ( P.L. 113-41 ) called on the OAS to prioritize its core functions and reduce its mandates, implement a results-based budgeting process and a transparent and merit-based human resource process, and alter its quota structure by October 2018 so that no member state is responsible for more than 50% of the organization's assessed contributions. The legislation also directed the U.S. Secretary of State to develop a strategy to ensure that the OAS adopts the reforms and provide quarterly briefings to Congress on their implementation. The OAS has made progress on many of the reforms recommended by Congress in the 4½ years since the OAS Revitalization and Reform Act was adopted. Secretary General Almagro has worked with the General Assembly and Permanent Council to develop a comprehensive strategic plan and realign the organization's structure and resources to focus on its four core priorities. For example, the Permanent Council reviewed 856 mandates that had been assigned to the OAS and identified 82 as priorities that aligned with the organization's strategic vision. The General Secretariat also has drafted a supplement strategic plan that defines the organization's objectives, describes the activities to be undertaken to achieve them, establishes indicators and timeframes for measuring progress, and assigns responsibilities to various OAS bodies. Member states may consider changes to the organization's quota structure in the coming months. In November 2017, the General Assembly adopted a resolution directing the Permanent Council to propose modifications that would gradually reduce the assessed dues of the largest contributor (the United States) to less than 50% of the total; the proposal is due by March 23, 2018. Reaching a consensus among member states may be difficult, however, as any reductions in the assessed contributions of the United States would need to be offset by increased contributions from other member states or further cuts to OAS staff and programs. The Trump Administration's FY2019 budget request for the OAS, which is approximately $8.5 million less than the U.S. government's estimated quota assessment, is based on the expectation that "the funding burden will be shared more equitably among member states." Some analysts argue that member states should agree to a one-time special assessment to recapitalize the OAS and cover the cost of deferred maintenance as part of their broader efforts to rebalance the quota structure and stabilize the organization's finances. Reintegration of Cuba into the Inter-American System80 Background Cuba was one of the founding members of the OAS and, as a signatory to the OAS Charter, remains a member. It has not participated in the organization since 1962, however, as a result of a decision at the Eighth Meeting of Consultation of the Ministers of Foreign Affairs to suspend Cuba for its adherence to Marxism-Leninism and alignment with the communist bloc. The resolution to exclude Cuba was controversial when it was adopted, and the reintegration of Cuba into the inter-American system has remained a frequent source of contention among the countries of the hemisphere ever since. Over the past decade, Latin American and Caribbean member states of the OAS repeatedly have pushed to include Cuba in hemispheric forums. At the 2009 OAS General Assembly, member states adopted a measure to repeal the 1962 resolution that suspended Cuba from participation in the OAS. The measure states that Cuba's eventual participation in the OAS "will be the result of a process of dialogue initiated at the request of the Government of Cuba, and in accordance with the practices, purposes, and principles of the OAS," which include representative democracy and respect for human rights. Although the Cuban government declared the repeal a "major victory," it also stated that it had no interest in participating in the OAS. In 2015, Cuban President Raúl Castro attended the Seventh Summit of the Americas in Panama. Although the Summits of the Americas are not officially part of the OAS, the OAS serves as the technical secretariat for the summit process, and previous summits only included the participating members of the OAS. Panama invited Cuba to attend the summit after every country in the hemisphere—with the exceptions of Canada and the United States—voiced support for Cuba's inclusion during the Sixth Summit of the Americas in 2012. During his inaugural speech, Secretary General Almagro asserted that the Seventh Summit of the Americas "was a turning point in our hemisphere." He went on to say he would "work to enable Cuba to become fully integrated into the OAS, obviously taking into account the need to make allowance for time frames and processes that are not under our control." Raúl Castro has repeatedly reiterated that Cuba is not interested in participating in the organization, however, and Almagro's relations with the Cuban government have deteriorated over the past three years as the Secretary General has become more outspoken in calling for democratic reforms. Cuba denied Almagro entry into the country to accept an award in honor of the late democracy activist Oswaldo Payá in 2017, and Raúl Castro reportedly asserted in March 2018 that OAS officials "will never be welcome" in Cuba. Policy Considerations Over the years, Members of Congress generally have agreed on the overall goals of U.S. policy toward Cuba—to help bring democracy and respect for human rights to the island—but have disagreed about how best to achieve those objectives. Some have argued that isolating Cuba is the best way to produce change. They opposed President Obama's efforts to normalize relations with Cuba and have lauded President Trump's decision to partially roll back U.S. engagement. Other Members contend that the sanctions-based policy that has been in place since the early 1960s has failed and argue that U.S. engagement is the best way to encourage reforms in Cuba. Congressional debate surrounding the reintegration of Cuba into the inter-American system has reflected the disagreements over broader U.S. policy toward the island. Members of Congress who have opposed engagement with Cuba have also opposed efforts to reintegrate the country into the inter-American system. In previous years, some Members introduced bills that would have withheld U.S. contributions to the OAS if Cuba were allowed to participate in the organization or the Summits of the Americas prior to transitioning to democracy. Conversely, Members who support greater U.S. engagement with Cuba generally have celebrated the country's inclusion in hemispheric forums. Congressional actions related to the normalization of relations with Cuba and the country's reintegration into the inter-American system could have broader implications for U.S. interests in the hemisphere. Latin American governments across the ideological spectrum have opposed the U.S. government's sanctions-based policy toward Cuba and have lauded the rapprochement between the U.S. and Cuban governments. Many analysts maintain that President Obama's decision to reestablish diplomatic relations with Cuba "removed a contentious issue that has been a thorn in U.S.-Latin American relations and has diverted attention from more productive areas of collaboration in the hemisphere." Likewise, some argue that the reintegration of Cuba into the inter-American system could create political space for allies in the region to place more pressure on Cuba regarding human rights and democracy. For example, several Cuban dissidents were able to attend and participate in the Civil Society and Social Actors Forum that took place alongside the Seventh Summit of the Americas. Others argue that Cuba's inclusion in hemispheric forums weakens the legitimacy of those institutions and "sends the wrong message about the consolidation of democracy in the Americas." Outlook In 1948, Alberto Lleras Camargo, the first Secretary General of the OAS, asserted "the organization ... is what the member governments want it to be and nothing else." This has held true throughout the organization's history, with the OAS engaging in activities and adopting new areas of focus in accordance with the decisions of member states. As an organization composed of 35 diverse nations that operates based on consensus, however, the OAS is often slow to arrive at decisions and prone to inaction. This is especially the case when the hemisphere is ideologically polarized or addressing contentious topics. Nevertheless, even when member states are incapable of establishing consensus on a given issue, the OAS continues to carry out a variety of activities to advance the organization's broad objectives: democracy promotion, human rights protection, economic and social development, and regional security cooperation. As the organization's largest financial contributor and the hemisphere's most powerful nation, the United States remains influential within the OAS. The organization's objectives in the region are largely consistent with those of the United States, and many of its activities complement U.S. efforts. At the same time, OAS actions (or the lack thereof) do not always align with the organization's stated objectives, and the U.S. government's ability to advance its policy initiatives in the organization has declined over the past 15 years. These conflicting tendencies are likely to continue in the coming years, spurring on the congressional debate over the utility of the OAS for advancing U.S. interests in the Western Hemisphere.

The Organization of American States (OAS) is a regional multilateral organization that includes all 35 independent countries of the Western Hemisphere (though Cuba currently does not participate). It was established in 1948 as a forum in which the nations of the hemisphere could engage one another and address issues of mutual concern. Today, the OAS concentrates on four broad objectives: democracy promotion, human rights protection, economic and social development, and regional security cooperation. It carries out a variety of activities to advance these goals, often providing policy guidance and technical assistance to member states. The United States is the largest financial contributor to the OAS, providing an estimated $68 million in FY2017—equivalent to 44% of the organization's total budget. U.S. Policy The United States historically has sought to use the OAS to advance economic, political, and security objectives in the Western Hemisphere. Although OAS actions frequently reflected U.S. policy during the 20th century, this has changed to a certain extent over the past 15 years. The organization's goals and day-to-day activities are still generally consistent with U.S. policy toward the region, but the U.S. government has struggled to obtain support from other member states on some high-profile issues, such as efforts to address the political crisis in Venezuela. As the OAS's decisions have begun to reflect the increasing independence of its member states, U.S. policymakers occasionally have expressed concerns about the direction of the organization. In recent years, some Members of Congress have criticized the OAS for failing to address the erosion of democratic institutions in Venezuela and other nations and have questioned whether the United States should continue to fund the organization. Others argue that the OAS remains an important forum for advancing U.S. relations with the other nations of the hemisphere and that U.S. policy should seek to strengthen the organization and make it more effective. Congressional Action The 115th Congress has continued to shape U.S. policy toward the OAS through its legislative and oversight activities. The Consolidated Appropriations Act, 2017 (P.L. 115-31), provided funding for the U.S. assessed contribution (membership dues) to the OAS, as well as $14.5 million in voluntary contributions to support the organization's anticorruption, human rights, democracy, and development assistance programs. Congress has yet to conclude action on FY2018 appropriations, but the House and Senate Appropriations Committees both have recommended providing voluntary contributions to the OAS in the reports (H.Rept. 115-253 and S.Rept. 115-152) accompanying their respective FY2018 foreign operations appropriations bills (H.R. 3362, included as Division G of House-passed H.R. 3354, and S. 1780). In November 2017, the Multilateral Aid Review Act of 2017 (S. 1928) was reported in the Senate and a companion bill (H.R. 4502) was introduced in the House. The measures would establish a multilateral review task force to assess the effectiveness of U.S. investments in the OAS and other multilateral institutions. Congress also has held hearings to examine U.S. policy toward the OAS. On November 30, 2017, the Senate Committee on Foreign Relations held a hearing to consider President Trump's nomination of Carlos Trujillo to be the U.S. Permanent Representative to the OAS. The committee reported the nomination favorably, but Trujillo has yet to receive a confirmation vote from the full Senate. On February 14, 2018, the House Committee on Foreign Affairs, Subcommittee on the Western Hemisphere, held a hearing on "Advancing U.S. Interests through the Organization of American States."

Legislative Background On December 11, 1980, Congress enacted the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, P.L. 96-510 ) to create the hazardous substance cleanup program. The program became known as "Superfund" in reference to the trust fund established by the law. The fund was originally supported by taxes levied on specific petroleum products and chemicals, and a corporate environmental income tax. Until recent years, the Superfund taxes provided the majority of the funding for the needs of the program. At the time of CERCLA's enactment, other federal environmental statutes provided federal agencies with only limited authority to address contamination at abandoned sites. CERCLA gave the federal government the authority to take direct action to respond to instances involving uncontrolled releases of hazardous substances (or pollutants and contaminants) that may endanger public health or the environment. CERCLA also enables the Environmental Protection Agency (EPA) to compel the persons responsible to clean up their contaminated sites. If the potentially responsible parties (PRPs) cannot be located, or they are unable (generally for financial reasons) to perform cleanup, EPA is authorized to use monies from the Superfund Trust Fund to clean up the site. CERCLA was expanded and reauthorized by the Superfund Amendments and Reauthorization Act of 1986 (SARA, P.L. 99-499 ). Amendments after SARA have been narrowly focused. In 1992 and 1996, Congress enacted legislation allowing for easier transfer of military bases with contaminated areas to local entities. In 1996 and 1999, Congress provided conditional liability exemptions for financial institutions and recycling facilities. In 2002, Congress enacted the Small Business Liability Relief and Brownfields Revitalization Act ( P.L. 108-118 ), which added further liability relief and authorized the Brownfields Program. Table 1 lists the various CERCLA amendments. Superfund Program Implementation The National Oil and Hazardous Substances Pollution Contingency Plan (NCP) contains the procedures and regulations for implementing the Superfund program. Generally, EPA leads the response to releases on land and in inland waters, whereas the Coast Guard leads the response in coastal waters of the United States. Responding to Releases Actions under the Superfund program are triggered by a release (or threat of release) of a hazardous substance into the environment. The CERCLA "environment" includes all media: water (surface and groundwater), soil, and air. CERCLA defines "hazardous substance" to include all the materials identified as hazardous under the Resource Conservation Recovery Act (RCRA), the Clean Water Act (CWA), the Clean Air Act (CAA), and the Toxic Substances Control Act (TSCA). CERCLA also authorizes EPA to respond to releases of "pollutants or contaminants," which are broadly defined to include virtually anything that can threaten the health of "any organism." Petroleum is specifically excluded from the definition of hazardous substance and pollutant or contaminant. This means that neither CERCLA authority nor trust fund monies may be used to respond to releases of petroleum. However, the 2002 Brownfields law authorizes the cleanup of some petroleum-contaminated sites. Site Assessment The Superfund cleanup process starts either with a site discovery or with a notification to EPA of a potential hazardous substance release. Sites of concern can be discovered by various parties: citizens, state agencies, or EPA Regional offices. CERCLA § 103 requires release notification. Facilities must notify the National Response Center if there has been a release of a hazardous substance above a certain threshold, termed a reportable quantity (RQ). Since the inception of the Superfund program, EPA has catalogued more than 47,000 potentially contaminated sites in the agency's database: the Comprehensive Environmental Response, Compensation, and Liability Information System (CERCLIS) . After a site has been identified, EPA or a state agency performs a preliminary assessment to judge the site's potential hazards. After further screening, EPA uses the Hazard Ranking System (HRS) to score the site's contamination and its risk of exposure to surrounding communities. The National Priorities List Sites that score high enough on the HRS are eligible for the National Priorities List (NPL), which is generally considered the official list of the most hazardous sites in the nation. Only a small percentage of the sites assessed are placed on the NPL. Over Superfund's history, EPA has placed 1,569 sites on the NPL (as of October 1, 2007). Of these sites, 321 have met cleanup goals and have been subsequently removed (deleted) from the NPL. At an additional 1,030 sites all physical construction activities have been performed, and operation and maintenance (such as treatment of contaminated groundwater) is ongoing. These sites are referred to as "construction complete." The NPL has been described as the centerpiece of the Superfund program, and thus it has been a focal point for Superfund criticism. As noted in a comprehensive report prepared by Resources for the Future (RFF) (hereafter referred to as the RFF Report): The expense and pace of cleaning up NPL sites has been, and continues to be, a contentious topic among followers of the Superfund program.... [E]ven though more than half of all NPL sites have been deemed "construction complete"—meaning that all physical remedies are in place and immediate risks posed by the site have been addressed—there remain hundreds of sites placed on the NPL during the early years of the program where cleanup remedies have still not been fully implemented. Some interest groups have questioned the listing process itself and the slow pace of cleanup at NPL sites. The decision to list a site on the NPL is ultimately at EPA's discretion. Many factors, other than the HRS score, influence whether a site is proposed for listing—for example, state support, community concerns, and Superfund budgetary issues. EPA has stated that The NPL is only of limited significance, however, as it does not assign liability to any party or to the owner of any specific property. Neither does placing a site on the NPL mean that any remedial or removal action necessarily need be taken. There are two categories of response activity in the Superfund program: (1) short-term removal action and (2) long-term remedial action. The trust fund can support removal action at NPL or non-NPL sites. However, trust fund monies can be used for remedial activity only if the site is on the NPL. The Removal Program The removal program grew out of the recognition that certain hazardous substance releases would necessitate a quick response. Removal action seeks to stabilize a site, and in some cases this minimizes the need for further cleanup. Removal action can be undertaken at sites regardless of their NPL status, and historically, most removal actions occur at non-NPL sites. CERCLA limits removal action to a one-year effort and expenditures of not more than $2 million. This limit applies only to efforts led by EPA and funded by trust fund dollars, not at sites where the responsible party is performing cleanup. Not all actions under the removal program are considered equally urgent. EPA groups removal actions into the following three categories: (1) Classic emergencies. Those actions where the release requires that on-site activities be initiated within minutes or hours of the determination that a removal action is appropriate. (2) Time-Critical Actions. Those actions where, based on an evaluation of the site, EPA determines that less than six months is available before site activities must be initiated. (3) Non-Time-Critical Actions. Those actions where, based on an evaluation of the site, EPA determines that more than six months is available before on-site activities must begin. Removal actions may include, but are not limited to: repairing a hazardous waste storage unit (e.g., landfill cover), transporting leaking drums to an appropriate disposal facility, and erecting a security fence to reduce opportunity of exposure. In recent years, the removal program has consistently received about one-third of the amount appropriated to the remedial program (see Figure 1 ). The Remedial Program The remedial program is the core of the Superfund program. In contrast to removal actions, remedial actions, in general, take more time, cost more money, and represent a more permanent solution. Congress consistently apportions about half of the annual Superfund appropriation to the remedial program (see Figure 1 ). The remedial program consists of multiple process steps, each with its own term of art. Although the remedial process does not typically follow a linear, step-by-step progression, a simplified version of events is discussed below, highlighting the main milestones. The remedial program first involves a comprehensive investigation of the site and analysis of cleanup alternatives or remedies. This examination process (the Remedial Investigation/Feasibility Study, or RI/FS) can take months, or even years. Following completion of the RI/FS, EPA selects a remedy to address the site's contamination. EPA must solicit public comment when determining the remedy for the site, and states typically play an active role in the remedy selection process. CERCLA directs EPA to select a permanent remedy or treatment whenever possible. The less-preferred option is to leave the waste in place and reduce human exposure (e.g., soil cover or security fence). If the method chosen is not permanent, EPA must review the site every five years to ensure remedy protection. After EPA decides the site-specific cleanup remedy and issues a formal Record of Decision (ROD), the remedial design (RD) phase commences. The RD is the engineering plan used to implement the remedy chosen by EPA. Development of the RD takes, on average, approximately two years. After the RD is complete, the actual cleanup process (Remedial Action) begins. For sites where cleanup has been completed, the total process, from start (a proposed listing on the NPL) to finish (cleanup goals achieved), takes between 8 and 11 years, on average. Cleanup Standards CERCLA directs EPA to assure that Superfund site cleanups protect human health and the environment. CERCLA specifically requires cleanups to meet "any standard, requirement, criteria, or limitation" under any federal or state environmental law. EPA may waive this requirement if, for example, meeting the standard will not provide a balance between (1) the need for protection of health and the environment at the site and (2) the availability of monies in the trust fund for other locations. CERCLA Liability CERCLA contains a liability scheme that is, by any measure, stringent. If a hazardous substance is released, or threatened to be released, from a facility, CERCLA liability may attach to a wide variety of persons. A potentially responsible party (PRP) is any individual or company that may have contributed to contamination at a Superfund site. PRPs may include current or former owners of a facility or vessel, current or former operators of a facility or vessel, generators who sent hazardous substances to the site, and transporters who brought hazardous substances to the site. CERCLA liability is considered to be strict, joint and several, and retroactive: Strict liability means that a party can be held responsible regardless of negligence. Moreover, under CERCLA, proof of causation is not necessary. Joint and several liability means that any liable party can be held responsible for the full cost of cleanup, regardless of the degree of involvement. Retroactive liability means that parties can be held responsible for actions that caused contamination prior to the passage of CERCLA. CERCLA's liability scheme provides EPA with strong enforcement authority to require PRPs to address site contamination. The joint and several component creates an incentive for one PRP (already identified by EPA) to locate other PRPs, so that the cleanup costs can be shared. The statute does provide several defenses, exemptions, and mechanisms for eliminating or reducing a party's CERCLA liability. This report does not discuss these devices. For information regarding several of them, see CRS Report RL31911, " Innocent Landowners " and " Prospective Purchasers " Under the Superfund Act , by [author name scrubbed]. Natural Resource Damages30 In addition to cleanup costs, CERCLA requires PRPs to address the environmental harm they caused by restoring or replacing any injured natural resources. PRPs must also pay for the lost use of a publicly owned resource and the associated damage assessment. CERCLA designates federal, state, and tribal authorities to serve as natural resource trustees within their jurisdiction. Only the trustees can make a natural resource damages claim under CERCLA. In some respects, liability for natural resource damages is more narrow than the liability for cleanup costs. For example, natural resource injuries occurring wholly before the enactment of CERCLA (1980) are excluded. Also, a claim must be brought within three years of its discovery and connection to a particular release. Federal Superfund Sites With the passage of SARA in 1986, federal facilities became subject to CERCLA in the same fashion as non-governmental entities. Before SARA was enacted, no federal facilities were placed on the National Priorities List (NPL). Since 1986, EPA has placed 172 federal facilities on the final NPL. Almost all federal facilities on the NPL are defense sites, including military facilities administered by the Department of Defense (DOD) and former nuclear weapons production sites administered by the Department of Energy (DOE). These sites are among the most contaminated of those on the entire NPL. The Superfund Trust Fund cannot be used to pay for cleanup at federal facilities. The agency responsible for the contamination is responsible for cleanup, and funding for removal or remedial action must come from that agency's budget. However, the trust fund may be used to provide alternative water supplies if groundwater contamination migrates beyond the facility boundaries and other PRPs are involved at the site. At federal sites on the NPL, EPA oversees remedy selection and remedial action. Federal sites that do not qualify for the NPL are subject to state laws concerning removal, remedial action, and enforcement. At these sites, states oversee cleanup activity. There are almost 800 sites nationwide that fall into this category. The State Role in the Superfund Process SARA encourages state involvement at Superfund sites, and outlines minimum requirements for state participation at virtually every phase of decision-making, from site assessment to enforcement and actively managing the site cleanup. CERCLA § 104(c) requires states to pay 10% of the remedial cleanup costs, and 100% of the operation and maintenance costs beginning 10 years after construction of the remedy has been completed. However, if the facility was operated by the state (or a political subdivision thereof) at the time of disposal, the state must share 50% of the removal or remedial cleanup costs. This cost-sharing component may play a role in whether sites are listed on the NPL. Although not currently required by law, EPA typically does not propose new sites to the NPL without a state's agreement. For budgetary reasons, states may be hesitant to add Fund-led sites to the NPL. Most Superfund sites are not on the NPL. Of the roughly 10,000 sites currently in the CERCLIS database, about 90% are not on the NPL. At these non-NPL sites, the federal role may include cleanup assessment or removal activity, or the federal government may have no presence at all. State cleanup programs have the authority to assess and clean up non-NPL sites and to identify other potential hazardous sites. The majority of the state cleanup programs have authorities similar to the federal Superfund program. Selected Superfund Issues This section of the report discusses four Superfund issues that have received interest in recent years. The first two issues concern program funding, including who should fund the program (industry or general taxpayers) and how much funding is needed to meet the program's obligations. The second two issues concern CERCLA interaction at specific site types: abandoned hardrock mines and animal feeding operations. Superfund Trust Fund and Taxes38 In February 2002, controversy erupted over the Bush Administration's proposal not to request renewal of the Superfund taxes in its FY2003 budget submission —a decision repeated in its submissions for FY2004 through FY2008. Congress has concurred with the Administration's position and chosen not to renew the Superfund taxes. The tax authority expired in 1995, but the fund's balance remained positive until FY2003. Without dedicated taxes, and with a relatively small balance in the trust fund, Congress has been using general revenues for a larger percentage of cleanup funds. Although several Members of Congress have introduced bills to reinstate the taxes during these years, such efforts have lacked the necessary support. CERCLA established the Superfund program and its trust fund in 1980. Although General Treasury revenues have provided some support for the program since its inception, the trust fund traditionally provided most of the funding for the Superfund program. Congress raised trust fund revenues primarily through excise taxes on the petroleum and chemical industries, and a corporate environmental income tax. These dedicated taxes sustained the trust fund until the taxing authority expired December 31, 1995. Since 1995, efforts to reinstate the taxes have not succeeded. At the end of FY1996, the trust fund reached a peak balance of $3.8 billion (see Figure 2 ). Without a consistent source of funding, the balance dwindled essentially to zero by the end of FY2003. The annual budgets have compensated for the lack of dedicated tax revenue by increasing the contribution from the general fund of the U.S. Treasury. In fiscal years 2004-2007, virtually the entire Superfund program was funded through General Treasury revenues appropriated by Congress. The FY2008 budget request followed this course, proposing to fund the vast majority of the $1.24 billion requested appropriation from General Treasury revenues. In a majority of cases, Superfund cleanups are paid for by potentially responsible parties (PRPs)—usually current or previous owners and/or operators of the site. According to EPA, PRPs conduct cleanup at more than 70% of the sites on the NPL. At approximately 30% of the NPL sites, either EPA cannot locate PRPs for these properties or the PRPs located do not have the necessary financial resources to assist with cleanup. It is primarily for this group of NPL sites (often called "orphan" sites) that EPA uses funds from the trust fund to conduct cleanup activities. In general, the current Superfund funding debate (i.e., whether a dedicated tax or General Treasury revenues should support the trust fund) applies to this subset of NPL sites. Proponents of reinstating the Superfund taxes argue that the cleanup of orphan sites should rely on taxes paid by the chemical and petroleum industries and companies that use CERCLA hazardous substances, not ordinary taxpayers. They refer to this as the "polluter pays" principle. When Bush Administration spokespersons indicate support for the "polluter pays" concept, they generally mean that cleanup should be funded by the parties directly involved (i.e., PRPs) rather than by industrial sectors or corporations that did not directly contribute to a specific site's contamination. Opponents of reinstating the tax argue, for example, that the tax is overreaching and unfair, as it applies to all industry sectors and to both compliant and noncompliant companies. Superfund tax proponents contend that in the context of federal budget deficits, it may be difficult to maintain spending at needed levels without dedicated taxes. Amendments to CERCLA have addressed some of the claims of unfairness. The Asset Conservation, Lender Liability, and Deposit Insurance Protection Act of 1996 ( P.L. 104-208 ) limited banks' and other lenders' exposure to Superfund liability at a contaminated site to the amount of their loans. Businesses engaged in recycling were absolved of liability if they met certain criteria showing that their activities were genuine recycling, and not shams to disguise illegal disposal of hazardous substances (Superfund Recycling Equity Act, P.L. 106-113 ). Additional limits on CERCLA liability were provided in the Small Business Liability Relief and Brownfields Revitalization Act ( P.L. 107-118 ), which made contributors of small amounts of hazardous substances at an NPL site exempt from liability if the wastes were disposed prior to April 1, 2001. Also exempted were residential property owners, small businesses, and small nonprofit organizations that sent only municipal solid waste to NPL sites, as well as property owners whose land abuts a Superfund site, prospective purchasers of contaminated property, and innocent landowners. Since the 107 th Congress, legislation has been introduced that would reinstate the Superfund taxes, but these efforts have failed. In the 110 th Congress, several members, including Senate Environment and Public Works Committee Chairman Barbara Boxer and Subcommittee on Superfund and Environmental Health Chair Hillary Clinton, have spoken in favor of restoring the taxes. Representative Maurice Hinchey ( H.R. 1887 ) and Senator Robert Casey ( S. 1179 ) introduced companion bills that would reinstate the taxes, and for the first five years would increase them by 50% to fund a response at "megasites" (where cleanup costs exceed $50 million) and at sites that present high health risks. Representatives Earl Blumenauer and Frank Pallone introduced H.R. 3636 , which would reimpose the taxes beginning with the date of enactment until January 1, 2018. Representative Pallone's H.R. 3962 would restore the taxes at their previous rates through the end of 2015. Superfund Program Funding Needs and Appropriation Levels Related to the Superfund program funding debate is the concern that the Superfund program is not receiving enough funding to match its annual obligations. Recent evidence indicates that appropriations from the past several years have fallen short of program needs. If Congress decides to increase annual appropriations without reinstating the Superfund taxes, General Treasury revenues contribution to the program will increase, possibly conflicting with deficit reduction goals. As noted above, in July 2001, Resources for the Future (RFF) released a comprehensive study, mandated by Congress, that estimated future program needs for fiscal years 2000-2009. RFF calculated that the base case program needs for FY2008 would be $1.7 billion. The report also estimated a high and low case: $1.5 billion and $1.8 billion per year, respectively. RFF concluded that funding needs would remain above $1.6 billion annually through FY2009 (using RFF's base case). As Figure 3 indicates, annual Superfund appropriations in recent years have consistently been several hundred million dollars less than the funding needs projected by RFF. Several factors contributed to RFF's projections for increased funding needs. First, RFF anticipated that numerous "mega sites" would move beyond the analysis and design phases and into the actual construction and cleanup phases. In the RFF analysis, the cost of remedial action at mega sites was projected to remain above historic levels through FY2007, and the cost of the Superfund program as a whole was projected to remain above FY2001 levels through at least FY2009 (the final year in the analysis). Second, EPA's Office of Inspector General (IG) highlighted the concern that hardrock mining sites may have a significant financial impact on the trust fund. The IG identified "156 hardrock mining sites nationwide that have the potential to cost between $7 billion and $24 billion to clean up." Although the IG points out uncertainty regarding the risks to human health and the environment at these sites, there is also uncertainty concerning PRPs and their ability to pay for cleanup. There is evidence that funding shortfalls have occurred in recent years. According to an EPA IG report, in FY2002, the EPA regional offices received no funds for seven of the sites at which the regions requested construction funding. At five different sites, the Regions received less than half of the total funds requested. In FY2003, the IG identified an additional 11 sites that could not begin construction because of a funding shortfall, and at least 5 other sites that did not receive their full funding request in that year. Although the IG did not report on the subject in FY2004, a survey of EPA staff by the House Energy and Commerce Committee Democratic staff found a reported shortfall of $263.1 million. EPA challenged some of the committee data but confirmed in letters to House and Senate Democrats that, due to lack of funding, it did not start construction at 19 sites that were ready for construction in FY2004. Congress could increase appropriation levels to meet the increased funding needs. The Administration notes that it requested increases in funding in both its FY2004 request for $1.39 billion and its FY2005 request for $1.38 billion, which Congress did not provide. Congress cut the FY2004 and FY2005 requests by $132 million and $134 million, respectively. Although the Administration's request in FY2006 ($1.28 billion) was lower compared with previous years, Congress cut the proposal by $40 million, enacting $1.24 billion. The Administration requested $1.26 billion for FY2007, a $20 million decrease from its previous request, but $20 million above the amount enacted by Congress in FY2006 (See Figure 4 ). The 109 th Congress adjourned without finalizing FY2007 appropriations for EPA, but it enacted a continuing resolution ( P.L. 109-383 , H.J.Res. 102 ) to provide funding through February 15, 2007. Pursuant to the formula provided in the continuing resolution, the Superfund program will continue to receive funding consistent with the FY2006 enacted appropriation. For FY2008 the Administration has requested $1.24 billion. Given RFF's projected funding needs for the Superfund program and the relatively minimal amounts available to the fund from sources other than general revenues, Congress will face competing interests if it attempts to appropriate all of Superfund's needs. RFF estimates that General Treasury revenue contributions as high as $1.5 billion per year would be needed to finance Superfund through the rest of the decade in the continued absence of Superfund taxes. This could prove difficult in light of current federal deficits and other funding priorities. Abandoned Hardrock Mines Although CERCLA liability is a powerful tool for EPA to drive cleanup of contaminated sites, the threat of CERCLA liability may act as a cleanup disincentive at abandoned hardrock mines. There are thousands of inactive or abandoned hardrock mines in the United States. As discussed previously, the number of hardrock mining sites listed on the NPL in future years, particularly those without identifiable PRPs, could play an important role in the Superfund funding debate. This section examines the interaction between CERCLA and contaminated hardrock mines. Background Hardrock mining involves the extraction of metals found in the earth's hard formations. Although the raw materials generated are essential to the U.S. economy, the hardrock mining process creates vast quantities of waste materials. EPA's Toxic Release Inventory (TRI) data show that the metal mining industry consistently leads other industry sectors in total annual releases of TRI chemicals. Hardrock mining played a central role in the development of the American West. However, as mining sites became uneconomical, mines were closed or the owners simply walked away. The precise number of inactive or abandoned mines is unknown. Though arguably a conservative estimate, EPA states that there are 200,000 inactive or abandoned mines throughout the country. The actual number of sites that pose a threat is also unknown. Estimates vary, and they seem to depend on how a threat is classified. For example, the Western Governors Association estimated that approximately 20% of abandoned mine lands (AMLs) may present a "concern" to water quality, public safety, or both. In its 1997 report, EPA found that only a small percentage of AMLs "contribute significantly" to threats to human health or the environment, but the aggregate impact is substantial, with many localized areas suffering serious environmental impacts. In 2002, an EPA team found that 5%-10% of the abandoned mines across the country may pose a "real environmental and health risk." Mining Sites and the National Priorities List CERCLA provides EPA with the authority to address environmental contamination (e.g., acid mine drainage) at AMLs. Pursuant to CERCLA authority, EPA has completed or overseen removal actions at 74 hardrock mining sites. EPA has listed at least 88 hardrock mining sites on the NPL. At least 17 of these mines are considered mega sites, with cleanup costs over $50 million at each site. Considering the large universe of AMLs, one might question why such a small percentage of the sites are listed on the NPL. There are several factors, particular to the mining industry, that may explain this. First, AML ownership often goes back more than 100 years and involves numerous private and public entities. Thus, the identification of PRPs is especially complex at mining sites. Second, the average cleanup cost—about $22 million—at a non-mega mining site is more than double the average cost of non-mega sites in other industries. Cleanup activities at mega mining sites can cost hundreds of millions of dollars. Third, states may provide some resistance to Fund-led (i.e., sites without PRPs) cleanup at mining sites, because the Superfund statute requires the state to pay 10% of the remedial costs and 100% of operation and maintenance costs. At mining sites, these costs could be significant and last for an indefinite period of time. On the other hand, several factors may lead EPA and the states to increase the number of AMLs on the NPL. For instance, growing populations in the West, due either to business development or purchases of second homes, may bolster the pressure to remove contamination from local water sources. Moreover, CWA requirements may provide further pressure to address the pollution from AMLs. Section 303(d) of the Clean Water Act requires states to identify pollutant-impaired water segments and develop "total maximum daily loads" (TMDLs) that set the maximum amount of pollution that a water body can receive without violating water quality standards. Federal Land Issues As with the total number of inactive or abandoned mines, the precise number of these mines on federal lands is unknown. The federal government owns a substantial percentage of the land in the western states, and many of the AMLs are on federal land. CERCLA prohibits the use of trust fund dollars at federally owned facilities. Federal land managers may need to clean up the site with funds from their own budget, if the federal government is considered the owner of the abandoned mine. Good Samaritan Issues The term "good samaritan" refers to parties (e.g., government agencies, nonprofits, and corporations) that attempt to clean up abandoned mines for which the parties have no legal responsibility. In most cases, these parties have a vested interest in cleaning up the contaminated mines and are not acting purely for altruistic reasons, as the term "good samaritan" might imply. Some stakeholders believe that the threat of CERCLA liability serves as a disincentive to good samaritan groups who might offer cleanup assistance. Under CERCLA's joint and several liability, EPA can hold one PRP responsible for the entire site cleanup. Under the statute's broad liability structure, good samaritans could potentially become liable as site owners, operators, or as persons who arrange for the disposal of a hazardous substance. For example, good samaritans who conduct remediation activities, such as the treatment of acid mine drainage, might be considered a site operator. Many groups argue that the threat of CERCLA liability creates a chilling effect, discouraging volunteer cleanup at abandoned mining sites. These parties have called for federal legislation that would provide good samaritans with protection from Superfund's liability scheme. In general, most parties support the concept of encouraging good samaritan assistance at AMLs. However, some environmental groups are concerned about providing exemptions from CERCLA's liability, pointing out that the strong liability provisions often drive cleanup at mining sites. Furthermore, some argue that the Superfund statute already provides liability protection for good samaritans. CERCLA § 107(d) (often referred to as the "good samaritan provision") might allow good samaritans to provide cleanup assistance at the direction of EPA, without the threat of liability. The Small Business Liability Relief and Brownfields Revitalization Act of 2002 ( P.L. 107-118 ), which amended portions of Superfund, added the "bona fide prospective purchaser" (BFPP) exemption. This provision allows parties to purchase contaminated property without accepting the liability for historical contamination, notwithstanding that they knew of the contamination when they purchased. The BFPP exemption is conditional. For example, BFPPs must take "reasonable steps" to (1) stop continuing releases, (2) prevent threatened future releases, and (3) prevent or limit human, environmental, or natural resource exposure to earlier hazardous substance releases. Thus, BFPPs may need to address the releases related to the actions of former owner/operators. Regarding this issue, EPA stated: Congress did not intend to create, as a general matter, the same types of response obligations that exist for a CERCLA liable party (e.g., removal of contaminated soil, extraction and treatment of contaminated groundwater).... Nevertheless, it seems clear that Congress also did not intend to allow a landowner to ignore the potential dangers associated with hazardous substances on its property. [Emphasis in original.] Regardless of the opportunities for avoiding liability, interested parties argue that the threat of Superfund liability remains. In a general sense, good samaritans may be uncertain how EPA would apply the BFPP provisions at a particular mining site. This uncertainty is perhaps amplified due to the possibility of citizen suits, which may occur if environmental or community groups disagree with an agency's interpretation or application of the law. Legislation Four good samaritan bills were introduced in the 109 th Congress. None of the bills received committee action, although the House Transportation and Infrastructure, Water Resources and Environment Subcommittee held an oversight hearing on hardrock mine cleanup and good samaritans on March 30, 2006. No bills have been introduced in the 110 th Congress. For more information, see CRS Report RL33575, Cleanup at Abandoned Hardrock Mines: Issues Raised by " Good Samaritan " Legislation in the 109 th Congress , by [author name scrubbed] and [author name scrubbed]. Releases from Animal Feeding Operations84 In the United States, there are approximately 238,000 animal feeding operations (AFO)—agriculture enterprises where animals are kept and raised in confinement. Animal waste from these operations generates several chemicals (e.g., ammonia, hydrogen sulfide, and phosphorous) that are listed as CERCLA hazardous substances. CERCLA requires facilities to report hazardous substance releases into the environment, including ambient air, that are above reportable quantities (RQ). The RQ for hydrogen sulfide and ammonia is 100 pounds per day; the RQ for phosphorous is 1 pound per day. In recent years, there have been questions as to how CERCLA applies to animal feeding operations. For example, are AFOs required to report ammonia air emissions as releases under CERCLA, and if so, how should the releases be counted in regards to the RQ? Several federal courts have addressed this particular issue by examining the CERCLA definition of "facility." Instead of counting each barn, lagoon, or land application area as separate facilities, these courts have ruled that the entire site should be considered a facility for purposes of CERCLA. Under this interpretation, large AFOs (referred to as concentrated animal feeding operations , or CAFOs) will be more likely to breach the reportable quantity levels because multiple release locations at a given site will be aggregated. At a hearing before the House Appropriations Subcommittee on Interior, Environment, and Related Agencies on February 28, 2007, EPA Administrator Stephen Johnson testified that the Agency was developing a regulation to exempt CAFOs from Superfund mandates to report air emissions. He said this would be a "very narrow regulation." Another question concerns CERCLA liability for manure that reaches water bodies (via erosion or leaching into groundwater). Manure is often applied to the land as fertilizer, but CERCLA excludes the "normal application of fertilizer" from the definition of release. Interested parties have argued that some AFOs are taking advantage of this exclusion by applying more manure to the land than is necessary. In the past three years, two federal district courts have looked into this matter, but both cases were settled. The terms of the settlements were not made public, and the settlements effectively ended the court proceedings without a formal ruling on the CERCLA applicability issues. However, a third case involving this issue is currently in the federal system. This court activity has increased concern in the agricultural community that other legal actions will follow, and that the courts will continue to apply CERCLA to AFOs. This concern has led to recent congressional interest. Members in the 109 th Congress made several attempts to exempt manure from the requirements of CERCLA. Although one of these legislative proposals ( H.R. 4341 ) gained considerable support (191 co-sponsors), the proposals also generated opposition from environmental groups and state and local governments. None of the bills were enacted. In the 110 th Congress, H.R. 1398 and S. 807 follow a similar approach. There has been no action on either bill. Senator Blanche Lincoln submitted Senate Amendment 1556 to the energy bill, H.R. 6 , on June 13, 2007; it would have added an exemption for manure from the definitions of "hazardous substance" and "pollutant or contaminant," and would have provided exceptions from other provisions of CERCLA. However, during debate the amendment was not offered. H.R. 6 passed the Senate on June 21, 2007. Conclusion Superfund issues, such as the four described above, continue to generate debate and interest. The selected topics discussed in this report are not mutually exclusive; activity in one of the issues may influence policy in another. For example, if more abandoned hardrock mining sites are added to the NPL, Congress may consider increasing annual appropriations to the Superfund program. This action could affect the argument concerning who should pay for the program. Similarly, CERCLA's level of application to animal feeding operations could affect the use of agency resources in the future. If more sites fall under the CERCLA umbrella, finite agency resources may be strained, thus further fueling a debate over Superfund taxes and funding levels.

Superfund is the federal government's principal program for cleaning up the nation's contaminated waste sites and protecting public health and the environment from releases of hazardous substances. Enacted into law as the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA, P.L. 96-510), the program became known as Superfund because Congress established a large trust fund—originally supported by taxes levied on specific petroleum products and chemicals—to provide the majority of the program's funding needs. Although the 26-year-old program has seen less attention compared with earlier years, Superfund issues continue to generate debate. This report provides a background and overview of the Superfund program and examines four topics that received interest in recent years. The first issue concerns Superfund program funding: who should pay for the program, general taxpayers or a dedicated tax on industry? The program was originally funded by a tax on industry that expired at the end of 1995. Without dedicated taxes, and with a relatively small balance in the trust fund, Congress has been using general revenues for a larger percentage of cleanup funds. Members introduced bills to reinstate the taxes in the current and past three Congresses, but so far these efforts have lacked the necessary support. The second issue regards Superfund program appropriations. Recent evidence indicates that appropriations from the past several years have fallen short of program needs. The Administration's FY2007 budget proposal for Superfund also fell below levels that, according to some estimates, are needed to meet program obligations. Without reinstating the Superfund taxes, any increased appropriation would be funded through General Treasury revenues. The third issue involves Superfund interaction with abandoned and contaminated hardrock mines. The number of hardrock mining sites requiring cleanup in future years, particularly those without identifiable responsible parties, could play an important role in the Superfund funding debate. There is also a concern that the threat of CERCLA liability may act as a cleanup disincentive for "good samaritans" who might offer cleanup assistance at abandoned hardrock mines. The fourth issue concerns Superfund's role at animal feeding operations. Stakeholders argue about whether these operations should be required to report ammonia air emissions, primarily resulting from animal waste, as hazardous substance releases. This issue also concerns the responsibility for releases of animal waste that reach water bodies.

Final Developments Third Continuing Resolution Extends Funding into FY2007 (and into the 110th Congress) The 109 th Congress adjourned with the FY2007 appropriations process still under way. A third continuing resolution (CR), P.L. 109-383 , signed into law December 9, 2006, provided funding for government operations (including the Departments of Health and Human Services and Education) through February 15, 2007, based on the FY2006 rate. For information on FY2007 Labor-HHS-Education the appropriations bills that were approved by House and Senate committees, but did not receive floor action, see the section " FY2007 Appropriations Process ," later in this report. Final Rule on Head Start Transportation Waivers On October 4, 2006, a final rule was published in the Federal Register authorizing, effective November 1, 2006, the Department of Health and Human Services to issue waivers to Head Start grantees from two of the provisions of the Head Start Transportation Regulation (45 CFR Part 1310). These two requirements are that children be secured in age- and weight-appropriate child restraint systems, and that there be at least one monitor onboard any bus transporting Head Start children. Federal Child Care-Related Programs and Tax Provisions Several federal programs support child care or related services, primarily for low-income working families. In addition, the tax code includes provisions specifically targeted to assist families with child care expenses. Descriptions of those programs and tax provisions follow, as does Table 1 , which shows funding (or estimated revenue loss or obligations where applicable) for the programs and tax provisions for the past five years. In many cases, other Congressional Research Service (CRS) reports are referenced as sources for more detailed information about individual programs. Several programs were due for reauthorization in the 109 th Congress (i.e., Child Care and Development Block Grant and Head Start), but remained unauthorized at the end of the 109 th Congress, whereas others (TANF and mandatory child care funding) were reauthorized in the second session. Readers should be aware that this report does not attempt to cover all issues connected with each of those reauthorizations. Child Care and Development Block Grant (CCDBG)3 The primary federal grant program funding child care is the CCDBG, which was created in 1990, and reauthorized and substantially expanded in 1996, as part of welfare reform. The CCDBG has been due to be reauthorized since the end of FY2002, and remained an incomplete agenda item at the close of the 109 th Congress. (See the " Legislative Activity in the 109 th Congress " section of this report for more on the unsuccessful reauthorization efforts.) The CCDBG is administered by the Department of Health and Human Services (HHS), and provides formula block grants to states, which use the grants to subsidize the child care expenses of families with children under age 13, if the parents are working or in school and family income is less than 85% of the state median. (In practice, many states establish income eligibility levels that are lower than this federal threshold.) Child care services are provided on a sliding fee scale basis, and parents may choose to receive assistance through vouchers or certificates, which can be used with a provider of the parents' choice, including sectarian providers and relatives. States receiving CCDBG funds must establish child care licensing standards, although federal law does not dictate what these standards should be or what types of providers must be covered. In addition, states must have health and safety requirements applicable to all providers receiving CCDBG subsidies that address prevention and control of infectious diseases, building and physical premises safety, and health and safety training for care givers. However, federal law does not dictate the specific contents of these requirements. The CCDBG is funded through both discretionary and capped entitlement grants (referred to in combination as the Child Care and Development Fund (CCDF)), and state maintenance-of-effort (MOE) and matching requirements apply to part of the entitlement funds. States must use at least 4% of their total funds to improve the quality and availability of child care, and according to statute, must target 70% of entitlement funds on welfare recipients working toward self-sufficiency or families at risk of welfare dependency. However, because all families falling below the 85% of state median income requirement can be categorized as "at risk," the 70% targeting of the welfare or at-risk population does not necessarily mean welfare families must be served. In theory, all funds may be used for low-income, non-welfare, working families. However, state plans indicate that many states guarantee child care to welfare families. No more than 5% of state allotments may be used for state administrative costs. The FY2006 Appropriations Act for the Departments of Labor, HHS, and Education ( P.L. 109-149 ) included roughly $2.1 billion in discretionary funding for the CCDBG. (An across-the-board rescission of 1% brought the precise total to $2.062 billion.) For FY2005, the Consolidated Appropriations Act ( P.L. 108-447 ) provided $2.083 billion. Mandatory (or "entitlement") CCDBG funding beginning in FY2003 through FY2005 was provided at the FY2002 rate ($2.717 billion for the year), under a series of funding extensions. Ultimately, funding for a longer, five-year period (FY2006-FY2010) was included in the Deficit Reduction Act of 2005, a budget spending reconciliation bill ( S. 1932 ), which was signed into law ( P.L. 109-171 ) on February 8, 2006. This law provides $2.917 billion annually for each of FY2006-2010. Temporary Assistance for Needy Families (TANF) TANF, created in the 1996 welfare reform law ( P.L. 104-193 ), provides fixed block grants for state-designed programs of time-limited and work-conditioned aid to needy families with children. The original legislation provided $16.5 billion annually through FY2002, and after a series of twelve temporary extensions, Congress included several welfare provisions (and mandatory child care funding) in its spending budget reconciliation bill ( S. 1932 ) which was signed into law ( P.L. 109-171 ) on February 8, 2006. The law maintains the TANF block grant at $16.5 billion for FY2006-2010. Child care is one of many services for which states may use TANF funding. In FY2005, HHS reports that states spent $1.3 billion in federal TANF funds for child care within the TANF program, and $1.92 billion in state TANF and separate state program (SSP) MOE funds. (Of that $1.92 billion in state spending, approximately $858 million could be "double counted" as state spending toward the CCDF MOE requirement.) In addition, states may transfer up to 30% of their TANF allotments to the CCDBG (CCDF), to be spent according to the rules of that program (as opposed to TANF rules). The transfer from the FY2005 TANF allotment to the CCDBG totaled $2.0 billion (representing 12% of the FY2005 TANF allotment). Child and Adult Care Food Program (CACFP) The CACFP provides federal funds (in some cases commodities) for meals and snacks served in licensed child care centers, family and group day care homes, and Head Start centers. Child care providers that are exempt from state licensing requirements must comply with alternative state or federal standards. Children under 12, migrant children under 15, and children with disabilities of any age may participate, although most are preschoolers. Eligible providers are usually public and private nonprofit organizations. The CACFP is an open-ended entitlement, administered by the Department of Agriculture. For FY2005, obligations are estimated to have been $2.066 billion, increasing to $2.174 billion in FY2006. Social Services Block Grant (SSBG) Title XX of the Social Security Act authorizes Social Services Block Grants, which may be used for social services at the states' discretion. There are no federal income eligibility requirements, targeting provisions, service mandates, or matching requirements. The most recently published HHS analysis of state expenditures indicates that 10% of total SSBG expenditures made in FY2004 ($254 million) were for child care in that year, an increase from those made for child care in FY2003 ($165 million). Title XX is a capped entitlement, and state allocations are based on relative population size. It should be noted that although the SSBG has an entitlement ceiling, appropriations may not always abide by it. For example, the ceiling in FY2001 was $1.7 billion; however, Congress appropriated $1.725 billion for that year, despite the ceiling. The FY2006 Appropriations Act for the Departments of Labor, HHS, and Education ( P.L. 109-149 ) included identical provisions to the FY2005 appropriations: $1.7 billion for the SSBG and states' authority to transfer up to 10% of their TANF block grants to the SSBG. (Note: the SSBG is not a discretionary program, and thus was not affected by the across-the-board rescission.) In addition to the regular SSBG funding, an additional $550 million was provided in the Defense Appropriations Act ( P.L. 109-148 ), targeted for needs arising from the Gulf Coast Hurricanes of 2005. Head Start Head Start provides comprehensive early childhood education and development services to low-income preschool children, typically (but not always) on a part-time basis. The Head Start Act has been due to be reauthorized since the end of FY2003, but remained an unfinished legislative agenda item at the close of the 109 th Congress. Funding has nevertheless been provided through the appropriations process. Under current law, Head Start funds are provided directly by HHS to local grantees, which must comply with detailed federal performance standards. In its budget request for FY2006, the Administration proposed to give up to nine states the opportunity to administer Head Start, provided they demonstrate how Head Start will be coordinated with other preschool programs and services to emphasize developing skills and behaviors including language development; pre-reading skills; numeracy; and social and emotional competence, while meeting state-established accountability standards. This proposal proved controversial in both the House and Senate during the 108 th Congress, and was not proposed in either the reauthorization bill passed in the House ( H.R. 2123 ) or the Senate bill approved in committee ( S. 1107 ) during the 109 th Congress; nor did the President propose it with his budget for FY2007. The available data show funded enrollment for Head Start in FY2005 to have totaled 906,993 children (10% of whom were under age 3, participating in Early Head Start). The FY2006 Appropriations Act for the Departments of Labor, HHS, and Education ( P.L. 109-149 ) provided $6.786 billion (post-rescission of 1%) for Head Start, a decrease from the FY2005 funding level (post-rescission of 0.8%) of $6.843 billion. In addition, as mentioned earlier, the Defense Appropriations Law ( P.L. 109-148 ) provided $90 million in Head Start funding to be used specifically for grantees serving children displaced by last year's Gulf Coast hurricanes, and to help with costs of renovating Head Start facilities that were affected by the storms. 21st Century Community Learning Centers (21st CCLC) The 21 st Century Community Learning Centers program is administered by the Department of Education and is authorized under the Elementary and Secondary Education Act (ESEA), as amended in 2002 by the No Child Left Behind Act ( P.L. 107-110 ). Funding for the 21 st CCLC program is provided to states under a formula grant, based on states' shares of Title I, Part A funds. States then use their allocations to make competitive awards to local educational agencies, community-based organizations, or consortia of public or private agencies that primarily serve students who attend schools with concentrations of poor students or low-performing schools. The focus of the program is to provide after-school academic enrichment opportunities for children in these communities. The 1% rescission applied to the appropriation provided by the FY2006 Appropriations Act ( P.L. 109-149 ) dropped the funding level to $981 million ($10 million less than FY2005 funding). Even Start The Department of Education administers the Even Start program, which provides grants for family literacy projects that include early childhood education. The appropriation for FY2006 was $99 million (post-rescission), a cut of $126 million from the FY2005 funding level of $225 million. Individuals with Disabilities Education Act (IDEA) Programs The Individuals with Disabilities Education Act (IDEA) authorizes an early intervention program for infants and toddlers with disabilities and their families, and preschool grants for children with disabilities. IDEA was reauthorized during the 108 th Congress. FY2006 appropriations (post-rescission) for the IDEA infants and toddlers program were $436 million, and the funding level for the preschool grants program was $381 million. Early Reading First The Early Reading First program, authorized by the Elementary and Secondary Education Act of 1965 (as amended), supports local efforts to enhance the school readiness of young children—particularly those from low-income families—through scientific research-based strategies and professional development that are designed to enhance the verbal skills, phonological awareness, letter knowledge, and pre-reading skills of preschool age children. The program provides competitive grants to eligible local educational agencies (LEAs) and to public or private organizations or agencies that are located in eligible LEAs. The Department of Education may award grants for up to six years. The FY2006 Appropriations Act ( P.L. 109-149 ) funded this program at $103 million (post-rescission). Early Childhood Educator Professional Development The Department of Education provides competitive grants to partnerships to improve the knowledge and skills of early childhood educators who work in communities that have high concentrations of children living in poverty. For each of FY2006 and FY2005, approximately $15 million was appropriated for these grants. Child Care Access Means Parents in School (CAMPIS) Authorized under the Higher Education Act amendments of 1998, and first funded for FY1999 at $5 million, the CAMPIS program is designed to support the participation of low-income parents in post-secondary education through campus-based child care services. Discretionary grants of up to four years in duration are awarded competitively to institutions of higher education, to either supplement existing child care services, or to start a new program. Funding for FY2006 was $15.8 million. Early Learning Fund/Early Learning Opportunities Act Program This HHS program (referred to by both names), authorized by the FY2001 Consolidated Appropriations Act ( P.L. 106-554 ) was last funded in FY2005 at $36 million. The FY2006 Appropriations Act includes no funding for this program. When funded, the program provided grants to communities to enhance school readiness for children under five, specifically by funding efforts to improve the cognitive, physical, social, and emotional development of these children. Although authorized at $600 million, FY2002 funding for the program was set at $25 million; FY2003 funding was set at $34 million (despite the President's FY2003 budget proposal to eliminate the program) and for FY2004, P.L. 108-199 included $34 million for the Early Learning Fund. Dependent Care Tax Credit (DCTC) The DCTC is a non-refundable tax credit for employment-related expenses incurred for the care of a dependent child under 13 or a disabled dependent or spouse, under Section 21 of the tax code. Beginning in tax year 2003, the Economic Growth and Tax Relief Reconciliation Act of 2001 ( P.L. 107-16 ) increased the maximum credit rate to 35% of expenses up to $3,000 for one child (for a credit of $1,050), and up to $6,000 for two or more children (for a credit of $2,100). The 35% rate applies to taxpayers with adjusted gross incomes of $15,000 or less. The rate decreases by 1% for each additional $2,000 increment (or portion thereof) in income until the rate reaches 20% for taxpayers with incomes over $43,000. The Joint Committee on Taxation's estimated revenue loss for 2005 is $3 billion, and $2.2 billion for 2006. Dependent Care Assistance Program (DCAP) Under Section 129 of the tax code, payments made by a taxpayer's employer for dependent care assistance may be excluded from the employee's income and, therefore, not be subject to federal income tax or employment taxes. The maximum exclusion is $5,000. Section 125 of the tax code allows employers to include dependent care assistance, along with other fringe benefits, in nontaxable flexible benefit or "cafeteria" plans. The estimated revenue loss associated with this income exclusion is $1 billion in 2005 and $1.1 billion for 2006. FY2006 Appropriations Following a lengthy appropriations process that included three continuing resolutions and consideration of two conference reports, a bill making appropriations for the Departments of Labor, HHS, and Education ( H.R. 3010 ) was ultimately signed into law ( P.L. 109-149 ) on December 30, 2005. Table 2 shows how the funding levels included in the conference agreement (and ultimately approved and signed into law), compare to the levels requested by the Administration and approved in the House and Senate versions of H.R. 3010 , discussed below. An across-the-board rescission of 1% was applied to discretionary programs funded under P.L. 109-149 , and the numbers in the table reflect that. President's FY2006 request On February 7, 2005, President Bush released his budget request for FY2006, which proposed to fund most, but not all, child care and related programs at the same rounded levels provided in FY2005. Exceptions included Head Start, for which a $45 million increase was proposed, and Even Start and the Early Learning Fund, both of which the Administration proposed to eliminate. Table 2 provides the Administration's proposed funding levels for child care and related programs for FY2006. (The President's proposed funding levels for FY2007 were released February 6, 2006 and are discussed later in this report.) House On June 24, 2005, the House amended and passed H.R. 3010 , a bill to make FY2006 appropriations for the Departments of Labor, Health and Human Services, and Education. House-proposed funding levels for FY2006 matched the levels requested in the President's FY2006 budget, with the exception of the Head Start and Even Start programs, which the House proposed to fund at higher levels than proposed by the President. Senate On July 14, 2005, the Senate Appropriations Committee approved and reported its own version of H.R. 3010 ( S.Rept. 109-103 ). Proposed funding levels mirrored those proposed in the House bill, with the following exceptions: Head Start funding was proposed at a level $25 million less than in the House bill; Even Start would have been eliminated (as proposed by the Administration); and the IDEA Infants and Toddlers Program would have been provided with $3 million more than proposed in the House version. President Bush's FY2007 Budget Request On February 6, 2006, President Bush released his budget request for FY2007, which proposed to fund most, but not all, child care and related programs at the same levels provided in FY2006. The exceptions included the Social Services Block Grant, which he proposed be cut from $1.7 billion to $1.2 billion, and the Even Start program, which the Administration proposed to eliminate. Table 3 provides the Administration's proposed funding levels for child care and related programs compared to the levels approved in House and Senate committees in 2006. Note that the FY2007 appropriations process was still under way at the close of the 109 th Congress, with funding being provided (through February 15, 2007) under a third continuing resolution ( P.L. 109-383 ) at the programs' FY2006 rate. Supplemental funding, like that provided to Head Start and SSBG to target needs arising from the 2005 Gulf hurricanes, is not considered in determining the rate for FY2007. (See " FY2007 Appropriations Process ," later in this report). CCDBG The President proposed to maintain both the discretionary and mandatory portions of funding for the child care block grant (referred to in combination as the Child Care and Development Fund (CCDF)) at the same levels provided for FY2006: $2.062 billion and $2.917 billion, respectively. The budget proposal did not include a plan for maintaining current service levels. According to budget documents, the number of children projected to receive child care services funded through CCDF, TANF (transfers and direct child care spending) and the SSBG will decrease by 300,000 over the next five years (from 2.1 million estimated to be served in FY2006, to 1.8 million in FY2011.) TANF The President proposed to maintain TANF in FY2007 at the level agreed upon in the Deficit Reduction Act ( P.L. 109-171 ), which provides $16.5 billion annually for FY2006-2010. These funds may continue to be used for child care, at states' discretion. The President's budget also proposed to maintain states' authority to transfer up to 10% of their TANF grants to the SSBG. SSBG The SSBG, a potential source of funding for child care, would have experienced a cut under the President's proposal. The President proposed to provide $1.2 billion for the SSBG in FY2007, a decrease of $500 million from the $1.7 billion provided in the FY2006 HHS Appropriations Act. The Administration contended that "while SSBG provides State flexibility, as the Congress intended, it fails to ensure that funds are directed towards activities that achieve results." In addition, it argued that "the purposes of SSBG overlap substantially with other categorical and flexible Federal social service programs." (Note: the FY2006 Defense Appropriations Act ( P.L. 109-148 ) provided an additional $550 million in special SSBG hurricane relief funding for FY2006, which was largely directed towards the affected Gulf states.) Head Start The President proposed to maintain Head Start funding at a level of $6.786 billion (the same amount included—post-rescission—in the FY2006 HHS Appropriations Act ( P.L. 109-149 )). In its Justification of Estimates for the Appropriations Committees, the Administration (HHS) contended that by allowing a greater portion of Head Start funds to be shifted away from training and technical assistance and into direct service grants, the number of children estimated to be served by Head Start (and Early Head Start) would increase to approximately 917,000 (an increase of roughly 10,000 children from FY2006 estimates). 21st Century Community Learning Centers The President recommended that the 21 st CCLC program be funded in FY2007 at the same level as in FY2006: $981 million. The Administration contended that the request would enable districts to provide after-school learning opportunities to more than 1.3 million students in 2,900 after-school programs. IDEA Grants for Infants and Families and Preschool Grants The President proposed to maintain the same level of funding for these grants as provided in FY2006: $436 million for grants to infants and families, and $381 million for preschool grants. The Administration stated that the budget request for infants and families grants would provide support to 57 state agencies serving approximately 315,400 infants and toddlers with disabilities, and their families. It contended that the request for preschool grants would provide an estimated $502 per child for approximately 759,000 children. Even Start For the third year in a row, the Administration proposed to eliminate the Even Start program, which, despite the previous year's Presidential request, was funded at a level of $99 million in FY2006, making steps towards eliminating much but not all, of the program. The FY2007 request—for no funding—would complete the process. The President has argued that limited resources are better spent in early childhood programs such as Reading First and Early Reading First , which, according to the Administration "are better structured to implement proven research and to achieve the President's literacy goals." (The FY2007 budget request proposed no increase for Early Reading First ($103 million program) or Reading First ($1 billion program). Child Care Access Means Parents in School (CAMPIS) The President proposed to continue funding the CAMPIS program at the same level as in FY2006 (post-rescission), which is $15.8 million. The Administration estimated that the FY2007 request would fund 181 existing projects. FY2007 Appropriations Process The FY2007 appropriations process, still under way at the close of the 109 th Congress, has consisted of a series of continuing resolutions, the third of which ( P.L. 109-383 ) is to provide funding through February 15, 2007, at the FY2006 annual rate. The 2006 fiscal year concluded with Congress failing to pass most of its appropriations bills for FY2007, including a bill making appropriations for the Departments of HHS, Labor, and Education. Therefore, in order to continue funding government operations into FY2007, Congress passed the first of three continuing resolutions (CR), attaching it to the Defense Appropriations Conference Report ( H.Rept. 109-676 ), and it was signed into law ( P.L. 109-289 ) on September 29, 2006. As of this writing, a third CR ( P.L. 109-383 ) provides funding through February 15, 2007, at programs' FY2006 rate. (Supplemental funding, like that provided to Head Start and SSBG to target needs arising from the 2005 Gulf hurricanes, was not included in determining the FY2006 rate for the FY2007 appropriations.) While neither the House nor Senate passed a bill in the 109 th Congress making FY2007 appropriations for the Departments of Labor, Health and Human Services, and Education, their respective Appropriations Committees did pass bills. The House committee reported H.R. 5647 ( H.Rept. 109-515 ) on June 20, 2006, and the Senate committee reported S. 3708 ( S.Rept. 109-287 ) one month later. The committees' proposed funding levels for child care and select related programs are shown in Table 3 , alongside the funding levels requested by the President. The Administration's Early Childhood Initiative Good Start, Grow Smart: The Bush Administration's Early Childhood Initiative, was first announced by the President in April of 2002 and has been reflected in budget proposals and program initiatives since that date. Not all the proposals have been adopted, however. Good Start, Grow Smart focuses on three overall areas: (1) strengthening Head Start; (2) partnering with states to improve early childhood education; and (3) providing information to teachers, care givers, and parents. In the President's FY2004 budget, he proposed to transfer the Head Start program to the Department of Education, as well as to provide states with the option to administer the program. The Head Start reauthorization bill passed by the House during the 108 th Congress ( H.R. 2210 ) did not include the proposal to transfer the program to ED, but did include provisions to allow a maximum of eight states to administer the program (provided they meet designated requirements). The Head Start reauthorization bills of this (109 th ) Congress ( H.R. 2123 and S. 2206 ) emphasized increased coordination among early childhood programs, but neither proposed either a departmental transfer of the program or state demonstration projects. The Administration has moved ahead with two other efforts that are in keeping with the Good Start, Grow Smart initiative, but that did not require legislative changes to the Head Start Act. One is the Strategic Teacher Education Program, also known as Project STEP, described by the Head Start Bureau as "a comprehensive, multi-faceted, sequential professional development endeavor to ensure teachers use research-based strategies to implement early and emergent literacy." As part of this development, during summer and fall 2002, 3,000 Head Start staff and 100 state child care administrators received 32 hours of training in strategies to support children's emerging literacy. Those who were trained are expected to serve as "mentor coaches" for staff within their respective Head Start programs. The second effort is the development and implementation of a national reporting system that can be used to assess the effectiveness of Head Start programs in achieving successful outcomes for children in terms of school readiness—particularly the areas of literacy and number knowledge. This national reporting system was implemented starting in the fall 2003, and assesses Head Start 4- and 5-year-olds twice a year on educational performance measures—using indicators that were included in legislation as part of the 1998 reauthorization of Head Start. Legislative Activity in the 109th Congress Child Care and Welfare Reauthorizations20 Both the CCDBG and TANF were due to be reauthorized at the end of FY2002, and on February 8, 2006, following 12 temporary extensions, the Deficit Reduction Act was signed into law ( P.L. 109-171 ), finally reauthorizing TANF and the mandatory portion of child care funding for FY2006-2010. Essentially, select provisions pertaining to welfare and child care reauthorizations were adopted from broader, free-standing reauthorization legislation ( H.R. 240 ) into the Deficit Reduction Act ( S. 1932 ). With respect to child care, the budget reconciliation act ( S. 1932 / P.L. 109-171 ) increases mandatory child care funding by $200 million annually for FY2006-FY2010, raising total annual mandatory funding from $2.717 billion to $2.917 billion (i.e. a $1 billion increase over five years). This provision was initially included in the welfare and child care reauthorization bill introduced in the House ( H.R. 240 ). Though less than the proposed increase of $6 billion over five years included in the Senate committee-passed welfare reauthorization bill ( S. 667 ), the $1 billion reflected twice the amount proposed by the House Ways and Means Committee in its initial budget reconciliation recommendations ($500 million over five years) to the Budget Committee. However, the reconciliation measure does not include a reauthorization of the CCDBG Act itself (i.e. the program rules and the authorized level of discretionary child care funding), which was addressed by H.R. 240 and S. 525 (as passed by the Senate HELP Committee, but never considered by the full Senate). Brief summaries of those bills can be found below. H.R. 240, by Representative Pryce (Approved by Ways and Means Subcommittee, March 15, 2005; Amended and Approved by Education and Workforce Committee, October 20, 2005) The Personal Responsibility, Work, and Family Promotion Act of 2005 resembled the welfare and child care reauthorization bill passed by the House in the 108 th Congress, with respect to the bill's child care provisions. H.R. 240 would have set mandatory child care funding at $2.917 billion in each of FY2006-FY2010, for an increase of $1 billion over five years above current funding. This is the one child care provision that was adopted by the Deficit Reduction Act ( S. 1932 / P.L. 109-171 ). The authorized level for the discretionary portion of CCDBG funding would have been increased by $200 million annually beginning in FY2006 ($2.3 billion), reaching $3.1 billion in FY2010. This bill would also have increased the child care quality set-aside from 4% to 6%, and would have amended state child care plan requirements to encourage states to improve the quality of child care available to families, and to promote school readiness by encouraging the exposure of children in care to nurturing environments and developmentally—appropriate activities. Likewise, the bill would have allowed states to establish CCDBG income eligibility limits at any level (prioritized by need), eliminating current law's federal limit of 85% of state median income. Lastly, the bill would have required that aggregated statistics on child care supply, demand, and quality be included in biennial reports to Congress. (It should be noted that two committees have jurisdiction over child care: the Education and Workforce Committee maintains jurisdiction of the CCDBG Act itself, which includes the program rules and the authorization for discretionary funding, while the Ways and Means Committee has responsibility for the mandatory child care funding stream that supports CCDBG programs. The mandatory funding is included in Section 418 of the Social Security Act, within the same title (Title IV) that includes the TANF program. (As noted earlier, TANF funds may also be used by states to support child care.) Amendments to H.R. 240 , by the Education and Workforce Committee. H.R. 240 as approved by the Education and Workforce Committee on October 20, 2005, adopted two CCDBG-related amendments (offered by Representative Fortuño). The first would require states to certify in their state plans that they will provide information to parents on the IDEA Part C program, as a way to foster coordination between the program and CCDBG. The second amendment called for states to collect and report information on the ethnicity and primary language of children receiving CCDBG services and also would add a definition of limited English proficiency to the law. Failed Amendment to H.R. 240 , by the Ways and Means Human Resources Subcommittee. On March 15, 2005, the Ways and Means Subcommittee on Human Resources debated H.R. 240 , and ultimately approved it (8-4), with solely Republican support. Child care funding remains a contentious issue, and Representative Stark offered an amendment to increase mandatory child care funding by $11 billion over five years (as opposed to the $1 billion included in the bill), but it was rejected. H.R. 751, by Representative McDermott (Introduced February 10, 2005) The Work, Family, and Opportunity Promotion Act included provisions to reauthorize TANF, and proposed to increase mandatory child care funding by $11 billion over five years. This bill did not receive committee action. On the Senate side, bills ( S. 105 and S. 6 ) to reauthorize welfare and aspects of child care were introduced early in the Congress, but did not receive committee action. On March 9, 2005, both the Finance Committee and the Health, Education, Labor, and Pensions (HELP) Committee approved and ordered reported bills ( S. 667 and S. 525 ) to reauthorize welfare and child care respectively, described below. Note that in the Senate, the Finance Committee has jurisdiction over the mandatory child care funding (and TANF), and the HELP Committee holds responsibility for the CCDBG Act. As mentioned earlier, a mandatory child care component ($1 billion over five years) was included in the budget reconciliation bill ( S. 1932 ), signed into law ( P.L. 109-171 ) on February 8, 2006. S. 667, Personal Responsibility and Individual Development for Everyone (PRIDE) Act of 2005 (Finance Committee Ordered Reported March 9, 2005) The Senate Finance Committee approved and ordered reported, with bipartisan support, a bill ( S. 667 ) referred to as the Personal Responsibility and Individual Development for Everyone (PRIDE) Act of 2005. The bill, which would have reauthorized TANF through FY2010, proposed to maintain the TANF block grant at its FY2005 level and to provide an additional $6 billion in mandatory child care funding over five years. The bill also proposed to provide an additional $1 billion over five years to the Social Services Block Grant. The allowable transfer from TANF to the SSBG under this bill would have been maintained at 10%. S. 525, The Caring for Children Act of 2005 (HELP Committee Ordered Reported, March 9, 2005) This bill, introduced by Senator Alexander on March 3, 2005, closely resembled the CCDBG reauthorization bill reported out of the HELP Committee last Congress ( S. 880 ). As was the case with the earlier bill, the HELP Committee approved S. 525 with bipartisan support. Major provisions would have authorized CCDBG discretionary funding at a level of $2.3 billion for FY2006, rising in $200 million increments up to $3.1 billion for FY2010; increased the percentage of funds that must be used for quality activities (newly specified in the proposal) from at least 4% to at least 6%; instructed states to use not less than 70% of funds remaining after quality and administrative set-asides for direct services (as defined by states); added three new goals to the act: (1) improving the quality of child care, (2) promoting school preparedness through developmentally and age-appropriate activities in child care, and (3) promoting parental and family involvement in the education of young children in child care settings; eliminated the federal eligibility maximum limit of 85% of state median income (SMI); required states to describe in their state plans how they would coordinate with other early childhood programs such as Head Start, state pre-kindergarten, and IDEA to expand accessibility to and continuity of care; required states to conduct statistically valid market rate surveys within two years preceding their state plans, and to set rates in accordance with the results (without reducing the number of children served); expanded data collection requirements; and required states beginning in FY2006 to submit a plan addressing the quality of child care services provided. Title II of the bill contained provisions to enhance security at child care centers in federal facilities, and Title III established a small business child care grant program, through which competitive grants would have been awarded to states for establishment and operation of employer-operated child care programs. ( S. 525 would have authorized $50 million over five years for this purpose, whereas S. 880 would have authorized $30 million. S. 525 also proposed to change the CCDBG allocation for tribes from "not less than 1% and not more than 2%" to a concrete "2%.") S. 105, by Senator Talent (Introduced January 24, 2005) This Senate version of the Personal Responsibility, Work, and Family Promotion Act of 2005 contained the same child care provisions as are proposed in H.R. 240 (see above). S. 6, by Senator Santorum (Introduced January 24, 2005) Among tax and TANF reauthorization provisions, the Family and Community Protection Act of 2005 ( S. 6 ) included an additional $1 billion over five years in mandatory child care funding. Head Start Reauthorization The Head Start program has been due to be reauthorized since the end of FY2003. On September 22, 2005, the House passed H.R. 2123 (by a vote of 231-284). The Senate did not bring a bill to the floor during the 109 th Congress, but the Health, Education, Labor, and Pensions (HELP) Committee did approve and report S. 1107 / S.Rept. 109-131 . Summaries of major provisions in the two bills ( H.R. 2123 , as passed by the House; and S. 1107 , as approved (by voice vote) by the full HELP Committee in the Senate) can be found in CRS Report RL30952, Head Start: Background and Issues , by [author name scrubbed]. Other Child Care-Related Legislation Other bills related to child care that were introduced in the 109 th Congress include H.R. 335 (Lynch), a bill to amend the CCDBG Act to increase availability and quality of child care by creating incentives for people age 55 and over to become child care providers; S. 15 (Bingaman), a bill that includes several provisions to amend both the Head Start Act and the CCDBG Act to expand access to programs and to improve program quality; S. 32 (Dayton), a bill authorizing the Secretary of Defense to fund child care for active duty military without access to a military child development center; and S. 233 (Roberts), a bill providing grants for building a child care training infrastructure and for encouraging employer-provided child care. Response to Hurricane Katrina Following Hurricane Katrina, the Department of Health and Human Services (HHS) issued a series of information memoranda alerting Head Start grantees and state child care administrators to various efforts being made to assist their respective programs in helping children and families affected by Hurricane Katrina. Specifically, the Head Start Bureau urged all its grantees to provide Head Start services to any displaced children and families in their communities as a result of the hurricane. On September 12, 2005, HHS announced that $15 million was available for helping cover costs over a 30-day period. Grantees were instructed to treat any preschool-aged child whose family had been displaced from their home as income-eligible, with or without documentation. The Head Start Bureau anticipated that programs serving newly enrolled displaced children might struggle to meet certain Head Start regulations, and issued guidance for requesting waivers in those areas. Moreover, the Bureau encouraged grantees to contact their regional federal offices with any concerns arising from serving evacuated families. The regional offices were asked (by HHS) to collect data (on a daily basis) from their respective grantees regarding the number of evacuee children being served by their program(s), and whether these children were new to Head Start, or, instead were previously enrolled in a Head Start program in the community from which they were displaced as a result of Hurricane Katrina. For copies of documents prepared by HHS relating to Head Start's role in responding to children and families affected by Hurricane Katrina, as well as procedures for addressing damaged facilities, see the following website: http://www.headstartinfo.org/hurricane_rir.htm . Moreover, the Defense Department's Appropriations Act for FY2006, signed into law ( P.L. 109-148 ) on December 30, 2005, included $90 million in additional funding for Head Start, to be used specifically for grantees serving children displaced by last year's Gulf Coast hurricanes, and to help with costs of renovating Head Start facilities that were affected by the storms. Those funds were not allocated according to the standard Head Start formula due to the targeted purpose of the funding. The Head Start Bureau took action to assess and address the needs of Head Start grantees in response to the hurricanes, collecting data for determining allocation of the $90 million. The Defense Appropriations Act also included SSBG funding in the amount of $550 million for use in covering expenses related to the consequences of last year's hurricanes in the Gulf of Mexico. (Expenses could potentially include child care costs.) The Defense Appropriations Act expanded the potential services for which the additional $550 million could be used, to include "health services (including mental health services) and for repair, renovation and construction of health facilities (including mental health facilities)." The allocation of funds was based on Federal Emergency Management Agency (FEMA) registrant data from hurricanes Katrina, Rita, and Wilma, with registrants from Hurricane Katrina receiving double-weighting. The news release regarding the allocation of funds can be accessed at http://www.acf.dhhs.gov/programs/ocs/ssbg/hurricane_relief.html . The bulk of the funds were allocated to the states of Louisiana (40%), Mississippi (23%), Texas (16%), Florida (10%), and Alabama (5%). A table showing all states' allocations can be accessed at http://www.acf.hhs.gov/news/press/2006/SSBG_funds.htm . The Child Care Bureau of HHS issued guidance regarding ways in which state child care administrators may use their Child Care and Development Block Grant (CCDBG) funds to help respond to needs resulting from the hurricane. No additional emergency grant funds have been provided, but state administrators have been made aware of various options for their use of funds, for example, making funds previously reserved (at a minimum 4% level) for "quality activities" available for use in providing emergency child care for displaced families. Likewise, states are reminded that they may amend their state CCDBG plans to redefine eligibility conditions (e.g., redefine "working") or priority rules and broaden them to be more inclusive of displaced families. For the full information memorandum sent to the state CCDBG lead agency administrators, see http://www.acf.dhhs.gov/programs/ccb/policy1/current/im0503/im0503.htm . On July 11, 2006, HHS Secretary Leavitt granted waivers that lifted state matching requirements on a portion of child care funding, allowing Louisiana, Mississippi, and Texas to access $60 million in federal funds without making the state matching contribution normally required of CCDF mandatory child care funds. The authority for the waivers was provided in the Emergency Supplemental Appropriations Act ( P.L. 109-148 ). As a result of the waivers, Louisiana was eligible for $27 million; Mississippi, $2 million; and Texas, $31 million. Hearings On March 15, 2005, the House Education and Workforce Committee's Subcommittee on 21 st Century Competitiveness held a hearing titled "Welfare Reform: Reauthorization of Work and Child Care." On September 27, 2006, the House Education and Workforce Committee's Subcommittee on Education Reform held a hearing titled "Perspectives on Early Childhood Home Visitation Programs."

Federal support for child care comes in many forms, ranging from grant programs to tax provisions. Some programs serve as specifically dedicated funding sources for child care services (e.g., the Child Care and Development Block Grant, or CCDBG), while for others (e.g., Temporary Assistance for Needy Families, or TANF), child care is just one of many purposes for which funds may be used. In many cases, federal programs target low-income families in need of child care assistance, but in the case of certain tax provisions, the benefits reach middle- and upper-income families as well. This report provides an overview of federal child care and related programs as they were addressed by the 109 th Congress. The 109 th Congress inherited several child care-related agenda items from the previous Congress(es), but resolved only a few. Efforts to reauthorize the CCDBG and TANF block grants, as well as the Head Start program, had started in the 108 th Congress, and ultimately, in February 2006, after 12 temporary extensions, the TANF block grant and the mandatory portion of child care funding was reauthorized for a five-year period via the Deficit Reduction Act ( P.L. 109-171 ). Whereas bills to reauthorize the Child Care and Development Block Grant itself ( H.R. 240 and S. 525 ) and the Head Start Program ( H.R. 2123 and S. 2206 ) failed to make their way to enactment in law, and remain on the agenda for the 110 th Congress. Funding for many child care and related programs is provided each year as part of the annual appropriations process for the Departments of Health and Human Services (HHS) and Education (ED). Fiscal Year 2007 appropriations bills for those departments (among most others) did not receive floor action in the House or Senate during the 109 th Congress, although the 2007 fiscal year began on October 1, 2006. The process extended into the 110 th Congress, with a third continuing resolution ( P.L. 109-383 ) temporarily funding government operations (through February 15, 2007) at rates based on the FY2006 funding levels. The FY2006 appropriations ( P.L. 109-149 ) included funding slightly below FY2005 amounts for most child care and related programs, as a result of an across-the-board rescission of 1% applied to most discretionary programs. Additional targeted funding for Head Start and the Social Services Block Grant—supplemental funding targeted specifically in response to needs arising from the Gulf Coast hurricanes of 2005—was included in the FY2006 Defense Appropriations Act ( P.L. 109-148 ). The President's FY2007 budget proposals in areas related to child care and early childhood development were framed in the context of the Administration's Early Childhood Initiative—"Good Start, Grow Smart"—which was initially launched in April 2002. The initiative emphasized the importance of promoting school readiness, a key focus of the President's Head Start reauthorization proposals. In efforts to promote school readiness among pre-school children, there has also been a growing emphasis on better coordination of early childhood programs, including most of the federal programs described in this report, as well as state pre-kindergarten programs and other state-funded efforts. This is the final update of this report; the 109 th Congress has adjourned.

Introduction The United States has an abundance of natural resources. For much of the nation's history, energy availability was not a concern as commerce and industry needs could be met by domestic supplies. However, industrialization and population growth, and the continuing development of a consumer-oriented society, led to growing dependence on foreign sources of energy during the 20 th century to supplement the demands of a growing economy. Recognition of the implications of dependence on foreign sources of energy, coupled with concerns over the volatility of prices driven by fluctuations in supply spurred by world events, prompted federal efforts to increase U.S. energy independence and reduce domestic consumption. A major result has been the establishment of a number of programs focused on energy efficiency and conservation of domestic resources and on research programs that target the development of renewable sources of energy. Many of these programs have roots going back almost 40 years and have been redesigned many times over that period. Many of the current programs have been reauthorized and redesigned periodically to meet changing economic conditions and national interests. The programs apply broadly to sectors ranging from industry to academia, and from state and local governments to rural communities. Each program has been designed to meet current needs as well as future anticipated challenges. Since 2005, Congress has enacted several major energy laws: the Energy Policy Act of 2005 (EPACT 2005; P.L. 109-58 ); the Energy Independence and Security Act of 2007 (EISA; P.L. 110-140 ); the Energy Improvement and Extension Act (EIEA), enacted as Division B of the Emergency Economic Stabilization Act (EESA; P.L. 110-343 ); and the American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ). Each of those laws established, expanded, or modified energy efficiency and renewable energy research, development, demonstration, and deployment (RDD&D) programs. The Department of Energy (DOE) operates the greatest number of efficiency and renewable energy incentive programs. The Department of the Treasury and the Department of Agriculture (USDA) operate several programs. A few programs can also be found among the Departments of the Interior (DOI), Labor (DOL), Housing and Urban Development (HUD), and Veterans Affairs (VA), and the Small Business Administration (SBA). This report outlines current federal programs and provisions providing grants, loans, loan guarantees, and other direct or indirect incentives for energy efficiency, energy conservation, and renewable energy RDD&D. The programs are grouped by administering agency with references to applicable federal agency websites. Incentives are summarized and indexed in the appendixes. Most program descriptions were compiled from authorizing statutes, the U.S. Code, and Administration budget request documents. Other program descriptions and some funding information were compiled from The Database of State Incentives for Renewables and Efficiency (DSIRE), the Assistance Listings (formerly the Catalog of Federal Domestic Assistance or CFDA) housed on the beta.SAM.gov website , and the Energy Star website. Most budgetary figures were compiled from executive agency budget justifications and congressional committee reports. For more information on agriculture-related grant programs, please see CRS Report R43416, Energy Provisions in the 2014 Farm Bill (P.L. 113-79): Status and Funding , by [author name scrubbed]. For more information on programs supporting the development and deployment of alternatives to conventional fuels and engines in transportation, please also see CRS Report R42566, Alternative Fuel and Advanced Vehicle Technology Incentives: A Summary of Federal Programs , by [author name scrubbed] et al. I. Department of Energy Office of Energy Efficiency and Renewable Energy Renewable Energy Biomass 1. Bioenergy Technologies Program (formerly the Biomass and Biorefinery Systems R&D Program) 2. Regional Biomass Energy Grant Programs 3. Geothermal Technologies Program (GTP) Hydrogen and Fuel Cells 4. Hydrogen & Fuel Cell Technologies Program Solar 5. Solar Energy Technologies Program (SETP) Water Power 6. Water Power Program (formerly Wind and Hydropower Technologies Program) Wind Energy Program 7. Wind Energy Program (formerly Wind and Hydropower Technologies Program) Energy Efficiency Buildings 8. Building Technologies Program 9. Weatherization Assistance Program (WAP) Industrial 10. Advanced Manufacturing Office (AMO, formerly the Industrial Technologies Program - ITP) 11. Inventions and Innovations Program Vehicles 12. Vehicle Technologies Program Other Energy Efficiency and Renewable Energy Programs 13. Conservation Research and Development Grants 14. Energy Efficiency and Renewable Energy Information Dissemination, Outreach, Training, and Technical Analysis/Assistance Grant Program 15. Renewable Energy Production Incentive (REPI) 16. Renewable Energy Research and Development Program 17. State Energy Program (SEP) 18. Tribal Energy Program (TEP) Other DOE Offices/Cross-Cutting Programs 19. Advanced Research Projects Energy Financial Assistance Program (ARPA-E) 20. Electricity Delivery and Energy Reliability, Research, Development and Analysis Grant Program (Office of Electricity Delivery and Energy Reliability - OE) 21. Federal Energy Management Program (FEMP) 22. Financial Assistance Program (Office of Science) 23. Loan Guarantee Program (Office of the Chief Financial Officer) 24. Small Business Innovation Research Program (SBIR)/Small Business Technology Transfer Program (STTR) II. U.S Department of the Treasury Please note that tax credits for biofuels and vehicles are covered in detail another CRS Report R42566, Alternative Fuel and Advanced Vehicle Technology Incentives: A Summary of Federal Programs , by [author name scrubbed] et al. Homeowner 1. Residential Energy Conservation Subsidy Exclusion (Corporate and Personal) 2. Residential Energy Efficiency Tax Credit 3. Residential Renewable Energy Tax Credit Business and Industry 4. Business Energy Investment Tax Credit (ITC) 5. Energy Efficient Commercial Buildings Tax Deduction 6. Energy-Efficient New Homes Tax Credit for Home Builders 7. Renewable Electricity Production Tax Credit State, Local, and Tribal Governments Cross-Cutting 8. Modified Accelerated Cost-Recovery System (MACRS) III. Department of Agriculture 1. Assistance to High Energy Cost Rural Communities Program 2. Bioenergy Program for Advanced Biofuels 3. Biomass Crop Assistance Program (BCAP) 4. Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program. (formerly the Biorefinery Assistance Program) 5. Community Wood Energy Program 6. Repowering Assistance Program (RAP) 7. Rural Energy For America Program (REAP) Grants and Loans 8. Sustainable Agriculture Research and Education Program (SARE) IV. Department of the Interior 1. Energy and Mineral Development Program (EMDP): Minerals and Mining on Indian Lands 2. Tribal Energy Development Capacity Grant Program V. Small Business Administration 1. 7(a) Loan Guarantees 2. 504 Loan Guarantees VI. U.S. Department of Housing and Urban Development 1. Energy Efficient Mortgages (EEMs) 2. FHA PowerSaver Loan Program VII. Department of Health and Human Services 1. Low Income Home Energy Assistance Program (LIHEAP) VIII. Department of Veterans Affairs 1. Energy Efficient Mortgages (EEMs) IX. Fannie Mae 1. Fannie Mae Green Initiative-Loan Program Appendix A. Summary of Federal Renewable Energy and Energy Efficiency Incentives/Index of Programs Appendix B. Index of Programs by Applicant Eligibility and Technology Type Appendix C. Expired Federal Energy Efficiency and Renewable Energy Incentive Programs 1. Assisted Housing Stability and Energy and Green Retrofit Investments Program (Recovery Act Funded) 2. Clean Renewable Energy Bonds (CREBs) 3. Energy Efficiency and Conservation Block Grants Program (EECBG) 4. Energy Efficiency and Renewable Energy Technology Deployment, Demonstration, and Commercialization Grant Program 5. Energy Efficient Appliance Rebate Program (EEARP) 6. Energy Efficient Appliance Tax Credit for Manufacturers 7. New Era Rural Technology Competitive Grants Program 8. Program of Competitive Grants for Worker Training and Placement in High Growth and Emerging Industry Sectors 9. Qualified Energy Conservation Bonds 10 . Qualifying Advanced Energy Manufacturing Investment Tax Credit 11. Renewable Energy Grants (1603 Program) Appendix D. Appendix D. Summary of Expired Federal Renewable Energy and Energy Efficiency Incentives/Index of Programs

Energy is crucial to the operation of a modern industrial and services economy. Concerns about the availability and cost of energy and about environmental impacts of fossil energy use have led to the establishment of a wide variety of federal incentives for renewable energy and energy efficiency. These incentives are aimed at the implementation of renewable energy and energy efficiency measures and the development and commercialization of renewable energy and energy efficiency technologies. Many of the existing energy efficiency and renewable energy programs have authorizations tracing back to the 1970s. Many of the programs have been reauthorized and redesigned repeatedly to meet changing economic factors. The programs apply broadly to sectors ranging from industry to academia, and from state and local governments to rural communities. Since 2005, Congress has enacted several major energy laws: the Energy Policy Act of 2005 (EPACT 2005; P.L. 109-58); the Energy Independence and Security Act of 2007 (EISA; P.L. 110-140); the Energy Improvement and Extension Act (EIEA), enacted as Division B of the Emergency Economic Stabilization Act (EESA; P.L. 110-343); and the American Recovery and Reinvestment Act (ARRA; P.L. 111-5). Each of those laws established, expanded, or modified energy efficiency and renewable energy research, development, demonstration, and deployment (RDD&D) programs. The Department of Energy (DOE) operates the greatest number of efficiency and renewable energy incentive programs. The Department of the Treasury and the Department of Agriculture (USDA) operate several programs. A few programs can also be found among the Departments of the Interior (DOI), Labor (DOL), Housing and Urban Development (HUD), and Veterans Affairs (VA), and the Small Business Administration (SBA). This report describes federal programs that provide grants, loans, loan guarantees, and other direct or indirect incentives for energy efficiency, energy conservation, and renewable energy. For each program, the report provides the administering agency, authorizing statute(s), annual funding, and the program expiration date. The appendixes provide summary information in a tabular format and also list recently expired programs.

Overview Each fiscal year, Congress and the President engage in a number of practices that influence short- and long-run revenue and expenditure trends. This section describes the budget cycle and explains how budget baselines are constructed. Budget baselines are used to measure how legislative changes affect the budget outlook and are integral to evaluating these policy choices. Budget Cycle2 Action on a given year's federal budget, from initial formation by the Office of Management and Budget (OMB) until final audit, typically spans four calendar years. The executive agencies begin the budget process by compiling detailed budget requests, overseen by OMB. Agencies work on their budget requests in the calendar year before the budget submission, often during the spring and summer (about a year and a half before the fiscal year begins). The President usually submits the budget to Congress around the first Monday in February, or about eight months before the beginning of the fiscal year. Congress typically begins formal consideration of a budget resolution once the President submits the budget request. The budget resolution is a plan, agreed to by the House and Senate, which establishes the framework for subsequent budgetary legislation. Because the budget resolution is a concurrent resolution, it is not sent to the President for approval. If the House of Representatives and Senate cannot agree on a budget resolution, a substitute measure known as a "deeming resolution" may be implemented by each chamber. House and Senate Appropriations Committees and their subcommittees typically begin reporting discretionary spending bills after the budget resolution is agreed upon. Appropriations Committees review agency funding requests and propose levels of budget authority (BA). Appropriations acts passed by Congress set the amount of BA available for specific programs and activities. Authorizing committees, which control mandatory spending, and committees with jurisdiction over revenues also play important roles in budget decision making. During the fiscal year, Congress and OMB oversee the execution of the budget. Once the fiscal year ends on the following September 30, the Department of the Treasury and the Government Accountability Office (GAO) begin year-end audits. Budget Baseline Projections Budget baseline projections are used to project the future impact of current laws and measure the effect of future legislation on spending and revenues. They are not meant to predict future budget outcomes. Baseline projections are included in both the President's budget and the congressional budget resolution. It is important to understand the assumptions and components included in budget baselines. In some cases, slight changes in the underlying models or assumptions can lead to large effects on projected deficits, receipts, or expenditures. The Congressional Budget Office (CBO) computes current-law baseline projections using assumptions set out in budget enforcement legislation. Since Congress and the President have resolved certain questions related to expiring tax policy and have enacted specific policies set to control discretionary spending over the next decade, there are fewer policy uncertainties affecting the baseline levels under current law. On the revenue side of the budget, the American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240 ; see additional discussion below) permanently set into law many individual tax rates and tax policy provisions. On the spending side, baseline discretionary spending levels are largely constrained by the caps and automatic spending reductions enacted as part of the Budget Control Act of 2011 (BCA; P.L. 112-25 ) and further modified by the Bipartisan Budget Act of 2015 (BBA 2015; P.L. 114-74 ). The CBO baseline also incorporates policy provisions in current law that have historically been revised before the subsequent policy changes actually took effect. Specifically, the CBO baseline assumes that discretionary budget authority from FY2018 through FY2021 will be restricted by the caps as created by the BCA, and that certain expiring tax provisions will not be extended. This leads to baseline projections of lower spending and higher revenue levels relative to what some consider likely based on previous policy actions. In addition to these elements of current law, macroeconomic assumptions, specifically of GDP growth, inflation, and interest rates, will also affect the baseline estimates and projections. Minor changes in the economic or technical assumptions that are used to project the baseline also could result in significant changes in the outyear deficit levels. Current baseline projections show rising budget deficits over the next several years. Such a trend represents a reversal from the significant declines in inflation-adjusted deficits experienced in the past few fiscal years. Those declines were primarily due to continued increases in employment (which increased revenues collected from income and payroll taxes) and reductions in discretionary spending. While the baseline projections include continued declines in discretionary outlays, those reductions are more than offset by increases in mandatory spending, which are largely due to the rising cost of Social Security and Medicare programs. Baseline projections also include increases in debt held by the public throughout the 10-year budget window. Debt held by the public finances budget deficits and federal loan activity, and is a function of three things: (1) the size of existing debt, (2) economic growth, and (3) interest rates. Debt held by the public declined in FY2015 for the first time since FY2007, which was largely attributable to interest rates that were well below their historical averages. However, the baseline projections include a rise in interest rates, which causes debt held by the public to increase. Debt held by the public was 73.6% of GDP at the end of FY2015, and is projected to be 86.1% of GDP at the end of FY2026. CBO also provides projections based on alternative policy assumptions, which illustrate the levels of spending and revenue if current policies continue, rather than expire as scheduled under current law. If discretionary spending caps established by the BCA are lifted and expiring tax provisions are extended, CBO projects an increase in the budget deficit of more than $1.0 trillion relative to the current-law baseline, inclusive of debt servicing costs, over the FY2017 to FY2026 period. Beyond the 10-year forecast window, federal deficits are expected to grow unless major policy changes are made. This is a result of increased outlays largely attributable to health care and retirement costs. Spending and Revenue Trends Over the last four decades, on average, federal spending has accounted for approximately 20.5% of the economy (as measured by GDP), while federal revenues averaged roughly 17.4% of GDP. Since FY2002, spending exceeded revenues in each fiscal year, resulting in budget deficits. Between FY2009 and FY2012, spending and revenue deviated significantly from historical averages, primarily as a result of the economic downturn and policies enacted in response to financial turmoil. In FY2015, the U.S. government spent $3.69 trillion and collected $3.25 trillion in revenue. At 2.5% of GDP, the resulting budget deficit was the smallest imbalance since FY2007. The trends in revenues and outlays between FY1970 and FY2015 are shown in Figure 1 . Federal Spending Federal outlays are often divided into three categories: discretionary spending, mandatory spending, and net interest. Discretionary spending is controlled by annual congressional appropriations acts. Mandatory spending encompasses spending on entitlement programs and spending controlled by laws other than annual appropriations acts. Entitlement programs such as Social Security, Medicare, and Medicaid make up the bulk of mandatory spending. Congress sets eligibility requirements and benefits for entitlement programs, rather than appropriating a fixed sum each year. Therefore, if the eligibility requirements are met for a specific mandatory program, outlays are made without further congressional action. Net interest comprises the government's interest payments on the debt held by the public, offset by small amounts of interest income the government receives from certain loans and investments. Federal Spending Relative to the Size of the Economy (GDP) In FY2000, total outlays equaled 17.6% of GDP, the lowest recorded level since FY1966. In FY2009, outlays peaked at 24.4% of GDP. Outlays then fell steadily for the next few years, equaling 20.3% of GDP in FY2014, before rising to 20.7% of GDP in FY2015. Under the CBO baseline, total outlays are projected to continue rising and will reach 23.1% of GDP in FY2026. Figure 2 shows the level of federal spending as a percentage of GDP, broken into the discretionary, mandatory, and net interest categories, between FY2000 and FY2026, as projected in the CBO baseline. In FY2000, discretionary spending totaled 6.1% of GDP. Discretionary spending increased in most years between FY2000 and FY2010, largely as a result of increases in security spending and federal interventions designed to stimulate the economy. Discretionary spending peaked in FY2010 at 9.1% of GDP. Since FY2010, discretionary spending has fallen, due both to the wind down of stimulus programs and the implementation of restrictions established by the BCA. In FY2015, discretionary spending totaled 6.5% of GDP. Baseline projections show continuing declines through the 10-year budget window. By FY2019, discretionary spending will fall to 5.8% of GDP, which would be its lowest level ever: discretionary spending is projected to total 5.2% of GDP by FY2026. The projected decline in discretionary spending in the baseline over the next decade is largely due to the reductions under current law contained in the BCA. Figure 2 also shows mandatory spending as a share of GDP. Mandatory spending totaled 12.9% of GDP in FY2015, up from 9.4% of GDP in FY2000. Mandatory spending peaked in FY2009 at 14.5% of GDP. Mandatory spending levels during the FY2009-FY2012 period were elevated mainly because of increases in outlays for income security programs as a result of the recession. The continuing economic recovery has resulted in lower mandatory spending on certain programs. However, mandatory spending is projected to continue its upward trend towards the end of the budget window due to growth in certain entitlement programs. As a result, under current law, CBO projects that mandatory spending will total 15.0% of GDP in FY2026, greater than the FY2009 level. Size of Federal Spending Components Relative to Each Other It is also possible to evaluate trends in the share of total spending devoted to each component. In FY2015, mandatory spending amounted to 62.4% of total outlays, discretionary spending reached 31.6% of total outlays, and net interest comprised 6.0% of total outlays. The largest mandatory programs, Social Security, Medicare, and the federal share of Medicaid, constituted 50.6% of all federal spending in FY2015. By FY2026, mandatory and net interest spending are projected to increase, while the share of outlays devoted to discretionary spending is projected to decline. Mandatory spending is projected to rise to 64.7% of total outlays while discretionary spending's share is projected to fall to 22.3% in that year. Net interest spending is projected to rise to 13.0% of total outlays in FY2026. Discretionary spending currently represents under one-third of total federal outlays. Some budget experts contend that to achieve significant reductions in federal spending, reductions in mandatory spending are needed. Budget and social policy experts have also stated that cuts in mandatory spending may cause substantial disruption to many households, because mandatory spending comprises important parts of the social safety net. Even though the budget deficit has recently been declining, future projections of increasing deficits and resulting high debt levels may warrant further action to restore fiscal health over the long term. Federal Revenue In FY2015, federal revenue collections totaled 18.2% of GDP, somewhat higher than the historical average over the last four decades (17.3% of GDP). Real federal revenues have increased in recent years, due primarily to increases in the tax base driven by an improving economy. Between FY2009 and FY2013, revenue collection was depressed as the result of the economic downturn and certain tax relief provisions. In FY2009 and FY2010, revenue collections totaled 14.6% of GDP. ATRA ( P.L. 112-240 ) increased the certainty of the revenue outlook. ATRA permanently extended reduced tax rates for most income groups, while raising tax rates for upper-income households beginning in calendar year 2013. As in FY2015, revenues are projected to total 18.2% of GDP in FY2026 under the CBO baseline. Individual income taxes have long been the largest source of federal revenues, followed by social insurance (payroll) and corporate income taxes. In FY2015, individual income tax revenues totaled 8.7% of GDP. Social insurance tax revenue accounted for 6.0% of GDP, and corporate income tax revenues equaled 1.9% of GDP in FY2015. All other taxes accounted for 1.7% of GDP in FY2015. Figure 3 shows revenue collections between FY2000 and FY2026, as projected in the CBO baseline. Deficits, Debt, and Interest The annual differences between revenue (i.e., taxes and fees) that the government collects and outlays (i.e., spending) result in the budget deficit (or surplus). Annual budget deficits or surpluses determine, over time, the level of publicly held federal debt and affect the level of interest payments to finance the debt. Budget Deficits Between FY2009 and FY2012, annual budgets as a percentage of GDP were sharply higher than deficits in any period since FY1945. The unified budget deficit in FY2015 was $439 billion, or 2.5% of GDP—the lowest level since FY2007. The unified deficit, according to some budget experts, gives an incomplete view of the government's fiscal conditions because it includes off-budget surpluses. Excluding off-budget items (Social Security benefits paid net of Social Security payroll taxes collected and the U.S. Postal Service's net balance), the on-budget FY2015 federal deficit was $466 billion. Budget Deficit for FY2016 The January 2016 CBO baseline estimated the FY2016 budget deficit at $544 billion, or 2.9% of GDP. The rise in the estimated budget deficit for FY2016 is the result of increases in spending more than offsetting a smaller rise in revenues. FY2016 outlays are projected to increase to 21.2% of GDP, up from 20.7% of GDP in FY2015; revenues are projected to increase from 18.2% of GDP to 18.3% of GDP over the same period. Federal Debt and Debt Limit Gross federal debt is composed of debt held by the public and intragovernmental debt. Intragovernmental debt is the amount owed by the federal government to other federal agencies, to be paid by the Department of the Treasury, which mostly consists of money contained in trust funds. Debt held by the public is the total amount the federal government has borrowed from the public and remains outstanding. This measure is generally considered to be the most relevant in macroeconomic terms because it is the debt sold in credit markets. Changes in debt held by the public generally track the movements of the annual unified deficits and surpluses. Historically, Congress has set a ceiling on federal debt through a legislatively established limit. The debt limit also imposes a form of fiscal accountability that compels Congress, in the form of a vote authorizing a debt limit increase, and the President, by signing the legislation, to take visible action to allow further federal borrowing when nearing the statutory limit. The debt limit by itself has no effect on the borrowing needs of the government. The debt limit, however, can hinder the Treasury's ability to manage the federal government's finances when the amount of federal debt approaches this ceiling, or when the suspension expires. In those instances, the Treasury has had to take extraordinary measures to meet federal obligations, leading to inconvenience and uncertainty in Treasury operations at times. At the end of CY2015 (December 31, 2015), federal debt subject to limit was approximately $18.922 trillion, of which $13.673 trillion was held by the public. The debt limit is currently suspended until March 15, 2017. Upon reinstatement, the debt limit will be modified to exactly accommodate any increases in statutory debt subject to limit above the previous limit ($18.1 trillion). At the end of calendar year 2015, total debt subject to limit was $18.9 trillion. Barring advanced legislative action, the debt limit will be reached when reinstated, so long as federal debt remains above the previous limit and continues to rise. Net Interest In FY2015, the United States spent $223 billion, or 1.3% of GDP, on net interest payments on the debt. What the government pays in interest depends on market interest rates as well as on the size and composition of the federal debt. Currently, low interest rates have held net interest payments as a percentage of GDP below the historical average despite increases in borrowing to finance the debt. Some economists, however, have expressed concern that federal interest costs could rise once the economy fully recovers, resulting in future strain on the budget. Interest rates are projected to gradually rise in the CBO baseline, resulting in net interest payments of $830 billion (3.0% of GDP) in FY2026. If interest costs rise to this level, they will be higher than the historical average. Recent Budget Policy Legislation and Events34 During the 112 th and 113 th Congresses, several legislative actions and events affected the fiscal outlook. The Budget Control Act of 2011 (BCA; P.L. 112-25 ), enacted in August 2011, increased the debt limit and required deficit reduction (ultimately implemented through across-the-board spending cuts) and caps on discretionary budget authority. Subsequent legislation has revised the spending reductions established in the BCA. The American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240 ) was enacted in January 2013 to deal with numerous expiring tax provisions, the BCA's across-the-board spending cuts (i.e., sequester), and other short-term considerations that were scheduled to take effect at the very end of 2012 or in early 2013. This combination was referred to by some as the "fiscal cliff." During October 2013, certain activities of the federal government were required to shut down due to a lapse in appropriations. Several months after the shutdown, the second piece of legislation modifying the BCA, the Bipartisan Budget Act of 2013 (BBA 2013; P.L. 113-67 ), was enacted (December 2014). It contained new discretionary spending levels for FY2014 and FY2015, replacing the old levels prescribed by the BCA. Actions taken in the 114 th Congress further modified the short- and long-run budget outlook. The Balanced Budget Act of 2015 (BBA 2015; P.L. 114-74 ) suspended the debt limit until March 2017, and raised the discretionary spending caps established by the BCA for FY2016 and FY2017. The Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) enacted budget authority for FY2016 in accordance with the discretionary caps modified by BBA 2015. Finally, the Protecting Americans from Tax Hikes Act of 2015 (PATH Act; P.L. 114-113 ) extended a number of tax provisions that expired at the end of 2014 (and which had been extended several times in recent years), and made some of the provisions permanent. The actions are discussed in more detail below. Budget Control Act of 201136 The Budget Control Act of 2011 (BCA; P.L. 112-25 ) was enacted on August 2, 2011. The BCA contained a variety of measures intended to reduce the deficit by at least $2.1 trillion over the FY2012-FY2021 period, along with a mechanism to increase the debt limit. The deficit reduction provisions included $917 billion in savings from statutory caps on discretionary spending and the establishment of a Joint Select Committee on Deficit Reduction (Joint Committee) to identify further budgetary savings of at least $1.2 trillion over 10 years. Because the Joint Committee was unable to reach an agreement, an automatic spending reduction process was triggered to begin in FY2013. This automatic process was intended to reduce spending levels further in the absence of other legislation to implement these changes. American Taxpayer Relief Act of 201237 As the BCA's additional spending reductions were set to take effect in early 2013, the American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240 ) was signed into law by President Obama on January 2, 2013. ATRA included a number of spending provisions. First, ATRA postponed the start of the FY2013 BCA automatic spending reductions until March 1, 2013. ATRA also reduced the FY2013 BCA spending reductions implemented via the automatic process by $24 billion (i.e., two months' worth of reductions), to roughly $85 billion equally divided between defense and nondefense spending. These provisions were offset by other changes in spending and revenue. Other spending changes unrelated to the BCA included an extension of certain unemployment benefits, prevention of reductions in Medicare physician payment rates, and a one-year extension of the 2008 farm bill. In addition, ATRA made a variety of changes to tax policy, including the permanent extension of the 2001 and 2003 tax cuts on both ordinary income and capital gains and dividends for taxpayers with taxable income below $400,000 ($450,000 for married taxpayers filing jointly). For taxpayers with taxable income above these thresholds, the marginal tax rate on ordinary income rose from 35% to 39.6% on the portion of their income above these thresholds, and the top tax rate on long-term capital gains and dividends rose from 15% to 20%. ATRA also reinstated the personal exemption phase-out (PEP) and limitation on itemized deductions (Pease) for taxpayers with adjusted gross income (AGI) above $250,000 ($300,000 for married couples filing jointly), allowing these limitations to expire for those with AGI below these thresholds. ATRA also extended the tax changes to a variety of tax credits, provided marriage tax penalty relief, and modified certain education-related tax incentives. ATRA also included a permanent "patch" for the alternative minimum tax and provided permanent estate and gift tax rules. Government Shutdown and Appropriations, FY2014-FY2015 On October 1, 2013, the federal government experienced a funding gap and partial shutdown after appropriations to fund many departments and agencies were not enacted by the beginning of FY2014. The funding gap and associated shutdown ended on October 17, 2013, with the enactment of the Continuing Appropriations Act, 2014 ( P.L. 113-46 ). The act provided interim appropriations through January 15, 2014. As part of the negotiations related to the passage of the Continuing Appropriations Act, the House and Senate agreed to go to conference on the FY2014 budget resolution. On December 9, 2013, Senator Patty Murray and Representative Paul Ryan released an agreement on discretionary spending caps for the remainder of the current fiscal year (FY2014) and the next fiscal year (FY2015), which was later enacted into law as the Bipartisan Budget Act of 2013 (BBA 2013; P.L. 113-67 ). The BBA 2013 replaced a portion of the BCA's automatic spending process reductions for FY2014 ($45 billion) and FY2015 ($18 billion). These changes allowed for more discretionary spending than was provided under the BCA for FY2014 and FY2015. Various deficit reduction measures were included to offset the cost of increases to discretionary spending. FY2016-FY2017 Appropriations and Tax Extenders On November 2, 2015, the Bipartisan Budget Act of 2015 (BBA 2015; P.L. 114-74 ) was signed into law. The BBA 2015 modified the caps on discretionary spending established by the BCA for FY2016 and FY2017. The BBA 2015 increased FY2016 discretionary caps by $50 billion (with $25 billion increases to both the defense and nondefense caps) relative to the limits designated by the BCA, and increased FY2017 discretionary caps by a total of $30 billion (with $15 billion increases to the defense and nondefense caps). The Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), enacted on December 18, 2015, appropriated FY2016 discretionary budget authority to government agencies. The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) was enacted as Division Q of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ). The PATH Act extended 56 tax provisions that expired at the end of tax year 2014, and which had been extended several times in recent years. The PATH Act included three types of extensions: 30 tax preferences were extended for two years, through tax year 2016; four provisions were extended for five years, though tax year 2019; and 22 provisions were made permanent. Budget for FY2017 The Obama Administration submitted its FY2017 budget to Congress on February 9, 2016. The President's budget lays out for Congress the Administration's views on national priorities and policy initiatives. Congress has also begun its consideration of the FY2017 budget. Obama Administration's FY2017 Budget President Obama presented his policy agenda in the Administration's FY2017 budget submission. If the policies are fully implemented, the Administration estimates that total FY2017 outlays would be $4,147 billion (21.5% of GDP) and revenues would be $3,644 billion (18.9% of GDP), resulting in a budget deficit of $503 billion (2.6% of GDP). Deficits under the proposed budget remain relatively constant over time, with an average annual deficit of $611 billion (2.6% of GDP) from FY2017 through FY2026. The President's budget proposes a variety of tax and spending measures intended to pay for a number of initiatives. Specifically, the President's budget proposes to adjust the caps on discretionary spending, as originally established by the Budget Control Act (BCA). In August 2011, the BCA placed limits on discretionary budget authority and included provisions for additional spending cuts to be implemented through an automatic process. Since enactment of the BCA, Congress and the President have modified the BCA several times, primarily to allow increases in discretionary spending (for more information, see the section titled "Recent Budget Policy Legislation and Events"). In FY2017, the President's budget would decrease the cap on discretionary nondefense spending in FY2017 by $5 billion. That decrease would be followed by larger increases to the caps on both defense and nondefense spending in FY2018 through FY2021. A summary of the changes to discretionary caps in all years is presented in Figure 4 . The President's budget would increase total capped discretionary budget authority by $188 billion from FY2017 through FY2021. Though the budget achieves net deficit reduction over the 10-year budget window, it does not identify which policy initiatives specifically offset the proposed increases in the discretionary caps. The budget also proposes to eliminate the sequester on mandatory programs through FY2025. Reductions in spending on Overseas Contingency Operations (OCO) more than offset the budgetary effect of the sequester elimination. Additional deficit reduction is proposed through various changes to the tax code, immigration reform, and other mandatory health programs. Together, these deficit reduction proposals total $1,719 billion relative to the Administration's Adjusted Baseline between FY2017 and FY2026. Finally, the President's Budget also includes a Cuts, Consolidations, and Savings section that contains proposed changes to 117 discretionary and mandatory programs, which would save approximately $14 billion in FY2017 if enacted. Deficit Projections in the FY2017 Budget Consistent with the presentation of previous budgets, the Obama Administration provided three separate deficit projections. First, OMB projected a Balanced Budget and Emergency Deficit Control Act (BBEDCA) baseline as required by statute. The BBEDCA baseline assumes that discretionary spending remains constant in real (i.e., inflation-adjusted) terms and revenue and mandatory (or direct) spending continue as under current law. Under this scenario, the FY2017 deficit is projected to total $636 billion. The Obama Administration also projected an adjusted baseline, which in its view provides a more transparent and realistic reflection of the federal government's current fiscal situation. This methodology is used to provide a basis for understanding how new policy choices would affect the fiscal outlook, essentially replacing the current BBEDCA baseline. The Administration's adjusted baseline assumes that discretionary spending will be limited by the discretionary caps put in place as part of the Budget Control Act as modified, and that emergency and disaster costs will be greater than BBEDCA baseline levels. The deficit under this scenario is projected to reach $612 billion in FY2017. The final deficit projection, the proposed budget, illustrates the impact on the budget outlook if all of the policies proposed in the budget are implemented. In FY2017, the Administration projects that the deficit will reach $503 billion. For FY2016, the budget deficit is estimated to be 2.6% of GDP, which is roughly the same level as the budget projects over the next decade. Under the Proposed Budget, the deficit would remain relatively flat throughout the budget window, averaging 2.6% of GDP over the period. (It rises in dollar terms.) The proposals in the President's budget are projected to result in deficit reductions of $3,640 billion over the next decade relative to the Administration-calculated adjusted baseline. The deficit levels in the proposed budget scenario are projected to be lower than both the CBO baseline and the adjusted baseline figures in each year of the budget window. Figure 5 below illustrates how the levels in the President's proposed budget compare to current law (CBO baseline) and the Administration's adjusted baseline (current policy) over the next decade. What Do These Baselines Reflect? As stated above, the adjusted baseline assumes that certain policies due to expire will be continued. The President's budget views the adjusted baseline as the most realistic projection of the budget deficit, and it is used as a benchmark to measure the impact of budget proposals. The proposed budget, however, is the one that illustrates the resulting budget outlook if all of the policies proposed by the President were implemented. Whether or not a certain policy proposal increases or decreases the deficit depends on which baseline is used as the starting point. Ultimately, the question of whether or not the amount of deficit reduction is sufficient can only be measured by actual budget outcomes (i.e., whether the budget deficit is higher or lower in the future relative to today) and whether or not the budget is on a sustainable path. There are no real limits on what assumptions can be used to construct the adjusted baseline as opposed to the BBEDCA baseline, whose parameters were set by legislation. The adjusted and BBEDCA baselines in the FY2017 budget assume, for example, that OCO funding will continue at current year levels, adjusted for inflation. However, in the proposed budget, the Administration assumes a reduction in OCO funding. As a result, the proposed budget allocates a reduction in the deficit of $636 billion over the FY2017-FY2026 period for reduced OCO costs relative to the adjusted baseline and BBEDCA baseline. The FY2017 Congressional Budget Resolution The Budget Committees in the House and Senate each work to develop a budget resolution as they receive information and testimony from various sources, such as the Administration, CBO, and congressional committees with jurisdiction over spending and revenues. In February, House Budget Committee Chairman Tom Price (R-GA) and Senate Budget Committee Chairman Mike Enzi (R-WY) began the process of preparing budget resolutions in advance of House and Senate consideration. Absent an agreement of a budget resolution conference report for FY2017 by the House and Senate, the BBA 2015 provides that the Senate Budget Committee chairman submit an allocation of FY2017 budgetary resources for publication in the Congressional Record between April 15, 2016, and May 15, 2016. Considerations for Congress Ongoing budgetary challenges remain, which may result in congressional action. Issues related to deficit reduction and the long-term budget outlook may continue to dominate the policy debate. Increased spending on entitlement programs, as currently structured, will likely contribute to rising deficits and debt, placing ever-increasing focus on how to achieve fiscal sustainability over the long term. Addressing Ongoing Budget Issues Various budget issues may feature prominently in the congressional debate in the near-term. Ongoing discussions over the budget resolution and legislation related to the Budget Control Act may be highlights of the agenda. As discussed above, the Bipartisan Budget Act of 2015 (BBA 2015) raised the caps on defense and nondefense budget authority as implemented by the BCA for FY2016 and FY2017. Under current law, those caps are scheduled to return to levels established by the BCA for FY2018 through their expiration at the end of FY2021. The Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) was enacted in December 2015, and provided discretionary budget authority for FY2016 under the discretionary caps as amended by the BBA 2015. Congress has begun work on the FY2017 annual appropriations process. While the BBA 2015 amended the discretionary caps for FY2017, an allocation of FY2017 budget authority across federal agencies remains to be established into law. Congress may also choose to consider further modifications to the BCA discretionary caps as amended. Long-Term Considerations Occasional budget deficits, in and of themselves, are not necessarily problematic. Deficit spending can allow governments to smooth outlays and revenues to shield taxpayers and program beneficiaries from abrupt economic shocks in the short term, while also temporarily boosting GDP when the economy is underperforming. Persistent deficits, however, lead to growing levels of federal debt that may lead to higher interest payments and may also have adverse macroeconomic consequences in the long term, including slowing investment and lowering economic growth. Since the debt cannot grow faster than GDP indefinitely, large deficits will eventually need to be reduced through increases in taxes, reductions in spending, or both. The federal government faces long-term budget challenges. Some measures of fiscal solvency in the long term indicate that, under current policy, the United State faces major future imbalance, specifically as it relates to rising health care costs and the likely impact on government-financed health care spending. Even as Congress and the President worked to enact deficit reduction legislation (i.e., the BCA), these laws were not seen to have made significant changes to the part of the budget that is projected to grow. Therefore, many budget analysts believe that additional deficit reduction is required to put the budget on a sustainable path over the long term. Further, over the last two years, many of those deficit reduction provisions have been softened. Under the current-law baseline, deficits continue to be projected over the budget window. CBO, GAO, and the Administration agree that the current mix of federal fiscal policies is unsustainable in the long term. The nation's aging population, combined with rising health care costs per beneficiary, may keep federal health costs rising faster than per capita GDP. CBO projected in June 2015 that under current policy, federal spending on health programs (including Medicare, Medicaid, CHIP, and exchange subsidies) would grow from 5.2% of GDP in FY2015 to 8.0% of GDP in FY2040. The 2014 Economic Report of the President also projected that future federal spending on Medicare and Medicaid would rise significantly under current-law projections. Though these forecasts are highly uncertain, it seems probable that spending on these programs will rise as a share of GDP over time. In addition, growing debt and rising interest rates are projected to cause interest payments to consume a greater share of future federal spending. CBO projects that under current law, spending to service the federal debt (net interest payments) will grow rapidly, from 1.3% of GDP in FY2015 to 4.3% of GDP in FY2040. GAO's recent long-term fiscal simulations, under an alternative policy scenario, projected that debt held by the public as a share of GDP would exceed the post-World War II historical high in the next 15 to 25 years. Keeping future federal outlays at 20% of GDP, or approximately at its historical average, and leaving fiscal policies unchanged, according to CBO projections, would require drastic reductions in all spending other than that for Medicare, Social Security, and Medicaid, or reining in the costs of these programs. Under CBO's extended baseline, maintaining the debt-to-GDP ratio at today's level (74%) in FY2040 would require an immediate and permanent cut in non-interest spending, increase in revenues, or some combination of the two in the amount of 1.1% of GDP (or about $210 billion in FY2016 alone) in each year. Maintaining this debt-to-GDP ratio beyond FY2040 would require additional deficit reduction. If policymakers wanted to lower future debt levels relative to today, the annual spending reductions or revenue increases would have to be larger. For example, in order to bring debt as a percentage of GDP in FY2040 down to its historical average over the past 40 years (38% of GDP), spending reductions or revenue increases or some combination of the two would need to generate net savings of roughly 2.6% of GDP (or $480 billion in FY2016 alone) in each year. Debt requires interest payments that can strain budgets if debt levels and interest rates are high. High debt levels could limit the government's flexibility in meeting its obligations or in responding to emerging needs of its citizens. Ultimately, failing to take action to reduce the projected growth in the debt might lead to future insolvency. Appendix. Budget Documents CBO Documents The Congressional Budget Office (CBO) provides data and analysis to Congress throughout the budget and appropriations process. Each January, CBO issues a Budget and Economic Outlook that contains current-law baseline estimates of outlays and revenues. In March, CBO typically issues an analysis of the President's budget submission with revised baseline estimates and projections. These documents can be delayed as a result of the legislative agenda or if the President's Budget is off schedule. In late summer, CBO issues an updated B u dget and Economi c Outlook with new baseline projections. In these documents, CBO sets a current-law baseline as a benchmark to evaluate whether legislative proposals would increase or decrease outlays and revenue collection. Baseline estimates are not intended to predict likely future outcomes, but to show what spending and revenues would be if current law remained in effect. CBO typically evaluates the budgetary consequences of legislative proposals and the Joint Committee on Taxation (JCT) evaluates the consequences of revenue proposals. CBO also releases other periodic publications focusing on the future fiscal health of the United States. In their publication, The Long-Term Budget Outlook , CBO makes projections on the state of the federal budget over the next 75 years. CBO discusses spending and revenue levels and the related issues that it expects will arise under different policy assumptions. In its Budget Options volumes, CBO provides specific policy options and the impact they will have on spending and revenues over a 10-year budget window. CBO also provides arguments for and against enacting each policy. OMB Documents The President's Budget contains five major volumes: (1) The Budget , (2) Historical Tables , (3) Analytical Perspectives , (4) Appendix , and (5) Supplemental Materials . These documents lay out the Administration's projections of the fiscal outlook for the country, along with spending levels proposed for each of the federal government's departments and programs. The Historical Tables volume also provides significant amounts of budget data, much of which extends back to 1962 or earlier. Along with the Administration's budget documents, the Department of the Treasury also releases its Green Book , which provides further detail on the revenue proposals that are contained in the budget.

The federal budget is a central component of the congressional "power of the purse." Each fiscal year, Congress and the President engage in a number of practices that influence short- and long-run revenue and expenditure trends. This report offers context for the current budget debate, and tracks legislative events related to the federal budget as they occur. In recent years, policies enacted to decrease spending, along with a stronger economy, have led to reduced budget deficits. The Budget Control Act of 2011 (BCA; P.L. 112-25) implemented several measures intended to reduce the deficit from FY2012-FY2021. Three subsequent pieces of legislation have modified the BCA since its enactment—the American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240), the Bipartisan Budget Act of 2013 (BBA 2013; P.L. 113-67), and the Bipartisan Budget Act of 2015 (BBA 2015; P.L. 114-74). These measures modified the discretionary budget authority levels permitted under the BCA for FY2013 through FY2017. Various deficit reduction measures were included to offset the costs of the changes to spending levels in that legislation, including extensions of the mandatory portion of spending reductions established by the BCA. The BCA will continue to affect spending limits in FY2017 and beyond, and Congress may debate enacting further modifications. The Obama Administration released its budget for FY2017 on February 9, 2016. If the policies included in the budget proposal are fully implemented, spending (outlays) would total an estimated $4,147 billion (21.5% of GDP) and revenues an estimated $3,644 billion (18.9% of GDP) in FY2017. Over the 10-year window, the proposed budget would decrease the deficit from an estimated 3.3% of GDP in FY2016 to 2.8% of GDP in FY2026, averaging 2.6% of GDP over the next decade. The President's budget proposes a small decrease in the FY2017 cap on nondefense discretionary budget authority, followed by larger increases in the defense and nondefense discretionary caps for FY2018 through FY2021. The budget also proposes to eliminate the sequester on mandatory programs through FY2025. Deficit reduction is proposed through various changes to the tax code, immigration reform, and mandatory health programs. Congressional consideration of the FY2017 budget is underway. The Budget Committees in the House and Senate each develop a budget resolution as they receive information and testimony from a number of sources, including the Administration, the Congressional Budget Office, and congressional committees with jurisdiction over spending and revenues. In February, House Budget Committee Chairman Tom Price (R-GA) and Senate Budget Committee Chairman Mike Enzi (R-WY) began the process of preparing budget resolutions in advance of consideration in the House and Senate. Absent an agreement on a budget resolution conference report for FY2017 by the House and Senate, the BBA 2015 provides that the Senate Budget Committee Chairman submit an allocation for publication in the Congressional Record of FY2017 budgetary resources between April 15, 2016, and May 15, 2016. Though the federal budget deficit has fallen in recent years, trends resulting from current federal fiscal policies are generally thought by economists to be unsustainable in the long term. Projections suggest that achieving a sustainable long-term trajectory for the federal budget will require deficit reduction. Reductions in deficits could be accomplished through revenue increases, spending reductions, or some combination of the two.

Current U.S. Forces According to the Department of Defense (DOD), as of March 1, 2007 there were approximately 25,000 U.S. service members in Afghanistan. The majority of U.S. combat forces composing the 7 th OEF rotation to Afghanistan were from the Fort Drum, NY-based 3 rd Brigade,10 th Mountain Division, which constituted the division's third year-long deployment to Afghanistan in five years. About 5,800 troops from the division's 3 rd Brigade, as well as Division Headquarters and other supporting units are from Fort Drum, while another 1,300 soldiers are from the division's 4 th Brigade, stationed at Fort Polk, LA. There are also an unknown number of U.S. Special Operations Forces (SOF) personnel from all services that are part of the Combined Joint Special Operations Task Force that is conducting special operations missions in and around Afghanistan. The 10 th Mountain Division—less 3 rd Brigade—is in the process of being replaced by the division headquarters of the Fort Bragg, NC-based 82 nd Airborne Division and the division's 4 th Infantry Brigade Combat Team. Aside from naval and air force special operations forces, U.S. Navy and Air Force service members are playing an increased role in ground operations in Afghanistan. Six of the twelve U.S.-led Provincial Reconstruction Teams (PRTs) are commanded by naval officers and 140 sailors are now serving on U.S. PRTs. The other six U.S. PRTs are led by Air Force officers and are made up of both soldiers and airmen. Tour Extension and Modification On January 25, 2007, DOD announced that the 3,200-member 3 rd Brigade, 10 th Mountain Division—which reportedly had already begun to redeploy advance elements back to Ft. Drum —would be extended in Afghanistan for up to 120 days. On February 14, 2007, DOD announced that they were diverting the Vincenza, Italy-based 173 rd Airborne Brigade from an upcoming deployment to Iraq and would instead deploy the brigade's 3,200 soldiers to Afghanistan in the spring of 2007. The 173 rd Airborne Brigade will serve as the 3 rd Brigade, 10 th  Mountain Division's replacement when that brigade redeploys to Ft. Drum, NY sometime in May 2007. On March 11, 2007 it was reported that the Administration plans to send an additional 3,500-soldier brigade to Afghanistan "to accelerate training of local forces." Non-U.S. Coalition Forces in Afghanistan Non-U.S. Coalition forces in Afghanistan are distributed between the U.S.-led Operation Enduring Freedom (OEF)—which conducts counterterror and counterinsurgency operations—and the NATO-led International Security and Assistance Force (ISAF), which provides security and reconstruction support for all of Afghanistan. In October 2006, NATO assumed command of ISAF and all security operations in Afghanistan—including OEF (OEF's U.S. commander serves as a deputy ISAF commander). Some countries contribute forces to both OEF and ISAF, while others contribute strictly to ISAF. At present, 21 nations contribute approximately 3,100 troops to OEF while the United States contributes about 9,600 troops to OEF. Thirty seven NATO and non-NATO nations contribute about 36,000 troops to ISAF. According to U.S. Central Command (USCENTCOM), the United States contributes approximately 15,800 troops to support ISAF. ISAF X On February 4, 2007 a composite headquarters assumed command of ISAF's tenth rotation previously held by NATO's Allied Command Europe Rapid Reaction Corps (ARRC). The 1,000-strong headquarters is commanded by U.S. Army General Dan McNeill—the highest ranking U.S. officer to command in Afghanistan—and will command ISAF and OEF forces until February 2008. Allied Troop Issues Despite repeated requests by the U.S. government and NATO commanders in Afghanistan for additional troops as well as the removal of national caveats that limit the utility of NATO forces—primarily German, French, Italian, Spanish, and Turkish forces—many NATO members have rejected sending additional forces or even modifying how their forces are employed. Poland is still expected to provide an additional 1,000 troops sometime in early 2007. While some maintain that forces that are not permitted to participate in offensive operations are of little value and put an unfair burden on U.S., British, Canadian, and Dutch forces that are actively involved in combat, others argue that these forces—even with their caveats—help to provide security that is needed to facilitate reconstruction. Continued German Presence?16 Despite German plans to send 500 additional troops and six Tornado reconnaissance planes to augment the 3,000 German troops already serving with ISAF, reports suggest that opposition is growing in Germany over its expanding military role in Afghanistan. This opposition has been heightened by the recent murder of a German aid worker and the abduction of two other German workers by insurgents. Increasing German public and political opposition to military participation in Afghanistan could make it highly unlikely that the German government will rescind national caveats and adopt a more offensive posture as called for by NATO and the United States. In light of this apparent growing opposition, NATO and U.S. officials might reconsider calling for a more offensive role for German forces, as such pressure could increase German political opposition and result in a reduction of German military participation in Afghanistan. 1,400 Additional British Troops Reports maintain that in response to a lack of commitment by other NATO nations to provide additional forces, Great Britain will deploy an additional 1,400 soldiers to Helmand province by the summer of 2007, bringing the British troop level in Afghanistan to 7,700. This new battle group will be comprised of units from 1 st Battalion, Royal Welsh Fusiliers, 1 st Battalion, Scots Guards, 5 th Regiment, Royal Artillery, and 39 th Regiment, Royal Artillery. Norwegian Special Forces The Norwegian government has reportedly committed to deploy a 150-soldier special forces unit to Afghanistan but, in deference to political opposition within the Norwegian government, this unit will be restricted to operating in and around Kabul—despite a NATO request that the unit be permitted to operate in southern Afghanistan. In addition to the special forces unit, Norway contributes 550 soldiers in northern Afghanistan as part of a quick reaction force and a Provincial Reconstruction Team. Additional Contributions21 The Czech Republic will increase its strength from 120 to 255, deploying a field hospital, a military police unit, and a chemical defense unit. Latvia will increase its troop strength from 30 to 100 and Lithuania, which already has 130 soldiers in Afghanistan will deploy a 55-man special forces unit during the summer of 2007. Even with the addition of the aforementioned troops and additional troops from the United States, Poland, the United Kingdom, and Norway, NATO's Supreme Commander, U.S. Army General John Craddock, still believes that NATO needs "another one or two combat battalions (a battalion averages about 650 soldiers) in Afghanistan." Recent Military Operations NATO/Afghan National Army Ambush Insurgents23 In what was described as the "first major engagement of 2007" and "the largest battle since September 2006," as many as 150 Taliban insurgents were killed when they were ambushed by NATO and Afghan forces as the insurgents crossed the Pakistani border into Afghanistan on January 11, 2007. Reports maintain that two large groups of insurgents were initially spotted gathering on the Pakistan side of the border near the Afghan Barmal district of Paktika Province. With what was described as "close co-operation with Pakistani authorities in monitoring the insurgents before they entered Afghanistan," NATO tracked insurgent vehicles loaded with men and equipment as they crossed into Afghanistan, and NATO and Afghan forces ambushed the insurgents in a deserted area about one half mile inside of Afghanistan. The ambush consisted of ground and air attacks and several trucks carrying arms and ammunition were also destroyed or captured. Operation Achilles24 On March 6, 2007 NATO and Afghan forces launched "Operation Achilles" in Helmand Province. The immediate goal of the operation—which will eventually involve 4,500 U.S., British, Canadian, and Dutch troops and 1,000 Afghan soldiers—is to secure the road leading to the Kajaki dam which has been described as a strategically important hydro-electric project. Taliban attacks against British forces providing security for the dam have precluded international aid work on the hydro-electric plant that provides electricity to about 1.7 million Afghans in the region. Longer term goals for Operation Achilles include bringing security to northern Helmand province and addressing the region's narcotics trafficking. NATO and Afghan officials maintain that about 700 insurgents have moved into the Helmand region and are posturing themselves to conduct attacks—including suicide attacks. More than 1,000 U.S. soldiers from the 4 th Brigade, 82 nd Airborne Division are participating in the early phases of Operation Achilles in an attempt to not only bring security to the Helmand region, but also to disrupt Taliban preparations for an anticipated spring offensive. Some analysts maintain that this latest NATO operation will face two significant challenges—a comparatively low number of NATO troops and its inability to pursue Taliban insurgents to their bases in Pakistan. U.S. officials suggest that any Afghan-centric military operation can only damage and not destroy Taliban forces that retreat to Pakistan to recruit and rearm its forces for future operations in Afghanistan. U.S. Marine Special Operations Unit Sent Home by U.S. Commander A 120 Marine Special Operations Company from the Second Marine Special Operations Battalion from Camp Lejeune, N.C. was reportedly sent home by U.S. commanders for its response to a March 4, 2007 incident where elements of the unit were ambushed by a vehicle-borne improvised explosive device and the Marines responded by killing as many as 10 civilians and wounding about 34 more. This was the first combat deployment of the recently-activated Marine special operations unit which had only been in Afghanistan for a few weeks out of a scheduled six month deployment and military officials have supposedly initiated an official investigation into the incident. U.S. military officials claim that the unit was sent home as it could no longer work in a counterinsurgency role because it had damaged the unit's relationship with the local population but some suggest that sending an entire unit home—particularly one as highly trained as a special operations unit—is highly unusual and perhaps indicative of deeper problems with the unit. Pakistani Military Operations Pakistani military operations in its Federally Administered Tribal Areas (FATA) as well as along the Pakistan-Afghan border, continue to play a significant role in combating the insurgency in Afghanistan. While many U.S. officials praise Pakistan's military activities, some U.S. and Afghan officials question if Pakistan is doing enough in combating Taliban insurgents. Reports also continue to suggest that Pakistan's Inter-Services Intelligence Agency is actively conducting training camps for insurgents and supporting jihadist madrassahs (religious schools) along the Afghan-Pakistan border. Pakistan has indicated that it would close four refugee camps along the border to prevent their use by insurgents and narco-traffickers and would add up to 938 border posts throughout the mountainous border region in increase intelligence activities and to tighten government control in the region. Pakistani officials indicated that the Afghan government has only about 100 border posts. Pakistan has supposedly started to issue biometric cards to monitor border crossings by people and traffic alike. Border Fence33 Reports suggest that the Pakistani government will shortly begin construction of a border fence along parts of it's 1,500 mile shared border with Afghanistan. In addition to erecting fencing and barbed wire, Pakistan also plans to emplace landmines to deter illegal border-crossers. Pakistani officials reportedly claim that the fences and mines will not be used at legal border crossings but will instead be placed on routes used by insurgents and drug traffickers. The Afghan government's response has been characterized as largely negative and some suggest that relations between the two countries have been further eroded. The Afghan government reportedly believes that the fence and mines would arbitrarily divide the Pashtun tribes that live on both sides of the border and the use of mines would invoke "bad memories" of the hundreds of thousands of landmines laid during 25 years of conflict—first by the Soviets in the 1980s and later by warring Afghan militias in the 1990s. The United Nations and other international groups have spent millions of dollars to remove these mines and many areas still contain mines from the 80s and 90s. Insurgent Tactics and Operations Insurgent tactics and operations against Coalition forces continue to evolve, and some maintain that they are becoming increasingly like the tactics employed in Iraq. U.S. military officials have noted that cross-border attacks against U.S. and Afghan forces have increased significantly since September 2006, when Pakistan signed a pact with tribal groups in the border region. According to officials, in the two months before the agreement, there were 40 cross-border attacks in Khost and Paktika provinces, but in the two months after the agreement, there were 140 attacks. U.S. military intelligence officials also provided statistics detailing the increase in insurgent attacks. In 2005, there were a reported 27 suicide attacks and in 2006, there were 139 attacks. In 2005, there were 783 road side bombs and in 2006, there were 1,677. The insurgents conducted 4,542 direct attacks (attacks using small arms, grenades an other weapons) in 2006, as compared to 1,558 such attacks in 2005. Taliban insurgents reportedly seized control of two towns in southern and southwestern Afghanistan, largely attributed to a lack of presence of NATO forces. On February 1, 2007, the town of Musa Qala in Helmand province was taken over by Taliban forces. About five months earlier, British forces vacated the town and handed over responsibility for its security to a tribal council and local police forces. On February 19, 2007, Taliban forces seized a district in southwestern Afghanistan. The attack occurred in the Baqwa district of Farah province where few NATO and Afghan troops are deployed. It is not known if Taliban forces have retained control of Baqwa district or have left the area. Taliban Spring Offensive? Reports vary as to insurgent troop strength and their ability to mount a spring offensive. One senior Taliban commander maintains that there 8,000 to 9,000 "fighters" in Helmand province alone presently opposing NATO's Operation Achilles and ready to participate in a "spring offensive." While some NATO military officials maintain that the Taliban are fully capable of mounting a large-scale spring offensive—noting an increase in attacks as the weather has begun to improve, others suggest that the Taliban is too weak for a new offensive, having been significantly degraded in the NATO campaigns of late 2006. While the Taliban might have been weakened by the campaigns of 2006, a recent cross border attack against U.S. Fire Base Tillman in Paktika Province on March 24—where 12 militants were killed in the fighting—seems to indicate that the insurgents are still willing and capable of directly confronting U.S. and Coalition forces. Provincial Reconstruction Teams41 PRTs are small, civil-military teams designed to extend the authority of the Afghan central government beyond Kabul and to facilitate aid and reconstruction projects. PRTs have enabled coalition forces to extend a degree of security to outlying regions and have also permitted U.S. forces to establish personal relationships with local Afghan leaders which some believe has helped to diminish insurgent influence in a number of regions. As of February 7, 2007, ISAF had 25 PRTs operational—12 of which were U.S. teams. Composition of U.S. PRTs U.S. PRTs consist of between 50 and 100 military and civilian personnel. Civilian personnel usually consist of a U.S. State Department representative, a U.S. Agency for International Development (USAID) representative, and a representative from the U.S. Department of Agriculture (USDA). There is also usually an Afghan representative from the Ministry of the Interior on the PRT. In terms of military personnel, each PRT has a commander, two civil affairs teams with four members each, operational and administrative staff, and force protection elements—usually a platoon-sized (40 soldier) force. The Afghan National Army (ANA) Training of the ANA commenced shortly after U.S. and Coalition forces defeated Taliban forces in early 2002. The Bonn II Conference on rebuilding Afghanistan in December 2002 endorsed a 70,000 strong Afghan National Army. Part of ISAF's mission is "supporting and helping to train the Afghan National Security Forces (ANSF) to a standard that will enable them in time to assume full responsibility for the internal and external security of the country." The ANA has been considered a relatively competent force, but one whose performance varies from very good to very poor, dependent to a large extent on the leadership of the particular unit. Recent reports suggest that the ANA continues to improve its proficiency, with some suggesting that the ANA "outperforms" the better-equipped Iraqi security forces. Some military officials believe that the ANA could defend Afghanistan without U.S. and NATO support in ten years or less. U.S. military officials maintain that more than two dozen ANA battalions are capable of conducting operations "on their own with minimal support" from U.S. or coalition forces. Some credit the ethnic diversity of the ANA and its training curriculum—which includes literacy, writing, and language training—as key factors in the ANA's growing efficacy. A 50,000 Soldier Afghan National Army?47 One report suggests that the Administration now supports the creation of a 50,000 soldier ANA as opposed to the 70,000 soldier force that the United States and other countries agreed to at the Bonn II Conference in December 2002 and later reaffirmed at the London Conference on Afghan Reconstruction. The Pentagon reportedly believes that Afghanistan will be unable to support a 70,000 soldier force and that Afghanistan won't even be able to pay for a 50,000 soldier force until 2063. The Afghan government reportedly opposes a reduction to a 50,000 soldier force and U.S. military officials acknowledge that a 50,000 soldier force would mean that the Afghan government would have to accept a greater degree of risk. A 150,000 Afghan National Army Needed? According to the Afghan Defense Minister, Abdul Rahim Wardak, the Afghan National Army needs at least 150,000 troops to secure the country. The Defense Minister reportedly suggests that a 70,000 member ANA—which is still three years away—could not end surging Taliban violence and protect the country from outside threats. Mr. Wardak maintains that this force must be well-trained and equipped with sufficient mobility and firepower as well as logistical and training institutions. Equipping the Afghan National Army Equipping the Afghan National Army continues to be described as "inadequate." In a recent report, the following observations were made by a retired U.S. Army general: They [ANA] have no real national logistics or maintenance system. The ANA has, for all practical purposes, no air power—neither helicopter or fixed wing. We should, in my view, have a five year program to equip them with 100-plus Blackhawks [UH-60 helicopter] (some equipped as gunships), 25-plus Chinooks [CH-47 helicopter], and two dozen C-130s [transport aircraft]/AC-130s [fire support aircraft]. They have no high speed, wheeled light armor (they should have three battalions of Stryker combat vehicles). They have junk small arms and should be equipped with U.S. Army modern automatic weapons. They lack body armor. They lack deployable, modern mortars and light artillery (this has been an absolute key to keeping U.S. Army combat units alive along the eastern frontier). While the provision of helicopter, transport aircraft, armored vehicles, and artillery would likely significantly enhance the ANA's combat capabilities, significant maintenance and logistical support would be required to sustain these systems—a capacity that is, at present, lacking. Some equipment is being provided to the Afghan National Army. On February 1, 2007, the United States handed over 12,000 heavy and light weapons and 800 High Mobility Multipurpose Wheeled Vehicles (HMMWVs) and trucks to the ANA. NATO states that it has provided the ANA over 50,000 light weapons, 110 armored personnel carriers, 12 helicopters and millions of rounds of ammunition although it is not known if these figures include contributions from the United States. Counternarcotics Operations52 Increased Poppy Production in 2006 According to the U.N., 2006 opium cultivation in Afghanistan rose 59% over 2005 levels, with expected revenues exceeding $3 billion. The number of people involved in opium cultivation increased by almost a third to 2.9 million—approximately 12% of Afghanistan's total population. In its report, the U.N. suggests that—particularly in Helmand and Kandahar provinces—NATO and the ANA combine its counterinsurgency and counternarcotics efforts to stop "the vicious circle of drugs funding terrorist and terrorists protecting drug traffickers." Some Afghan government officials maintain that former commanders and warlords that have become district chiefs and local police chiefs under the new Afghan central government and are involved in the drug trade. Some experts suggest that since the fall of the Taliban in 2001 and because of Coalition and government pressure, that major Afghan drug traffickers: Have used their wealth and influence to establish complex systems of protection, systematically targeting government and law enforcement institutions for corruption by paying some officials at all levels to allow them to continue their business and by purchasing positions within institutions. If these systems have been developed within Afghan government institutions to protect and perpetuate the illegal Afghan drug trade, NATO and U.S. military actions designed to combat the Afghan opium trade and disrupt its financial ties to Taliban insurgents may prove to be ineffective. The Afghan national government continues to resist U.S. pressure for aerial eradication of opium-producing poppies but has renewed its ground-based eradication efforts, hoping to destroy some 123,550 acres before the poppy harvest begins in April. U.S. and NATO's Role in Countering Drugs While NATO's supreme commander has reportedly ordered NATO commanders in Afghanistan to "increase their assistance to local counternarcotics authorities," he also reiterated that "NATO was not authorized to play a direct role in the anti-narcotics effort," and could only supply intelligence and security and logistical assistance. Some question if more direct NATO involvement in Afghan counternarcotics efforts could achieve better results but additional troops would likely be required for a more direct role in counternarcotics operations. Issues for Congress Adequacy of Forces? Congress might examine the adequacy of forces—both U.S. and NATO—in terms of their ability to successfully prosecute combat operations against a Taliban insurgency that has evolved in terms of tactics and its ability to conduct coordinated, relatively large-scale military operations. One issue that might be explored is that of national caveats that limit the usefulness of some nation's military forces. It can be argued that because many NATO nations significantly restrict their force's operations that a disproportionate burden is being placed on NATO countries that do not restrict how their forces are used in Afghanistan. Such a disparity could also conceivably result in a rift between NATO forces that participate in combat operations and those forces that are restricted from participating—a rift that insurgents might choose to exploit. While it is possible that these national caveats have resulted in requirements for additional forces that can participate in combat operations it can be argued that forces subject to national caveats are playing a vital role in Afghanistan by virtue of their presence, which affords a degree of security and enables relief and reconstruction efforts. Can NATO Sustain or Increase Its Current Force Levels? As part of any discourse on the adequacy of NATO forces in Afghanistan, Congress might also consider NATO's ability to sustain current force levels in Afghanistan or increase these levels if the situation requires. Of particular concern, is the "pass the hat" manner in which NATO obtains its forces from member countries which likely makes any sort of long-term planning difficult at best. NATO's 2006 request for an additional 2,000 to 2,500 combat soldiers is considered by some as illustrative of these difficulties. Because of what some call a lack of commitment by many NATO members, the United States and Great Britain were compelled to provide the majority of reinforcements needed to meet the growing security threat posed by the Taliban insurgents and narcotics traffickers. Why Was the U.S. Marine Special Operations Unit Asked to Leave Afghanistan? Congress may decide to examine the specific events that lead to the expulsion of the Marine Special Operations Company. One report suggests that after the ambush, some Afghan witnesses stated that "the Marines fired recklessly at passing vehicles and pedestrians along the crowded road flanked by shops." Such a reaction by a unit reportedly "composed of some of the most experienced, highly trained Marines—including many experts in reconnaissance and marksmanship," is considered by some to be highly unusual for a supposedly elite and highly disciplined unit. The Evolving Insurgency Five years into the conflict in Afghanistan, it can be argued that the Taliban insurgency has evolved both operationally and in terms of its impact on efforts to extend security and reconstruction throughout Afghanistan. Congress might decide to examine the current state of the insurgency and its potential for further growth and evolution, and U.S. and NATO efforts to address this evolution. Reports suggest that insurgent attacks have more than doubled over the past six months, now numbering more than 600 attacks per month resulting in at least 3,700 military and civilian deaths in 2006. This pattern of attacks reportedly "threatens to reverse some of the gains made in the past, with development activities being especially hard-hit in several areas, resulting in partial or total withdrawal of international agencies in a number of the worst-affected provinces." The nature of insurgent operations suggests that the Taliban insurgency continues to evolve. Some military officials concede that despite Coalition offensive operations, the insurgency has grown stronger. The insurgency now attacks in larger groups, mounting more sophisticated and audacious operations that often feature coordinated fires and maneuvers. The insurgents also have displayed a tenacity that was not present in past operations by pressing their attacks as opposed to past "hit and run" attacks. It can be argued that these operational characteristics represent a Taliban insurgency that has improved its militarily effectiveness over the past five years of conflict, despite repeated attempts by Coalition ground and air forces to destroy it. Adequacy of the Afghan National Army Congress might consider reviewing the U.S. government's commitment to building and supporting an effective Afghan National Army—a prerequisite for the withdrawal of U.S. forces from Afghanistan. The Administration appears to be supporting a 50,000 soldier Afghan National Army as opposed to the 70,000 soldier force that it committed to in 2002. Critics of this policy suggest that it is based on a desire to cut costs and does not take into account the current situation where insurgents are stepping up both conventional attacks and explosive device and suicide attacks against Coalition forces. In addition, some analysts maintain that a 50,000 soldier force would be inadequate to confront the insurgency and defend Afghanistan's western border with Iran. Some suggest that such an approach, which might make sense from a short-term financial perspective, could result in an undermanned Afghan National Army and require an indefinite commitment of U.S. and foreign troops to provide for Afghanistan's security needs. Beyond national security, some suggest that success of the Afghan National Army is important for other reasons. Some maintain that Afghanistan has no unifying institutions, that the Karzai government controls Kabul but not much more; that the Afghan National Police are a fundamentally corrupt organization; and that in the rural areas of Afghanistan, druglords and warlords are in charge. Some view the multi-tribal Afghan National Army as a "good place to start" to build Afghan national loyalty. Inadequate Equipment for the Afghan National Army With numerous reports from U.S. officials citing the poor state of the Afghan National Army in terms of equipment, it is possible that Congress might examine how the United States and NATO and Coalition countries plan to improve the equipment posture of the Afghan National Army. Taliban insurgent forces are said to be better equipped than their ANA counterparts, who reportedly ride into battle in "Ford Ranger pick up trucks, with no body armor or helmets, and who communicate with cellphones." Many analysts see little prospect for success if the ANA is not properly equipped and supported. Counternarcotics Operations The current U.S. military policy on counternarcotics operations and NATO's limited mandate for participating in counternarcotics operations may come under congressional scrutiny. While "burning poppy fields" and conducting combat operations on narcotics-related facilities might be too extreme a course of action for U.S. and NATO troops, a more active role short of direct action might have an impact on insurgent activities. According to one report, while the solution to the illegal opium problem requires an interdisciplinary approach due to the central role opium production plays in Afghanistan's economy, NATO [and U.S. forces] should play a greater role "in targeting drug laboratories, opium stockpiles, and trafficking routes" as this would "not only help Afghan counternarcotics efforts but also curtails the flow of drugs to Europe, which gets 90 percent of its heroin from Afghanistan." Opponents of a more active U.S. and NATO counternarcotics role could argue that these efforts would shift resources and focus away from helping to stabilize the security situation, which could undermine the credibility of the Afghan central government. Additional Reading CRS Report RL30588, Afghanistan: Post-Taliban Governance, Security, and U.S. Policy , by [author name scrubbed]. CRS Report RL32686, Afghanistan: Narcotics and U.S. Policy , by [author name scrubbed]. CRS Report RL33627, NATO in Afghanistan: A Test of the Transatlantic Alliance , by Vincent Morelli and [author name scrubbed]. CRS Report RL33110, The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11 , by [author name scrubbed].

The U.S. military has been involved in Afghanistan since the fall of 2001 when Operation Enduring Freedom toppled the Taliban regime and attacked the Al Qaeda terrorist network hosted by the Taliban. A significant U.S. military presence in the country could continue for many years as U.S., North Atlantic Treaty Organization (NATO), Coalition, and Afghan National Army (ANA) forces attempt to stabilize the country by defeating the insurgency, facilitating reconstruction, and combating Afghanistan's illegal drug trade. Despite NATO's assumption of command of the International Security Assistance Force (ISAF), the United States will remain the largest troop contributing nation and will continue Operation Enduring Freedom, intended to locate and destroy insurgents and terrorists operating in Afghanistan. Acting on a 2006 request by NATO senior leaders for additional troops, the United States, Great Britain, and possibly Poland will together send approximately 6,000 additional troop to help combat insurgents. Insurgent activity continues to evolve, with some of the tactics and techniques being used by Afghan insurgents reportedly similar to those employed in Iraq. Reports suggest that instead of building a 70,000 soldier Afghan National Army as agreed to in the 2002 Bonn Conference, the Administration intends to support a 50,000 soldier force, while some Afghan officials suggest that a 150,000 man Afghan National Army will be needed to insure both internal and external security. Senior U.S. officials have also stated that the Afghan National Army needs to be significantly better equipped if it is to become an effective security force. Despite the efforts of the Coalition and Afghan government, poppy production in 2006 significantly surpassed last year's crop and reported cooperation between drug lords and insurgents has added a new dimension and possible complications to efforts to combat the insurgents and the growing drug trade. The possible involvement of Afghan government and police officials in protecting drug traffickers, in concert with NATO's and the United States' indirect involvement in counternarcotics efforts, calls into question the Coalition's ability to stem the illegal opium trade that helps to finance insurgent operations. The 110 th Congress, in its oversight role, may choose to examine the sufficiency of U.S. and NATO forces, the impact of an evolving insurgency, NATO's operations against insurgents, the size, proficiency, and equipping of the Afghan National Army, and the effectiveness of counternarcotics operations. This report will be updated as events warrant.

Introduction and Overview This report provides Congress with official, unclassified, background data from U.S.government sources on transfers of conventional arms to developing nations by major suppliers forthe period 2000 through 2007. It also includes some data on worldwide supplier transactions. Itupdates and revises CRS Report RL34187(pdf) , Conventional Arms Transfers to Developing Nations,1999-2006 . The data in this report provide a means for Congress to identify existing supplier-purchaserrelationships in conventional weapons acquisitions. Use of these data can assist Congress in itsoversight role of assessing whether the current nature of the international weapons trade affects U.S.national interests. For most of recent American history, maintaining regional stability, and ensuringthe security of U.S. allies and friendly nations throughout the world, have been important elementsof U.S. foreign policy. Knowing the degree to which individual arms suppliers are making armstransfers to individual nations or regions provides Congress with a context for evaluating policyquestions it may confront. Such policy questions may include, for example, whether or not tosupport specific U.S. arms sales to given countries or regions or to support or oppose such armstransfers by other nations. The data in this report may also assist Congress in evaluating whethermultilateral arms control arrangements or other U.S. foreign policy initiatives are being supportedor undermined by the actions of arms suppliers. The principal focus of this report is the level of arms transfers by major weapons suppliersto nations in the developing world -- where most of the potential for the outbreak of regional militaryconflicts currently exists. For decades, during the height of the Cold War, providing conventionalweapons to friendly states was an instrument of foreign policy utilized by the United States and itsallies. This was equally true for the Soviet Union and its allies. The underlying rationale for U.S.arms transfer policy then was to help ensure that friendly states were not placed at risk through amilitary disadvantage created by arms transfers by the Soviet Union or its allies. Following the ColdWar's end, U.S. arms transfer policy has been based on assisting friendly and allied nations indeveloping and maintaining their ability to deal with regional security threats and concerns. The data in this report illustrate how global patterns of conventional arms transfers havechanged in the post-Cold War and post-Persian Gulf War years. Relationships between armssuppliers and recipients continue to evolve in response to changing political, military, and economiccircumstances. Where before the principal motivation for arms sales by foreign suppliers might havebeen to support a foreign policy objective, today that motivation may be based as much on economicconsiderations as those of foreign or national security policy. The developing world continues to be the primary focus of foreign arms sales activity byconventional weapons suppliers. During the period of this report, 2000-2007, conventional armstransfer agreements (which represent orders for future delivery) to developing nations comprised66.6% of the value of all international arms transfer agreements. The portion of agreements withdeveloping countries constituted 67.7% of all agreements globally from 2004-2007. In 2007, armstransfer agreements with developing countries accounted for 70.5% of the value of all suchagreements globally. Deliveries of conventional arms to developing nations, from 2004-2007,constituted 64.7% of all international arms deliveries. In 2007, arms deliveries to developing nationsconstituted 55.6% of the value of all such arms deliveries worldwide. The data in this new report supersede all data published in previous editions. Since thesenew data for 2000-2007 reflect potentially significant updates to and revisions in the underlyingdatabases utilized for this report, only the data in this most recent edition should be used. The dataare expressed in U.S. dollars for the calendar years indicated, and adjusted for inflation (see boxnotes on page 3). U.S. commercially licensed arms export delivery values are excluded (see box noteon page 20). Also excluded are arms transfers by any supplier to subnational groups. The definitionof developing nations, as used in this report, and the specific classes of items included in its valuestotals are found in box notes on page 3. The report's table of contents provides a detailed listing anddescription of the various data tables to guide the reader to specific items of interest. Major Findings General Trends in Arms Transfers Worldwide The value of all arms transfer agreements worldwide (to both developed and developingnations) in 2007 was nearly $60 billion. This was an increase in arms agreements values over 2006of 9.2% ( Chart 1 )( Table 8A ). In 2007, the United States led in arms transfer agreements worldwide , making agreementsvalued at over $24.8 billion (41.5% of all such agreements), up significantly from $16.7 billion in2006. Russia ranked second with $10.4 billion in agreements (17.3% of these agreements globally),down from $14.3 billion in 2006. The United Kingdom ranked third, its arms transfer agreementsworldwide were $9.8 billion in 2007, up from $4.1 billion in 2006. The United States, Russia, andthe United Kingdom collectively made agreements in 2007 valued at over $45 billion, 75.2% of allinternational arms transfer agreements made by all suppliers ( Figure 1 )( Tables 8A, 8B, and 8D ). For the period 2004-2007, the total value of all international arms transfer agreements($208.3 billion) was substantially higher than the worldwide value during 2000-2003 ($147.6billion), an increase of 29.2%. During the period 2000-2003, developing world nations accountedfor 67.7% of the value of all arms transfer agreements made worldwide. During 2004-2007,developing world nations accounted for 67.7% of all arms transfer agreements made globally. In2007, developing nations accounted for 70.5% of all arms transfer agreements made worldwide( Figure 1 )( Table 8A ). In 2007, the United States ranked first in the value of all arms deliveries worldwide , makingnearly $12.8 billion in such deliveries or 41.3%. This is the eighth year in a row that the UnitedStates has led in global arms deliveries. Russia ranked second in worldwide arms deliveries in 2007,making $4.7 billion in such deliveries. The United Kingdom ranked third in 2007, making $2.6billion in such deliveries. These top three suppliers of arms in 2007 collectively delivered nearly$20.1 billion, 64.8% of all arms delivered worldwide by all suppliers in that year ( Figure 2 )( Tables9A, 9B, and 9D ). The value of all international arms deliveries in 2007 was $31 billion. This is a decrease inthe total value of arms deliveries from the previous year (a decline from $33.6 billion). The totalvalue of such arms deliveries worldwide in 2004-2007 ($134.9 billion) was lower than the deliveriesworldwide from 2000-2003 ($143.6 billion, a decline of nearly $10 billion) ( Figure 2 )( Tables 9Aand 9B )( Charts 7 and 8 ). Developing nations from 2004-2007 accounted for 64.7% of the value of all internationalarms deliveries. In the earlier period, 2000-2003, developing nations accounted for 65.1% of thevalue of all arms deliveries worldwide. In 2007, developing nations collectively accounted for55.6% of the value of all international arms deliveries ( Figure 2 )( Tables 2A, 9A, and 9B ). Worldwide weapons orders increased in 2007. The total of nearly $60 billion was an increasefrom $54.9 billion in 2006, or 9.2%. Global arms agreement values for the other years covered hereranged from $48.7 billion in 2005 to $32.6 billion in 2003. Of the major arms orders secured in2007 most were made by the traditional major suppliers. In some instances these orders representedsignificant new acquisitions by the purchasing country. In others they reflected the continuation oracceleration of a longer-term weapons-acquisition program. The increase in new weapons sales can also be explained, in part, by the decision of somepurchasing nations to acquire major systems they had deferred buying due to budgetaryconsiderations. Some nations were completing the integration of major weapons systems they havealready purchased into their force structures. Some of the growth in arms transfer agreements morerecently also reflects contracts related to training and support services, as well as upgrades ofexisting weapons systems. Individual orders such as these can be expensive, and in given instancesprove to be nearly as costly as orders for new units of military equipment. Because the international arms market continues to be intensely competitive, severalproducing countries have focused sales efforts on prospective clients in nations and regions whereindividual suppliers have had competitive advantages resulting from well-establishedmilitary-support relationships. Arms sales to new NATO member nations in Europe to support theirmilitary modernization programs have created new business for arms suppliers, while allowing theseNATO states to sell some of their older generation military equipment, in refurbished form, to otherless-developed countries. There are inherent limitations on these European sales due to the smaller defense budgets ofmany of the purchasing countries. Yet creative seller financing options, as well as the use ofco-assembly, co-production, and counter-trade agreements to offset costs to the buyers continue tofacilitate new arms agreements. It seems likely that the United States and European countries orconsortia will compete vigorously for prospective arms contracts within the European region in theforeseeable future. Such sales seem particularly important to European suppliers, as they canpotentially compensate, in part, for lost weapons deals elsewhere in the developing world that resultfrom reduced demand for new weapons. Developed nations continue their efforts to protect important elements of their nationalmilitary industrial bases by limiting arms purchases from other developed nations. However, severalkey arms suppliers have placed additional emphasis on joint production of various weapons systemswith other developed nations as a more effective way to preserve a domestic weapons productioncapability, while sharing the costs of new weapons development. The consolidation of certainsectors of the domestic defense industries of key weapons-producing nations continues, in the faceof intense foreign competition. Some supplying nations, meanwhile, have chosen to manufactureitems for niche weapons categories where their specialized production capabilities give themimportant advantages in the international arms marketplace. Despite the recent upward trend in weapons purchases with the developed world, somedeveloping nations have limited their weapons purchases primarily due to their limited financialresources to pay for such equipment. Other prospective arms purchasers in the developing worldwith significant financial assets have been cautious in launching new and costlyweapons-procurement programs. Increases in the price of oil, while an advantage for major oilproducing states in funding their arms purchases, has, simultaneously, caused economic difficultiesfor many oil consuming states, contributing to their decisions to curtail or defer new weaponsacquisitions. A number of less affluent developing nations have chosen to upgrade existing weaponssystems in their inventories, while reducing their purchases of new ones. This circumstance maycurtail sales of some new weapons systems. Yet the weapons upgrade market can be very lucrativefor some arms producers, and partially mitigate the effect of fewer opportunities for the sale ofmajor items of military equipment. Most recently, the nations in the Near East and Asia regions have resumed large weaponspurchases in contrast with arms sales activity in the earliest years of this report. These major orderscontinue to be made by a select few developing nations in these regions. They have been madeprincipally by India and China in Asia, and Saudi Arabia and the United Arab Emirates in the NearEast. These purchasing tendencies are subject to abrupt change based on the strength of either thethreat assessments of individual states or the strength of their individual economies. For the largergroup of nations in these regions the strength of the economies of a wide range of nations in thedeveloping world continues to be the most significant factor in the timing of many of their armspurchasing decisions. Latin America, and, to a much lesser extent, Africa, are regions where some nations wish tomodernize important sectors of their military forces. Some large arms orders (by regional standards)have been placed by a few states in these two regions within the last decade. Yet in Latin Americaand Africa, many countries are constrained in their weapons purchases by their financial resources. So long as there is limited availability of seller-supplied credit and financing for weapons purchases,and national budgets for military purchases remain relatively low, it seems likely that major armssales to these two regions of the developing world will be limited to a small number of nations there. General Trends in Arms Transfers to Developing Nations The value of all arms transfer agreements with developing nations in 2007 was nearly $42.3billion, an increase from the $38.1 billion total in 2006 Chart 1 )( Figure 1 )( Table 1A ). In 2007, thevalue of all arms deliveries to developing nations ($17.2 billion) was lower than the value of 2006deliveries (over $21.4 billion), and the lowest total for the 2000-2007 period ( Charts 7 and8 )( Figure 2 )( Table 2A ). Recently, from 2004-2007, the United States and Russia have dominated the arms marketin the developing world, with both nations either ranking first or second for 3 out of these 4 yearsin the value of arms transfer agreements . From 2004-2007, Russia made nearly $39.3 billion,27.9% of all such agreements, expressed in constant 2007 dollars. During this same period, theUnited States made $34.7 billion in such agreements, 24.6% of all such agreements. Collectively,the United States and Russia made 52.5% of all arms transfer agreements with developing nationsduring this four year period. The United Kingdom, the third leading supplier, from 2004-2007 made$21.3 billion or 15.1% of all such agreements with developing nations during these years. In theearlier period (2000-2003) the United States ranked first with $46.4 billion in arms transferagreements with developing nations or 48.3%; Russia made $25.6 billion in arms transferagreements during this period or 26.6%. France made nearly $5 billion in agreements or 5.2% ( Table1A ). From 2000-2007, most arms transfers to developing nations were made by two majorsuppliers in any given year. The United States ranked first among these suppliers for five of the lasteight years during this period, falling to third place in 2005. Russia has been a strong competitor forthe lead in arms transfer agreements with developing nations, ranking second every year from 2000through 2003, and first from 2004-2006. Although Russia has lacked the larger traditional clientbase for armaments held by the United States and the major West European suppliers, its recentsuccesses in concluding new arms orders suggests that Russia is likely to continue to be, for sometime, a significant leader in arms agreements with developing nations. Russia's most significant highvalue arms transfer agreements continue to be with India and China. Russia has also had somesuccess in concluding arms agreements with clients beyond its principal two. Russia continues toseek to expand its prospects in North Africa, the Middle East, and Southeast Asia. Most recently Russia has increased sales efforts in Latin America, despite having essentiallyabandoned major arms sales efforts there after the end of the Cold War. Venezuela has become asignificant new arms client gained by Russia in this region. The Russian government has adoptedmore flexible payment arrangements for its prospective customers in the developing world, includinga willingness in specific cases to forgive outstanding debts owed to it by a prospective client in orderto secure new arms purchases. Additionally, Russia continues to seek to enhance the quality of itsfollow-on support services to make Russian products more attractive and competitive, and to assureits potential clients that it can effectively provide timely service and spare parts for the weaponssystems it exports. Major West European arms suppliers, particularly France and the United Kingdom, haveconcluded large orders with developing countries over the last eight years based on either long-termsupply relationships or their having specialized weapons systems readily available. Germany hasbeen a key source of naval systems for developing nations. Although it faces increased competitionfrom these other major arms suppliers, the United States appears likely to hold its position as theprincipal supplier to key developing world nations, especially those able to afford major newweapons. The United States has developed for decades such a wide base of arms equipment clientsglobally that it is able to conclude a notable number of agreements annually to provide upgrades,ordnance and support services for the large variety of weapons systems it has previously sold to itsclients. Thus, even when the United States does not conclude major new arms agreements in a givenyear, it can still register significant arms agreement values based on transactions in these othercategories. The principal arms-supplying nations continue to focus their sales efforts on the wealthierdeveloping countries. Arms transfers to the less affluent developing nations are still constrained bythe scarcity of funds in their defense budgets and the unsettled state of the international economy. The overall decline in the level of arms agreements with developing nations that began after 2001and continued through 2003 has halted. Arms transfer agreements with developing countries reachedtheir highest total value in 2007 at nearly $43.3 billion. From 2004 through 2007 there has been asteady increase in arms transfer agreements with developing countries, aid to an important degreeby sales to the more affluent nations in this group. Those developing nations with notably increasedoil revenues have been particularly active in seeking new weaponry most recently. China, as well as other European and non-European suppliers, appears to have increased theirparticipation in the arms trade with the developing world in recent years, albeit at lower levels, andwith more uneven results, than those of the major suppliers. Nevertheless, these non-major armssuppliers have proven capable, on occasion, of making arms deals of consequence. Most of theirannual arms transfer agreement values during 2000-2007 have been comparatively low, although thevalues are larger when they are aggregated together as a group. In individual cases they have beensuccessful in selling older generation equipment, while they procure newer weapons to upgrade theirown military forces. These arms suppliers also are more likely to be sources of small arms and lightweapons and associated ordnance, rather than routine sellers of major military equipment. Most ofthese arms suppliers have not consistently ranked with the traditional major suppliers of advancedweaponry in the value of their arms agreements and deliveries ( Tables 1A, 1F, 1G, 2A, 2F, and2G ). United States. The total value -- in real terms --of United States arms transfer agreements with developing nations rose from $9.1 billion in 2006to $12.2 billion in 2007. The U.S. share of the value of all such agreements was 28.8% in 2007, upfrom a 24% share in 2006 ( Charts 1, 3 and 4 )( Figure 1 )( Tables 1A and 1B ). In 2007, the total value of U.S. arms transfer agreements with developing nations wasattributable to a few major deals with clients in the Near East and in Asia. A substantial number ofsmaller valued purchases by a wide number of traditional U.S. arms clients throughout the Near Eastand Asia contributed notably to the overall U.S. agreements total. The arms agreement total of theUnited States in 2007 illustrates the continuing U.S. advantage of having well-established defense-support arrangements with weapons purchasers worldwide, based upon the existing variety of U.S.weapons systems their militaries utilize. U.S. agreements with all of its clients in 2007 include notonly sales of major weapons systems, but also the upgrading of systems previously provided. TheU.S. totals also include agreements for a wide variety of spare parts, ammunition, ordnance, training,and support services which, in the aggregate, have significant value. Among the larger valued arms transfer agreements the United States concluded in 2007 withdeveloping nations were: with the United Arab Emirates for 26 UH-60M Black Hawk helicoptersfor over $800 million, and for 20 High Mobility Artillery Rocket Systems (HIMARS) launchers androckets for $595 million. Other U.S. arms agreements in 2007 were with Egypt for co-productionof 125 M1A1 Abrams tanks for $771 million; with Saudi Arabia for 152 GE/Pratt&Whitney jetengines for $386 million, and for F-15 aircraft follow-on services for $319 million; with South Koreafor 58 AN/VRC-90E SINCGAR radio systems for $427 million and for 210 SM-2 STANDARDBlock III missiles for $210 million; with Colombia for 15 UH-60L Black Hawk helicopters for $217million; and with Jordan for a C4SIR system for $208 million. Russia. The total value of Russia's arms transferagreements with developing nations in 2007 was $9.7 billion, a decrease from $14.4 billion in 2006,placing Russia third in such agreements with the developing world. Russia's share of all developingworld arms transfer agreements increased, then fell from 37.9% in 2006 to 23% in 2007 ( Charts 1,3, and 4 )( Figure 1 )( Tables 1A, 1B, and 1G ). Russian arms transfer agreement totals with developing nations have been notable during thelast four years. During the 2004-2007 period, Russia ranked first among all suppliers to developingcountries, making $37.9 billion in agreements (in current 2007 dollars) ( Table 1F ). Russia's statusas a leading supplier of arms to developing nations stems from a successful effort to overcome thesignificant economic and political problems associated with the dissolution of the former SovietUnion. Traditional arms clients of the former Soviet Union were generally less wealthy developingcountries valued as much for their political support during the Cold War, as for their desire forSoviet weaponry. Several of these Soviet-era client states received substantial military aid grantsand significant discounts on their arms purchases. After 1991 Russia consistently placed a premiumon obtaining hard currency for the weapons it sold. Faced with stiff competition from Western armssuppliers in the post-Cold War period, Russia modified and adapted its selling practices in an effortto regain and sustain an important share of the developing-world arms market. In recent years, Russian leaders have made significant efforts to provide more creativefinancing and payment options for prospective arms clients. They have agreed to engage incounter-trade, offsets, debt-swapping, and, in key cases, to make significant licensed productionagreements in order to sell Russia's weapons. The willingness to license production has been acentral element in several cases involving Russia's principal arms clients, India and China. Russia'sefforts to expand its arms customer base have met with mixed results. Russia's arms sales efforts,apart from those with China and India, have been focused on Southeast Asia. Here Russia hassecured arms agreements with Malaysia, Vietnam, and Indonesia. Most recently Russia hasconcluded major arms deals with Venezuela and with Algeria. Elsewhere in the developing worldRussian military equipment can be competitive because it ranges from the most basic to the highlyadvanced. For less affluent developing nations Russia's less expensive armaments are particularlyattractive. The sale of military aircraft and missiles continues to be a significant portion of Russia's armsexports. But the absence of major new research and development efforts in this and other militaryequipment areas can jeopardize long-term Russian foreign arms sales prospects. Although militaryweapons research and development (R&D) programs exist in Russia, other major arms suppliers arecurrently more advanced in the process of developing and producing weaponry than in existingRussian R&D programs. Despite these potential difficulties, Russia continues to have important arms developmentand sales programs involving India and China, which should provide it with sustained businessthroughout this decade. Through agreements concluded in the mid-1990s, Russia has sold majorcombat fighter aircraft, and main battle tanks to India, and has provided other major weaponssystems though lease or licensed production. It continues to provide support services and items forthese various weapons systems. Sales of advanced weaponry in South Asia by Russia have been amatter of ongoing concern to the United States because of long-standing tensions between India andPakistan. When India acquires a new weapon system this typically leads Pakistan to seek comparableweapons or those with offsetting capabilities. A key U.S. policy objective is keeping a potentiallydestabilizing arms race in this region within check. (1) China has been Russia's other key arms client in Asia, especially for advanced aircraft andnaval systems. Since 1996, Russia has sold China Su-27 fighter aircraft and agreed to licensedproduction of them. It has sold the Chinese quantities of Su-30 multi-role fighter aircraft,Sovremenny-class destroyers equipped with Sunburn anti-ship missiles, and Kilo-class Project 636submarines. Russia has also sold the Chinese a variety of other weapons systems and missiles. In2005, Russia agreed to sell China 30 IL-76TD military transport aircraft and 8 IL-78M aerialrefueling tanker aircraft for more than $1 billion. Russia also signed new arms transfer agreementswith China for a number of AL-31F military aircraft engines for $1 billion, and agreed to sell jetengines for China's FC-1 fighter aircraft at a cost in excess of $250 million. Chinese armsacquisitions are apparently aimed at enhancing its military projection capabilities in Asia, and itsability to influence events throughout the region. These acquisitions continue to be monitored byU.S. policymakers. The U.S. policy interest is, among other things, ensuring that it providesappropriate military equipment to U.S. allies and friendly states in Asia to help offset any prospectivethreat China may pose to such nations, while keeping the U.S. military aware of any threat it mayface in any confrontation with China. (2) In 2007 there were no especially large Chinese arms agreementswith Russia, possibly because the Chinese military is focused on absorbing and integrating previousarms purchases from Russia into its force structure. Among the most significant arms transfer deals Russia made in 2007 were with India. Theseagreements included the sale of 347 T-90 main battle tanks, 40 Su-30MKI combat fighter aircraftand a number of MiG-29 fighter aircraft. Also concluded was an agreement for the production ofjet aircraft engines and one for long term defense production cooperation. An important portion ofRussia's $9.7 billion arms agreement total for 2007 was with India. In 2007, Russia also made new arms sales with Indonesia for three Su-27SKM and threeSu-30MK2 fighter aircraft for $355 million, and for Mi-17 and Mi35M helicopters for over $100million. Iran contracted with Russia for five batteries of the S-300PMU1 air defense system, andSyria purchased the Buk-M1-2 air defense system. China. The Iran-Iraq war in the 1980s providedChina with the opportunity to become an important supplier of less expensive weapons to certaindeveloping nations. During that conflict China demonstrated that it was willing to provide arms toboth combatants in the war, in quantity and without conditions. Since that time China's arms saleshave been more regional and targeted. From 2004-2007, the value of China's arms transferagreements with developing nations averaged about $2.3 billion annually. During the period of thisreport, the value of China's arms transfer agreements with developing nations were highest in 2007at $3.8 billion. A significant portion of that total can be attributed to a significant contract withPakistan associated with the production of the J-17 fighter aircraft. Generally, China's sales figuresreflect several smaller valued weapons deals in Asia, Africa, and the Near East, rather than one ortwo especially large agreements for major weapons systems ( Tables 1A, 1G, and 1H )( Chart 3 ). There have been few developing nations with significant financial resources that have soughtto purchase Chinese military equipment during the eight-year period of this report, because mostChinese weapons for export are less advanced and sophisticated than weaponry available fromWestern suppliers or Russia. China, consequently, does not appear likely to be a key supplier ofmajor conventional weapons in the international arms market for the foreseeable future. China'slikely client base could be states in Asia and Africa seeking quantities of small arms and lightweapons, rather than major combat systems. At the same time, China has been an important sourceof missiles in the developing world arms market. China supplied Silkworm anti-ship missiles toIran. Credible reports persist in various publications that China has sold surface-to-surface missilesto Pakistan, a long-standing and important client. Iran and North Korea have also reportedlyreceived Chinese missile technology, which may have increased their capabilities to threaten othercountries in their respective neighborhoods. The continued reporting of such activities by crediblesources raise important questions about China's stated commitment to the restrictions on missiletransfers set out in the Missile Technology Control Regime (MTCR), including its pledge not toassist others in building missiles that could deliver nuclear weapons. Since China has some militaryproducts -- particularly missiles -- that some developing countries would like to acquire, it canpresent an obstacle to efforts to stem proliferation of advanced missile systems to some areas of thedeveloping world where political and military tensions are significant, and where some nations areseeking to develop asymmetric military capabilities. (3) China, among others, has been a key source of a variety of small arms and light weaponstransferred to African states. Although the prospects for significant revenue earnings from thesearms sales are limited, China may view such sales as one means of enhancing its status as aninternational political power, and increasing its ability to obtain access to significant naturalresources, especially oil. Controlling the sales of small arms and light weapons to regions ofconflict, in particular to some African nations, has been a matter of concern to the United States. The United Nations also has undertaken an examination of this issue in an effort to achieveconsensus on a path to address it. (4) Major West European Suppliers. Beyond theUnited States and Russia, the four major West European arms suppliers -- France, the UnitedKingdom, Germany, and Italy -- are the nations that can supply a wide variety of more highlysophisticated weapons to would-be purchasers. They can serve as alternative sources of armamentsthat the United States chooses not to supply for policy reasons. The United Kingdom sold majorcombat fighter aircraft to Saudi Arabia in the mid-1980s, when the U.S. chose not to sell acomparable aircraft for policy reasons. These four NATO nations have been allies of the UnitedStates and generally have supported the U.S. position in restricting arms sales to certain nationsduring the Cold War era. In the post-Cold War era, their national defense export policies have notbeen fully coordinated with the United States as likely would have been the case at the Cold War'sheight. These leading European arms supplying states, particularly France, view arms sales foremostas a matter for national decision. France has also frequently used foreign military sales as animportant means for underwriting development and procurement of weapons systems for its ownmilitary forces. So the potential exists for policy differences between the United States and majorWest European supplying states over conventional weapons transfers to specific countries. Such aconflict resulted from an effort led by France and Germany to lift the arms embargo on arms salesto China currently adhered to by members of the European Union. The United States viewed thisas a misguided effort, and vigorously opposed it. The proposal to lift the embargo was ultimatelynot adopted, but it proved to be a source of significant tension between the U.S. and the EuropeanUnion. Thus, arms sales activities of major European suppliers continue to be of interest to U.S.policymakers, given their capability to make sales of advanced military equipment to countries ofconcern to U.S. national security policy. (5) The four major West European suppliers (France, the United Kingdom, Germany, and Italy),as a group, registered a significant increase in their collective share of all arms transfer agreementswith developing nations between 2006 and 2007. This group's share rose from 18.5% in 2006 to32.2% in 2007. The collective value of this group's arms transfer agreements with developingnations in 2007 was $13.6 billion compared with a total of $7.1 billion in 2006. Of these fournations, the United Kingdom was the leading supplier with $9.8 billion in agreements in 2007, adramatic increase from $4.1 billion in agreements in 2006. A substantial portion of the UnitedKingdom's $9.8 billion agreement total in 2007 is attributable to an order valued in excess of $9billion from Saudi Arabia for 72 Typhoon Eurofighter aircraft. Germany's $1.5 billion in armsagreements in 2007 resulted primarily from an agreement with South Korea for the purchase of anexisting Patriot PAC-2 air defense system for $1.2 billion ( Charts 3 and 4 )( Tables 1A and 1B ). Collectively, the four major West European suppliers held a 32.2% share of all arms transferagreements with developing nations during 2007. In the period from 2004-2007 they have generallybeen important participants in the developing world arms market. Individual suppliers within themajor West European group have had notable years for arms agreements, especially France in 2000and 2005 ($2.2 billion and $6.8 billion, respectively). The United Kingdom also had largeagreement years in 2004 ($4.5 billion), in 2006 ($4.1 billion), and $9.8 billion in 2007. Germanyconcluded arms agreements totaling nearly $2 billion in 2006, and $1.5 billion in 2007. In the caseof each of these three European nations, large agreement totals in one year have usually reflected theconclusion of very large arms contracts with one or more major purchasers in that particular year( Table 1A and 1B ). The Major West European suppliers have had their competitive position in weapons exportsstrengthened over the years through strong government marketing support for their foreign armssales. As they all can produce both advanced and basic air, ground, and naval weapons systems, thefour major West European suppliers have competed successfully for arms sales contracts withdeveloping nations against both the United States, which has tended to sell to several of the sameclients, and with Russia, which has sold to nations not traditional customers of either the WestEuropeans or the United States. But the demand for U.S. weapons in the global arms marketplace,from a large established client base, has created a more difficult environment for individual WestEuropean suppliers to secure, on a sustained basis, large new contracts with developing nations. Continuing strong demand for U.S. defense equipment as well as concern for maintainingtheir market share of the arms trade has led European Union (EU) member states to adopt a new codeof conduct for defense procurement practices. This code was agreed to on November 21, 2005, atthe European Defense Agency's (EA) steering board meeting. Currently voluntary, the EU hopesit will become mandatory, and through its mechanisms foster greater competition within theEuropean defense equipment sector in the awarding of contracts for defense items. The larger hopeis that by fostering greater intra-European cooperation and collaboration in defense contracting, andthe resulting programs, that the defense industrial bases of individual EU states will be preserved,and the ability of European defense firms to compete for arms sales in the international armsmarketplace will be substantially enhanced. A few European arms suppliers have begun to phase out production of certain types ofweapons systems. Such suppliers have increasingly engaged in joint production ventures with otherkey European weapons suppliers or even client countries in an effort to sustain major sectors of theirindividual defense industrial bases -- even if a substantial portion of the weapons produced are fortheir own armed forces. The Eurofighter project is one example; the Eurocopter is another. OtherEuropean suppliers have also adopted the strategy of cooperating in defense production ventures withthe United States such as the Joint Strike Fighter (JSF), rather than attempting to compete directly,thereby meeting their own requirements for advanced combat aircraft, while positioning themselvesto share in profits resulting from future sales of this new fighter aircraft. (6) Regional Arms Transfer Agreements The markets for arms in regions of the developing world have traditionally been dominatedby the Near East and by Asia. Nations in the Latin America and Africa regions, by contrast, havenot been major purchasers of weapons, except on rare occasions. The regional arms agreement datatables in this report demonstrate this. United States policymakers have placed emphasis on helpingto maintain stability throughout the regions of the developing world. Thus, the United States hasmade and supported arms sales and transfers it has believed would advance that goal, whilediscouraging significant sales by other suppliers to states and regions where military threats tonations in the area are minimal. Other arms suppliers do not necessarily share the U.S. perspectiveon what constitutes an appropriate arms sale. For in some instances the financial benefit of the saleto the supplier trumps other considerations. The regional and country specific arms-transfer data inthis report provide an indication of where various arms suppliers are focusing their attention and whotheir principal clients are. By reviewing these data, policymakers can identify potentialdevelopments which may be of concern, and use this information to assist their review of optionsthey may choose to consider given the circumstances. What follows below is a review of data onarms-transfer agreement activities in the two regions that lead in arms acquisitions, the Near Eastand Asia. This is followed, in turn, by a review of data regarding the leading arms purchasers in thedeveloping world. Near East. (7) The primary catalyst for newweapons procurements in the Near East region in the last decade was the Persian Gulf crisis ofAugust 1990-February 1991. This crisis, culminating in a U.S.-led war to expel Iraq from Kuwait,created new demands by key purchasers such as Saudi Arabia, Kuwait, the United Arab Emirates,and other members of the Gulf Cooperation Council (GCC) for a variety of advanced weaponssystems. Subsequently, major concerns over the growing strategic threat from Iran has become theprincipal driver of GCC states' arms purchases. Because GCC states do not share a land border withIran, their weapons purchases have focused primarily on air, naval, and missile defense systems. Egypt and Israel, meanwhile, have continued their military modernization programs, increasing theirarms purchases from the United States. (8) Most recently, the position of Saudi Arabia as principal arms purchaser in the Persian Gulfregion has been re-established. In the period from 2000-2003, Saudi Arabia's total arms agreementswere valued at $3.2 billion (in current dollars), less than the levels of the U.A.E., Egypt, and Israel. For the period from 2004-2007, Saudi Arabia's total arms agreements were $23.2 billion (in currentdollars), making it the leading Near East purchaser once again. The Near East has generally been the largest arms market in the developing world. However,in 2000-2003, it accounted for 42.3% of the total value of all developing nations arms transferagreements ($33.3 billion in current dollars), ranking it second behind Asia which was first with46.9% of these agreements ($35.2 billion in current dollars). But, during 2004-2007, the Near Eastregion accounted for 46.3% of all such agreements ($63.1 billion in current dollars), again placingit first in arms agreements with the developing world. The Asia region ranked second in 2004-2007with $57.6 billion in agreements or 42.3% ( Tables 1C and 1D ). The United States dominated arms transfer agreements with the Near East during the2000-2003 period with 73.6% of their total value ($24.5 billion in current dollars). Russia wassecond during these years with 9.3% ($3.1 billion in current dollars). Recently, from 2004-2007, theUnited States accounted for 32.8% of arms agreements with this region ($20.7 billion in currentdollars), while the United Kingdom accounted for 27.9% of the region's agreements ($17.6 billionin current dollars). Russia accounted for 20.8% of the region's agreements in the most recent period($13.1 billion in current dollars) ( Chart 5 )( Tables 1C and 1E ). Asia. Efforts in several developing nations inAsia have been focused on upgrading and modernizing defense forces, and this has led to newconventional weapons sales in that region. Since the mid-1990s, Russia has become the principalsupplier of advanced conventional weaponry to China -- selling fighters, submarines, destroyers, andmissiles -- while maintaining its position as principal arms supplier to India. Russian arms sales tothese two countries have been primarily responsible for the increase in Asia's overall share of thearms market in the developing world. Russia has expanded its client base in Asia, receiving aircraftorders from Malaysia, Vietnam, and Indonesia. India has also expanded its weapons supplier base,purchasing the Phalcon early warning defense system aircraft in 2004 from Israel for $1.1 billion,and numerous items from France in 2005, in particular 6 Scorpene diesel attack submarines for $3.5billion. In 2007, India made major purchases from Russia of T-90 main battle tanks, Su-30 MKIfighter aircraft, and MiG-29 fighter aircraft. The United States made a multi-billion dollar sale toPakistan in 2006 of new F-16 fighter aircraft, weapons, and aircraft upgrades, while Sweden soldit a SAAB-2000 based AWACS airborne radar system for over a billion dollars. In 2007, Pakistancontracted with China for production of J-17 fighter aircraft. These transactions have placedPakistan among the leading major Asian arms buyers of recent years. The data on regionalarms-transfer agreements from 2000-2007 continue to reflect that Near East and Asian nations arethe primary sources of orders for conventional weaponry in the developing world. Asia has traditionally been the second largest developing-world arms market. In 2004-2007,Asia ranked second, accounting for 42.3% of the total value of all arms transfer agreements withdeveloping nations ($57.6 billion in current dollars). Yet in the earlier period, 2000-2003, the regionranked first, accounting for 46.9% of all such agreements ($35.2 billion in current dollars) ( Tables1C and 1D ). In the earlier period (2000-2003), Russia ranked first in the value of arms transfer agreementswith Asia with 49.8% ($17.5 billion in current dollars). The United States ranked second with19.8% ($7 billion in current dollars). The major West European suppliers, as a group, made 12.5%of this region's agreements in 2000-2003. In the later period (2004-2007), Russia ranked first inAsian agreements with 35.9% ($20.7 billion in current dollars), primarily due to major combataircraft, and naval system sales to India and China. The United States ranked second with 19.3%($11.1 billion in current dollars). The major West European suppliers, as a group, made 17.4% ofthis region's agreements in 2004-2007. ( Chart 6 )( Table 1E ). Leading Developing Nations Arms Purchasers India was the leading developing world arms purchaser from 2000-2007, making armstransfer agreements totaling $31.9 billion during these years (in current dollars). In the 2000-2003period, China ranked first in arms transfer agreements at $10.1 billion (in current dollars). In2004-2007 India ranked first in arms transfer agreements, with a large increase to $24.2 billion from$7.7 billion in the earlier 2000-2003 period (in current dollars). This increase reflects thecontinuation of a military modernization effort by India, underway since the 1990s, based primarilyon major arms agreements with Russia. The total value of all arms transfer agreements withdeveloping nations from 2000-2007 was $217.6 billion in current dollars. Thus India aloneaccounted for 14.7% of all developing-world arms-transfer agreements during these eight years. Inthe most recent period, 2004-2007, India made $24.2 billion in arms transfer agreements (in current dollars). This total constituted 17.8% of all arms transfer agreements with developing nations duringthese four years ($136 billion in current dollars). Saudi Arabia ranked second in arms transferagreements during 2004-2007 with $23.2 billion (in current dollars), or 17.1% of the value of alldeveloping-world arms-transfer agreements ( Tables 1, 1I, and 1J ). During 2000-2003, the top ten recipients collectively accounted for 66.9% of all developingworld arms transfer agreements. During 2004-2007, the top ten recipients collectively accountedfor 61.6% of all such agreements. Arms transfer agreements with the top ten developing worldrecipients, as a group, totaled $34.1 billion in 2007 or 80.6% of all arms transfer agreements withdeveloping nations in that year. These percentages reflect the continued concentration of major armspurchases by developing nations among a few countries ( Tables 1, 1I, and 1J ). Saudi Arabia ranked first among all developing world recipients in the value of arms transfer agreements in 2007, concluding $10.6 billion in such agreements. India ranked second inagreements at $5 billion. Pakistan ranked third with $4.2 billion in agreements. Seven of the topten recipients were in the Near East region; three were in the Asian region ( Table 1J ). (9) India was the leading recipient of arms deliveries among developing world recipients in2007, receiving $1.6 billion in such deliveries. Israel ranked second in arms deliveries in 2007 with$1.5 billion. Egypt ranked third with $1.5 billion ( Table 2J ). Arms deliveries to the top ten developing nation recipients, as a group, were valued at $11.1billion, or 64.5% of all arms deliveries to developing nations in 2007. Five of these top ten recipientswere in Asia; three were in the Near East; one was in Latin America, one was in Africa ( Tables 2and 2J ). Weapons Types Recently Delivered to Near East Nations Regional weapons delivery data reflect the diverse sources of supply and type of conventionalweaponry actually transferred to developing nations. Even though the United States, Russia, andthe four major West European suppliers dominate in the delivery of the fourteen classes of weaponsexamined, it is also evident that the other European suppliers and some non-European suppliers,including China, are capable of being leading suppliers of selected types of conventional armamentsto developing nations ( Tables 3-7 ). Weapons deliveries to the Near East , historically the largest purchasing region in thedeveloping world, reflect the quantities and types delivered by both major and lesser suppliers. Thefollowing is an illustrative summary of weapons deliveries to this region for the period 2004-2007 from Table 5 : United States. 557 tanks and self-propelled guns 587 APCs and armored cars 6 minor surface combatants 94 supersonic combat aircraft 29 helicopters 748 surface-to-air missiles 77 anti-ship missiles Russia. 230 tanks and self-propelled guns 260 APCs and armored cars 30 supersonic combat aircraft 30 helicopters 1,640 surface-to-air missiles China. 60 other aircraft 80 anti-ship missiles Major West European Suppliers. 20 tanks and self-propelled guns 60 APCs and armored cars 3 major surface combatants 27 minor surface combatants 6 guided missile boats 20 supersonic combat aircraft 10 helicopters 80 anti-ship missiles All Other European Suppliers. 130 tanks and self-propelled guns 1,280 APCs and armored cars 10 minor surface combatants 9 guided missile boats 320 surface-to-air missiles 70 anti-ship missiles All Other Suppliers. 560 APCs and armored cars 88 minor surface combatants 20 helicopters 30 surface-to-surface missiles 20 anti-ship missiles Large numbers of major combat systems were delivered to the Near East region from2004-2007, specifically, tanks and self-propelled guns, armored vehicles, major and minor surfacecombatants, supersonic combat aircraft, helicopters, air defense and anti-ship missiles. The UnitedStates and Russia made deliveries of supersonic combat aircraft to the region. The United States,China, and the European suppliers delivered many anti-ship missiles. The United States, Russia, andEuropean suppliers in general were principal suppliers of tanks and self-propelled guns, APCs andarmored cars, surface-to-air missiles, as well as helicopters. Three of these weapons categories --supersonic combat aircraft, helicopters, and tanks and self-propelled guns -- are especially costly andare a large portion of the dollar values of arms deliveries by the United States, Russia, and Europeansuppliers to the Near East region during the 2004-2007 period. The cost of naval combatants is also generally high, and the suppliers of such systems duringthis period had their delivery value totals notably increased due to these transfers. Some of the lessexpensive weapons systems delivered to the Near East are, nonetheless, deadly and can createimportant security threats within the region. In particular, from 2004-2007, the United Statesdelivered 77 anti-ship missiles to the Near East region, China delivered 80, and the four major WestEuropean suppliers delivered 80. The United States delivered six minor surface combatants to theNear East, while the major West European suppliers collectively delivered three major surfacecombatants, 27 minor surface combatants and six guided missile boats. The non-major WestEuropean suppliers collectively delivered 70 anti-ship missiles. Other non-European supplierscollectively delivered 560 APCs and armored cars, 88 minor surface combatants, as well as 30surface-to-surface missiles, a weapons category not delivered by any of the other major weaponssuppliers during this period to any region. Arms Values Data Tables and Charts for 2000-2007 Tables 1 through 1J present data on arms transfer agreements with developing nations bymajor suppliers from 2000-2007. These data show the most recent trends in arms contract activityby major suppliers. Delivery data, which reflect implementation of sales decisions taken earlier, areshown in Tables 2 through 2J . Tables 8, 8A, 8B, 8C, and 8D provide data on worldwide armstransfer agreements from 2000-2007, while Tables 9, 9A, 9B, 9C, and 9D provide data on worldwide arms deliveries during this period. To use these data regarding agreements for purposesother than assessing general trends in seller/buyer activity is to risk drawing conclusions that can bereadily invalidated by future events -- precise values and comparisons, for example, may change dueto cancellations or modifications of major arms transfer agreements. These data sets reflect the comparative magnitude of arms transactions by arms supplierswith recipient nations expressed in constant dollar terms, unless otherwise noted. Illustrative pie andbar charts are provided in this section to give the relative market share of individual arms suppliersglobally, to the developing world and to specific regions. Figure 1 provides the value of worldwidearms transfer agreements for 2000-2003, 2004-2007, and 2007, and the suppliers' share of suchagreements with the developing world. Figure 2 provides the value of worldwide arms deliveriesfor 2000-2003, 2004-2007, and 2007, and the suppliers' share of such deliveries with the developingworld. Specific content of other individual data tables is described below. Table 1 shows the annual current dollar values of arms transfer agreements to developingnations by major suppliers from 2000-2007. This table provides the data from which Tables 1A ( constant dollars ) and Table 1B ( supplier percentages ) are derived. Regional Arms Transfer Agreements, 2000-2007 Table 1C gives the values of arms transfer agreements between suppliers and individualregions of the developing world for the periods 2000-2003 and 2004-2007. These values areexpressed in current U.S. dollars. (10) Table 1D , derived from Table 1C , gives the percentagedistribution of each supplier's agreement values within the regions for the two time periods. Table1E , also derived from Table 1C , illustrates what percentage share of each developing world region'stotal arms transfer agreements was held by specific suppliers during the years 2000-2003 and2004-2007. Arms Transfer Agreements With Developing Nations, 2000-2007: LeadingSuppliers Compared Table 1F gives the values of arms transfer agreements with the developing nations from2000-2007 by the top eleven suppliers. The table ranks these suppliers on the basis of the total current dollar values of their respective agreements with the developing world for each of threeperiods -- 2000-2003, 2004-2007, and 2000-2007. Arms Transfer Agreements With Developing Nations in 2007: LeadingSuppliers Compared Table 1G ranks and gives for 2007 the values of arms transfer agreements with developingnations of the top eleven suppliers in current U.S. dollars. Arms Transfer Agreements With Near East 2000-2007: Suppliers andRecipients Table 1H gives the values of arms transfer agreements with the Near East nations bysuppliers or categories of suppliers for the periods 2000-2003 and 2004-2007. These values areexpressed in current U.S. dollars. They are a subset of the data contained in Table 1 and Table 1C . Arms Transfers to Developing Nations, 2000-2007: Agreements WithLeading Recipients Table 1I gives the values of arms transfer agreements made by the top ten recipients of armsin the developing world from 2000-2007 with all suppliers collectively. The table ranks recipientson the basis of the total current dollar values of their respective agreements with all suppliers foreach of three periods--2000-2003, 2004-2007, and 2000-2007. Arms Transfers to Developing Nations in 2007: Agreements With LeadingRecipients Table 1J names the top ten developing world recipients of arms transfer agreements in 2007. The table ranks these recipients on the basis of the total current dollar values of their respectiveagreements with all suppliers in 2007. Developing Nations Arms Delivery Values Table 2 shows the annual current dollar values of arms deliveries (items actually transferred)to developing nations by major suppliers from 2000-2007. The utility of these particular data is thatthey reflect transfers that have occurred. They provide the data from which Tables 2A (constantdollars) and Table 2B (supplier percentages) are derived. Regional Arms Delivery Values, 2000-2007 Table 2C gives the values of arms deliveries by suppliers to individual regions of thedeveloping world for the periods 2000-2003 and 2004-2007. These values are expressed in current U.S. dollars. (11) Table2D , derived from Table 2C , gives the percentage distribution of each supplier's deliveries valueswithin the regions for the two time periods. Table 2E , also derived from Table 2C , illustrates whatpercentage share of each developing world region's total arms delivery values was held by specificsuppliers during the years 2000-2003 and 2004-2007. Arms Deliveries to Developing Nations, 2000-2007: Leading SuppliersCompared Table 2F gives the values of arms deliveries to developing nations from 2000-2007 by thetop eleven suppliers. The table ranks these suppliers on the basis of the total current dollar valuesof their respective deliveries to the developing world for each of three periods -- 2000-2003,2004-2007, and 2000-2007. Arms Deliveries to Developing Nations in 2007: Leading SuppliersCompared Table 2G ranks and gives for 2007 the values of arms deliveries to developing nations of thetop ten suppliers in current U.S. dollars. Arms Deliveries to Near East, 2000-2007: Suppliers andRecipients Table 2H gives the values of arms delivered to Near East nations by suppliers or categoriesof suppliers for the periods 2000-2003 and 2004-2007. These values are expressed in current U.S.dollars. They are a subset of the data contained in Table 2 and Table 2C . Arms Deliveries to Developing Nations, 2000-2007: The LeadingRecipients Table 2I gives the values of arms deliveries made to the top ten recipients of arms in thedeveloping world from 2000-2007 by all suppliers collectively. The table ranks recipients on thebasis of the total current dollar values of their respective deliveries from all suppliers for each ofthree periods -- 2000-2003, 2004-2007, and 2000-2007. Arms Transfers to Developing Nations in 2007: Agreements With LeadingRecipients Table 2J names the top ten developing world recipients of arms transfer agreements in 2007. The table ranks these recipients on the basis of the total current dollar values of their respectiveagreements with all suppliers in 2007. Chart 1. Arms Transfer Agreements Worldwide, 2000-2007 Developed and Developing Worlds Compared Source: U.S. Government Chart 2. Arms Transfer Agreements Worldwide (supplier percentage of value) Source: U.S. Government Chart 3. Arms Transfer Agreements With Developing Nations (supplier percentageof value) Source: U.S. Government Chart 4. Arms Transfer Agreements With Developing Nations by Major Supplier,2000-2007 (billions of constant 2007 dollars) Source: U.S. Government Figure 1. Worldwide Arms Transfer Agreements,2000-2007 and Suppliers' Share with Developing World (in millions of constant2007 U.S. dollars) Source: U.S. Government Chart 5. Arms Transfer Agreements with Near East (supplier percentage ofvalue) Source: U.S. Government Chart 6. Arms Transfer Agreements With Developing Nations in Asia (supplierpercentage of value) (excludes Japan, Australia, and New Zealand) Source: U.S. Government Chart 7. Arms Deliveries Worldwide 2000-2007 Developed and DevelopingWorlds Compared Source: U.S. Government Chart 8. Arms Deliveries to Developing Countries by Major Supplier,2000-2007 (in billions of constant 2007 dollars) Source: U.S. Government Figure 2. Worldwide Arms Deliveries,2000-2007 and Suppliers' Share with Developing World (in millions of constant2007 U.S. dollars) Source: U.S. Government Table 1. Arms Transfer Agreements with Developing Nations, by Supplier, 2000-2007 (in millions of currentU.S.dollars) Source: U.S. Government Note: Developing nations category excludes the U.S., Europe, Canada, Japan, Australia and New Zealand. All data are for the calendar year given exceptfor U. S. MAP (Military Assistance Program), IMET (International Military Education and Training), and Excess Defense Article data which are includedfor the particular fiscal year. All amounts given include the values of all categories of weapons, spare parts, construction, all associated services, militaryassistance, excess defense articles, and training programs. Statistics for foreign countries are based upon estimated selling prices. All foreign data arerounded to the nearest $100 million. The United States total in 2000 includes a $6.432 billion licensed commercial agreement with the United ArabEmirates for 80 F-16 aircraft. Table 1A. Arms Transfer Agreements with Developing Nations, by Supplier, 2000-2007 (in millions of constant 2007U.S. dollars) Source: U.S. Government *Based on Department of Defense Price Deflator. Table 1B. Arms Transfer Agreements with Developing Nations, by Supplier, 2000-2007 (expressed asa percent oftotal, by year) Source: U.S. Government *Major West European category includes France, United Kingdom, Germany, Italy. Table 1C. Regional Arms Transfer Agreements, by Supplier, 2000-2007 (in millions of current U.S.dollars) Source: U.S. Government Note: All foreign data are rounded to the nearest $100 million. The United States total for Near East in 2000-2003 includes a $6.432 billion licensedcommercial agreement with the United Arab Emirates in 2000 for 80 F-16 aircraft. *Major West European category included France, United Kingdom, Germany, Italy. Table 1D. Percentage of Each Supplier's Agreements Value by Region, 2000-2007 Source: U.S. Government *Major West European category included France, United Kingdom, Germany, Italy. Table 1E. Percentage of Total Agreements Value by Supplier to Regions, 2000-2007 Source: U.S. Government *Major West European category includes France, United Kingdom, Germany, Italy. Table 1F. Arms Transfer Agreements withDeveloping Nations, 2000-2007: Leading Suppliers Compared (in millions of currentU.S. dollars) Source: U.S. Government Note: All foreign data are rounded to the nearest $100 million. Where rounded datatotals are the same, the rank order is maintained. *The United States total includes a $6.432 billion licensed commercial agreementwith the United Arab Emirates in 2000 for 80 F-16 aircraft. Table 1G. Arms Transfer Agreements withDeveloping Nations in 2007: Leading Suppliers Compared (in millions of currentU.S. dollars) Source: U.S. Government Note: All foreign data are rounded to the nearest $100 million. Where rounded datatotals are the same, the rank order is maintained. Table 1H. Arms Transfer Agreements with Near East,by Supplier (in millions of current U.S. dollars) Source: U.S. Government Note: 0=data less than $50 million or nil. All data are rounded to nearest $100 million. *Major West European includes France, United Kingdom, Germany, and Italy totals asan aggregate figure. **The United States total for 2000-2003 includes a $6.432 billion licensed commercialagreement with the United Arab Emirates in 2000 for 80 F-16 aircraft. Table 1I. Arms Transfer Agreements withDeveloping Nations, 2000-2007: Agreements by the Leading Recipients (in millionsof current U.S. dollars) Source: U.S. Government Note: All foreign data are rounded to the nearest $100 million. Where rounded datatotals are the same, the rank order is maintained. *The U.A.E. total includes a $6.432 billion licensed commercial agreement with theUnited States in 2000 for 80 F-16 aircraft. Table 1J. Arms Transfer Agreements withDeveloping Nations in 2007: Agreements by Leading Recipients (in millions ofcurrent U.S. dollars) Source: U.S. Government Note : All foreign data are rounded to the nearest $100 million. Where rounded datatotals are the same, the rank order is maintained. Table 2. Arms Deliveries to Developing Nations, by Supplier, 2000-2007 (in millions of current U.S.dollars) Source: U.S. Government Note: Developing nations category excludes the United States, Russia, Europe, Canada, Japan, Australia, and New Zealand. All data are for the calendaryear given, except for U.S. MAP (Military Assistance Program), IMET (International Military Education and Training), excess defense articles, whichare included for the particular fiscal year. Licensed commercial exports are excluded. All amounts given include the values of all categories of weaponsand ammunition, military spare parts, military construction, military assistance and training programs, and all associated services. Statistics for foreigncountries are based upon estimated selling prices. All foreign data are rounded to the nearest $100 million. Table 2A. Arms Deliveries to Developing Nations, by Supplier, 2000-2007 (in millions of constant 2007U.S.dollars) Source: U.S. Government *Based on Department of Defense Price Deflator. Table 2B. Arms Deliveries to Developing Nations, by Supplier, 2000-2007 (expressed as a percent oftotal, byyear) Source: U.S. Government *Major West European category includes France, United Kingdom, Germany, Italy. Table 2C. Regional Arms Deliveries by Supplier, 2000-2007 (in millions of current U.S.dollars) Source: U.S. Government Note: All foreign data are rounded to the nearest $100 million. *Major West European category includes France, United Kingdom, Germany, Italy. Table 2D. Percentage of Supplier Deliveries Value by Region, 2000-2007 Source: U.S. Government *Major West European category includes France, United Kingdom, Germany, Italy. Table 2E. Percentage of Total Deliveries Value by Supplier to Regions, 2000-2007 Source: U.S. Government *Major West European category includes France, United Kingdom, Germany, Italy. Table 2F. Arms Deliveries to DevelopingNations, 2000-2007 Leading Suppliers Compared (in millions of current U.S.dollars) Source: U.S. Government Note: All foreign data are rounded to the nearest $100 million. Where rounded datatotals are the same, the rank order is maintained. Table 2G. Arms Deliveries to DevelopingNations in 2007: Leading Suppliers Compared (in millions of current U.S.dollars) Source: U.S. Government Note: All foreign data are rounded to the nearest $100 million. Where rounded datatotals are the same, the rank order is maintained. Table 2H. Arms Deliveries to Near East, by Supplier (inmillions of current U.S. dollars) Source: U.S. Government Note: 0=data less than $50 million or nil. All data are rounded to nearest $100 million. *Major West European includes France, United Kingdom, Germany, and Italy totals as anaggregate figure. Table 2I. Arms Deliveries to Developing Nations,2000-2007: The Leading Recipients (in millions of current U.S.dollars) Source: U.S. Government Note: All foreign data are rounded to the nearest $100 million. Where rounded datatotals are the same, the rank order is maintained. Table 2J. Arms Deliveries to Developing Nationsin 2007: The Leading Recipients (in millions of current U.S.dollars) Source: U.S. Government Note: All foreign data are rounded to the nearest $100 million. Where rounded datatotals are the same, the rank order is maintained. Selected Weapons Deliveries to Developing Nations,2000-2007 Other useful data for assessing arms transfers are those that indicate who hasactually delivered specific numbers of specific classes of military items to a region . These data are relatively "hard" in that they reflect actual transfers of militaryequipment. They have the limitation of not giving detailed information regardingeither the sophistication or the specific name of the equipment delivered. However,these data show relative trends in the delivery of important classes of militaryequipment and indicate who the leading suppliers are from region to region overtime. Data in the following tables set out actual deliveries of fourteen categories ofweaponry to developing nations from 2000-2007 by the United States, Russia, China,the four major West European suppliers as a group, all other European suppliers asa group, and all other suppliers as a group. The tables show these deliveries data forall of the developing nations collectively, for Asia, for the Near East, for LatinAmerica, and for Africa ( Tables 3-7 ). Care should be taken in using the quantitative data within these specifictables. Aggregate data on weapons categories delivered by suppliers do not provideprecise indices of the quality and/or quantity of the weaponry delivered. The historyof recent conventional conflicts suggests that quality and/or sophistication ofweapons can offset quantitative advantage. Further, these data do not provide anindication of the relative capabilities of the recipient nations to use effectively theweapons delivered to them. Superior training -- coupled with good equipment,tactical and operational proficiency, and sound logistics -- may, in the last analysis,be a more important factor in a nation's ability to engage successfully in conventionalwarfare than the size of its weapons inventory. Table 3. Numbers of Weapons Delivered by Suppliers to Developing Nations Source: U.S. Government Note: Developing nations category excludes the U.S., Russia, Europe, Canada, Japan,Australia and New Zealand. All data are for calendar years given. *Major West Europeanincludes France, United Kingdom, Germany, and Italy totals as an aggregate figure. Datarelating to surface-to-surface and anti-ship missiles by foreign suppliers are estimates basedon a variety of sources having a wide range of accuracy. As such, individual data entries inthese two weapons delivery categories are not necessarily definitive. Table 4. Number of Weapons Delivered by Suppliers toAsia and the Pacific Source: U.S. Government Note: Asia and Pacific category excludes Japan, Australia and New Zealand. All data arefor calendar years given. *Major West European includes France, United Kingdom,Germany, and Italy totals as an aggregate figure. Data relating to surface-to-surface andanti-ship missiles by foreign suppliers are estimates based on a variety of sources having awide range of accuracy. As such, individual data entries in these two weapons deliverycategories are not necessarily definitive. Table 5. Numbers of Weapons Delivered by Suppliersto Near East Source: U.S. Government Note: All data for calendar years given. *Major West European includes France, UnitedKingdom, Germany, and Italy totals as an aggregate figure. Data relating tosurface-to-surface and anti-ship missiles by foreign suppliers are estimates based on a varietyof sources having a wide range of accuracy. As such, individual data entries in theses twoweapons delivery categories are not necessarily definitive. Table 6. Numbers of Weapons Delivered by Suppliersto Latin America Source: U.S. Government Note: All data for calendar years given. *Major West European includes France, UnitedKingdom, Germany, and Italy totals as an aggregate figure. Data relating tosurface-to-surface and anti-ship missiles by foreign suppliers are estimates based on a varietyof sources having a wide range of accuracy. As such, individual data entries in theses twoweapons delivery categories are not necessarily definitive. Table 7. Number of Weapons Delivered by Suppliers toAfrica Source: U.S. Government Note: All data are for calendar years given. *Major West European includes France, UnitedKingdom, Germany, and Italy totals as an aggregate figure. Data relating tosurface-to-surface and anti-ship missiles by foreign suppliers are estimates based on a varietyof sources having a wide range of accuracy. As such, individual data entries in these twoweapons delivery categories are not necessarily definitive. Worldwide Arms Transfer Agreements and Deliveries Values,2000-2007 Ten tables follow. Tables 8, 8A, and 8B and Tables 9, 9A, and 9B , providethe total dollar values for arms transfer agreements and arms deliveries worldwidefor the years 2000-2007 in the same format and detail as do Tables 1, 1A, and 1B and Tables 2, 2A, and 2B for arms transfer agreements with and arms deliveries todeveloping nations. Tables 8C, 8D, 9C, and 9D provide a list of the top eleven armssuppliers to the world based on the total values ( in current dollars ) of their armstransfer agreements and arms deliveries worldwide during calendar years 2000-2003,2004-2007, and 2007. These tables are set out in the same format and detail as Tables 1F and 1G for arms transfer agreements with, and Tables 2F and 2G forarms deliveries to developing nations, respectively. Total Worldwide Arms Transfer AgreementsValues, 2000-2007 Table 8 shows the annual current dollar values of arms transfer agreementsworldwide. Since these figures do not allow for the effects of inflation, they are, bythemselves, of limited use. They provide, however, the data from which Tables 8A (constant dollars) and 8B (supplier percentages) are derived. Total Worldwide Delivery Values2000-2007 Table 9 shows the annual current dollar values of arms deliveries (itemsactually transferred) worldwide by major suppliers from 2000-2007. The utility ofthese data is that they reflect transfers that have occurred. They provide the datafrom which Tables 9A (constant dollars) and 9B (supplier percentages) are derived. Table 8. Arms Transfer Agreements with the World, by Supplier, 2000-2007 (in millions of current U.S. dollars) Source: U.S. Government Note: All data are for the calendar year given, except for U.S. MAP (Military Assistance Program) and IMET (International Military Education andTraining), excess defense articles, which are included for the particular fiscal year. All amounts given include the values of all categories of weapons andammunition, military spare parts, military construction, excess defense articles, military assistance and training programs, and all associated services. Statistics for foreign countries are based upon estimated selling prices. All foreign data are rounded to the nearest $100 million. The U.S. total in 2000includes a $6.432 billion licensed commercial agreement with the United Arab Emirates for 80 F-16 aircraft. Table 8A. Arms Transfer Agreements with the World, by Supplier, 2000-2007 (in millions of constant2007 U.S.dollars) Source: U.S. Government *Based on Department of Defense Price Deflator. Table 8B. Arms Transfer Agreements with the World, by Supplier, 2000-2007 (expressed as a percentof total, byyear) Source: U.S. Government Note: Columns may not total due to rounding. *Major West European category includes France, United Kingdom, Germany, Italy. Table 8C. Arms Transfer Agreements with theWorld, 2000-2007: Leading Suppliers Compared (in millions of current U.S.dollars) Source: U.S. Government Note: All foreign data are rounded to the nearest $100 million. Where rounded datatotals are the same, the rank order is maintained. *The U.S. total includes a $6.432billion licensed commercial agreement with the United Arab Emirates in 2000 for 80F-16 aircraft. Table 8D. Arms Transfer Agreements with theWorld in 2007: Leading Suppliers Compared (in millions of current U.S.dollars) Source: U.S. Government Note: All foreign data are rounded to the nearest $100 million. Where rounded data totals are the same, the rank order is maintained. Table 9. Arms Deliveries to the World, by Supplier, 2000-2007 (in millions of current U.S.dollars) Source: U.S. Government Note: All data are for the calendar year given, except for U.S. MAP (Military Assistance Program), IMET (International Military Education and Training),excess defense articles, which are included for the particular fiscal year. Licensed commercial exports are excluded. All amounts given include the valuesof all categories of weapons and ammunition, military spare parts, military construction, excess defense articles, military assistance and training programs,and all associated services. Statistics for foreign countries are based upon estimated selling prices. All foreign data are rounded to the nearest $100million. Table 9A. Arms Deliveries to the World, by Supplier, 2000-2007 (in millions of constant 2007 U.S.dollars) Source: U.S. Government *Based on Department of Defense Price Deflator. Table 9B. Arms Deliveries to the World, by Supplier 2000-2007 (expressed as a percent of total, byyear) Source: U.S. Government *Major West European category includes France, United Kingdom, Germany, Italy. Table 9C. Arms Deliveries to the World,2000-2007: Leading Suppliers Compared (in millions of current U.S.dollars) Source: U.S. Government Note: All foreign data are rounded to the nearest $100 million. Where rounded datatotals are the same, the rank order is maintained. Table 9D. Arms Deliveries to the World in 2007:Leading Suppliers Compared (in millions of current U.S.dollars) Source: U.S. Government Note: All foreign data are rounded to the nearest $100 million. Where rounded datatotals are the same, the rank order is maintained. Description of Items Counted in Weapons Categories,2000-2007 Tanks and Self-propelled Guns: This category includes light, medium, and heavytanks; self-propelled artillery; self-propelled assault guns. Artillery: This category includes field and air defense artillery, mortars, rocketlaunchers and recoilless rifles -- 100 mm and over; FROG launchers -- 100mm andover. Armored Personnel Carriers (APCs) and Armored Cars: This category includespersonnel carriers, armored and amphibious; armored infantry fighting vehicles;armored reconnaissance and command vehicles. Major Surface Combatants: This category includes aircraft carriers, cruisers,destroyers, frigates. Minor Surface Combatants: This category includes minesweepers, subchasers,motor torpedo boats, patrol craft, motor gunboats. Submarines: This category includes all submarines, including midget submarines. Guided Missile Patrol Boats: This category includes all boats in this class. Supersonic Combat Aircraft: This category includes all fighter and bomber aircraftdesigned to function operationally at speeds above Mach 1. Subsonic Combat Aircraft: This category includes all fighter and bomber aircraftdesigned to function operationally at speeds below Mach 1. Other Aircraft: This category includes all other fixed-wing aircraft, includingtrainers, transports, reconnaissance aircraft, and communications/utility aircraft. Helicopters: This category includes all helicopters, including combat and transport. Surface-to-air Missiles: This category includes all ground-based air defensemissiles. Surface-to-surface Missiles: This category includes all surface-surface missileswithout regard to range, such as Scuds and CSS-2s. It excludes all anti-tank missiles.It also excludes all anti-ship missiles, which are counted in a separate listing. Anti-ship Missiles: This category includes all missiles in this class such as theHarpoon, Silkworm, Styx and Exocet. Regions Identified in Arms Transfer Tables and Charts ASIA Afghanistan Australia Bangladesh Brunei Burma (Myanmar) China Fiji India Indonesia Japan Cambodia Kazakhstan Kyrgyzstan Laos Malaysia Nepal New Zealand North Korea Pakistan Papua New Guinea Philippines Pitcairn Singapore South Korea Sri Lanka Taiwan Tajikistan Thailand Turkmenistan Uzbekistan Vietnam NEAR EAST Algeria Bahrain Egypt Iran Iraq Israel Jordan Kuwait Lebanon Libya Morocco Oman Qatar Saudi Arabia Syria Tunisia United Arab Emirates Yemen EUROPE Albania Armenia Austria Azerbaijan Belarus Bosnia/Herzegovina Bulgaria Belgium Canada Croatia Czechoslovakia/ Czech Republic Cyprus Denmark Estonia Finland France FYR/Macedonia Georgia Germany Greece Hungary Iceland Ireland Italy Latvia Liechtenstein Lithuania Luxembourg Malta Moldova Netherlands Norway Poland Portugal Romania Russia Slovak Republic Slovenia Spain Sweden Switzerland Turkey Ukraine United Kingdom Yugoslavia/Federal Republic(Serbia/Montenegro) AFRICA Angola Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Congo Côte d'Ivoire Djibouti Equatorial Guinea Ethiopia Gabon Gambia Ghana Guinea Guinea-Bissau Kenya Lesotho Liberia Madagascar Malawi Mali Mauritania Mauritius Mozambique Namibia Niger Nigeria Réunion Rwanda Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania Togo Uganda Zaire Zambia Zimbabwe LATIN AMERICA Antigua Argentina Bahamas Barbados Belize Bermuda Bolivia Brazil British Virgin Islands Cayman Islands Chile Colombia Costa Rica Cuba Dominica Dominican Republic Ecuador El Salvador French Guiana Grenada Guadeloupe Guatemala Guyana Haiti Honduras Jamaica Martinique Mexico Montserrat Netherlands Antilles Nicaragua Panama Paraguay Peru St. Kitts & Nevis St. Lucia St. Pierre & Miquelon St. Vincent Suriname Trinidad Turks & Caicos Venezuela

This report is prepared annually to provide Congress with official, unclassified, quantitativedata on conventional arms transfers to developing nations by the United States and foreign countriesfor the preceding eight calendar years for use in its policy oversight functions. All agreement anddelivery data in this report for the United States are government-to-government Foreign MilitarySales (FMS) transactions. Similar data are provided on worldwide conventional arms transfers byall suppliers, but the principal focus is the level of arms transfers by major weapons suppliers tonations in the developing world. Developing nations continue to be the primary focus of foreign arms sales activity byweapons suppliers. During the years 2000-2007, the value of arms transfer agreements withdeveloping nations comprised 66.6% of all such agreements worldwide. More recently, armstransfer agreements with developing nations constituted 67.7% of all such agreements globally from2004-2007, and 70.5% of these agreements in 2007. The value of all arms transfer agreements with developing nations in 2007 was nearly $42.3billion. This was an increase from $38.1 billion in 2006. In 2007, the value of all arms deliveries to developing nations was $17.2 billion, the lowest total in these deliveries values for the entire2000-2007 period (in constant 2007 dollars). Recently, from 2004-2007, the United States and Russia have dominated the arms marketin the developing world, with both nations either ranking first or second for 3 out of 4 years in thevalue of arms transfer agreements . From 2004-2007, Russia made nearly $39.3 billion, 27.9% ofall such agreements, expressed in constant 2007 dollars. During this same period, the United Statesmade $34.7 billion in such agreements, 24.6% of all such agreements. Collectively, the UnitedStates and Russia made 52.5% of all arms transfer agreements with developing nations during thisfour-year period. In 2007, the United States ranked first in arms transfer agreements with developing nationswith $12.2 billion or 28.8% of these agreements. The United Kingdom was second with $9.8 billionor 23.2% of such agreements. Russia was third with $9.7 billion or 23%. In 2007, the United Statesranked first in the value of arms deliveries to developing nations at $7.6 billion, or 44.2% of all suchdeliveries. Russia ranked second at $4.6 billion or 26.7% of such deliveries. In 2007, Saudi Arabia ranked first in the value of arms transfer agreements among alldeveloping nations weapons purchasers, concluding $10.6 billion in such agreements. India rankedsecond with $5 billion in such agreements. Pakistan ranked third with $4.2 billion.

Introduction This report provides summary data on the number of Senators and Members of the House who first entered Congress between the 64 th Congress (1915-1917) and the 114 th Congress (2015-2016). Since the convening of the 64 th Congress, 4,201 individuals have entered the House of Representatives for their first, or "freshman," terms as a Representative. An additional 28 have begun service as a Delegate or Resident Commissioner. During th e same period, 844 individuals began their first terms in the Senate. First-term membership is divided into two broad categories in each chamber: Members chosen prior to the convening of a Congress, and those chosen after a Congress convenes. The "pre-convening" category includes Members who were elected in the general election, and in any special elections held prior to the convening of a Congress. The 64 th Congress was chosen as the starting point for data collection because it was the first Congress for which Senators were chosen by direct popular election. This provides a single date upon which most Members in both chambers are chosen to serve prior to the convening of a Congress. In the Senate, the pre-convening category also includes any Senators who were appointed to the Senate prior to the convening of a new Congress. The "post-convening" category includes Members who joined either chamber after the convening of a Congress. Means by which seats may be filled by a post-convening Member in either chamber include special elections held after a Congress convenes or electoral challenges that result in a new Member being seated. In the Senate, a first-term Member may also join the chamber through appointment or special election. Members whose congressional service in one chamber is not consecutive are counted as first-term Members in the first instance of their service as a Member, if that term occurred between the 64 th and 114 th Congresses. For example, a Representative who served in the 87 th Congress (1961-1962), and 89 th Congress (1965-1966), but not the 88 th Congress (1963-1964), would be counted as a first-term Representative only for the 87 th Congress. Members with service in the House and Senate are listed in each capacity in which they served a first term, if those terms occurred between the 64 th and 114 th Congresses. The resulting data, combining pre-convening and post-convening first-term Members, provide a count of all Members who served a first term in the House or Senate. Data on pre-convening first-term Members provide partial insight into the extent of membership turnover in the House and Senate since 1915, and are discussed in greater detail below. Post-convening first-term Member data do not reveal clear patterns within individual Congresses, or over time. This is due in part to the wide range of reasons that a seat in the House and Senate may become vacant in the course of a Congress, and the circumstances under which it may be filled. Data describing the number and partisan breakdown of first-term membership in the Senate are provided in the " Data Tables " section in Table 6 . Data describing first-term Representatives are available in Table 7 . Table 8 in the same section provides information for Members of the House serving as a Delegate or Resident Commissioner. Turnover Data on pre-convening first-term Members provide insight into the extent of membership turnover in the House and Senate. Table 5 in the " Data Tables " section summarizes the number of pre-convening Members entering the House and Senate at the beginning of a new Congress, and as a percentage of the seats in each chamber. These data identify most of the turnover in each chamber, but they may not identify all of the changes in every Congress, since they only reflect the number of Members who served their first term in the chamber. Some Members who had prior service that is not consecutive may have been reelected to the House, or reelected or appointed to the Senate. In those circumstances, the data in Table 5 may understate the extent of change in some Congresses. House Turnover Since the 64 th Congress, the average turnover in the House with each election has been 72 seats, or 16.57%. The election with the greatest change occurred in 1932, resulting in a turnover of 158 seats, or 36.32% of the Representatives between the 72 nd Congress (1931-1933) and the 73 rd Congress (1933-1934). The smallest pre-convening turnover among Representatives in the House occurred in the 101 st Congress (1989-1990), with a change in 30 seats, or 6.90%. Figure 1 provides a graphic representation of the percentage change in House membership between the 64 th Congress and the 114 th Congress. The data suggest that while there is no consistent pattern of change from Congress to Congress, the overall number of new, pre-convening, first-term Representatives has declined. This appears to be consistent with some academic findings that argue that the durations of Members' careers have been increasing in the past century. Table 1 provides data for the House on the number of seats and percentage change of the five Congresses that saw the greatest change in pre-convening Representatives between the 64 th and 114 th Congresses. With one exception, the 103 rd Congress (1993-1994), these changes occurred in Congresses convening prior to the 74 th Congress (1935-1936). Table 2 provides data on the number of seats and percentage change of the six Congresses that saw the least change between the 64 th and 114 th Congresses. The smallest pre-convening turnover among Representatives in the House occurred in the 101 st Congress (1989-1990), with a change in 30 seats, or 6.90%. All of the smallest changes occurred after the 89 th Congress (1965-1966). The distribution of greater changes occurring earlier in the period between the 64 th -114 th Congresses, and smaller changes happening in the later period may also support contentions regarding the duration of Representatives' careers. Data describing the number and partisan distribution of first-term Representatives are provided in Table 7 . Table 8 provides similar information for Members of the House serving as a Delegate or Resident Commissioner. Senate Turnover As shown in Table 5 , in the " Data Tables " section, since the 64 th Congress, the average number of pre-convening first-term Senators each Congress has been 10. Table 6 shows that the 79 th Congress (1945-1946) produced the greatest change in membership with 33 new Senators, 34.38%, taking seats in the chamber in the course of the Congress. Figure 2 provides a graphic representation of the percentage change in first-term Senate membership between the 64 th Congress and the 114 th Congress. The data suggest that while there is no consistent pattern of change from Congress to Congress, the overall number of pre-convening, first-term Senators has declined since the 64 th Congress. Changes in Member career patterns in the Senate may explain some of the change. Table 3 provides data on the number of Senate seats and percentage change of the five Congresses that saw greatest change between the 64 th and 114 th Congresses. All of those Congresses occurred before the 87 th Congress (1961-1962). The smallest turnover of pre-convening Senators occurred in the 102 nd Congress (1991-1992), with a change of three seats. In the 73 rd Congress (1932-1933), a 15-seat change amounted to a percentage change of 15.63%, since the Senate had 96 seats. Table 4 provides data on the number of seats and percentage change of the seven Congresses that saw the least change between the 64 th and 114 th Congresses. Smaller changes appear to be more evenly distributed through the latter half of the Congresses observed. This may be explained in part by electoral patterns. While the entire House stands for election every two years, only one-third of the seats in the Senate are subject to election in the same period; barring change in membership for other reasons, this assures that two-thirds of Senate membership will remain unchanged. Data describing the first-term membership of the Senate are provided in Table 6 . Data Tables

This report provides summary data on the number of Senators and Members of the House of Representatives who first entered Congress between the 64th Congress (1915-1917) and the 114th Congress (2015-2016). First-term membership is divided into two broad categories in each chamber: Members chosen prior to the convening of a Congress, and those chosen after a Congress convenes. The resulting data, combining pre-convening and post-convening first-term Members, provide a count of all Members who served a first term in the House or Senate. Since the convening of the 64th Congress, 4,201 individuals have entered the House of Representatives for their first, or "freshman," terms as Representatives. An additional 28 have begun service as Delegates or Resident Commissioners. During the same period, 844 individuals began their first terms in the Senate. Data on pre-convening first-term Members provide partial insight into the extent of membership turnover in the House and Senate since 1915. In both chambers, the data suggest that the overall number of first-term Members elected to Congress who take their seats at the convening of a new Congress has declined since the 64th Congress. This appears to be consistent with findings that argue that the duration of Members' careers has been increasing in the past century. Taken on their own, post-convening first-term Member data do not reveal clear patterns within individual Congresses, or over time. This is due in part to the wide range of reasons that a seat in the House and Senate may become vacant in the course of a Congress, and the circumstances under which it may be filled.

Introduction The Supplemental Security Income (SSI) program, authorized by Title XVI of the Social Security Act, is a means-tested income assistance program financed from general tax revenues. Under SSI, disabled, blind, or aged individuals who have low incomes and limited resources are eligible for benefits regardless of their work histories. In December 2013, more than 8.3 million people received SSI benefits. In that month, these beneficiaries received an average cash benefit of $529.15 and the program paid out over $4.6 billion in federally administered SSI benefits. All but four states and the Commonwealth of the Northern Mariana Islands supplement the federal SSI benefit with additional payments, which may be made directly by the state or combined with the federal payment. For SSI recipients who live in another person's household and receive in-kind support and maintenance, the federal benefit rate is reduced by one-third (to about $481 per month for an individual in 2014). Individuals who reside in public institutions throughout any given month are generally not eligible for SSI. A cost of living adjustment (COLA) is applied annually in January using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to reflect changes in the cost of living. After a 1.7% COLA adjustment in 2013, a 1.5% COLA was applied for 2014. Most SSI recipients are also eligible for Medicaid and the Supplemental Nutrition Assistance Program (SNAP) benefits. In some cases, the income and resources of non-recipients are counted in determining SSI eligibility and payment amounts. Income and Resource Limits Individuals and couples must have limited assets or resources to qualify for SSI benefits. Resources are defined by regulation as "cash or other liquid assets or any real or personal property that an individual (or spouse, if any) owns and could convert to cash to be used for his or her support and maintenance." The countable resource limit for SSI eligibility is $2,000 for individuals and $3,000 for couples. These limits are set by law, are not indexed for inflation, and have been at their current levels since 1989. Earned and Unearned Income Two types of income are considered for purposes of determining SSI eligibility and payment amounts: earned and unearned income. Earned income includes wages, net earnings from self-employment, and earnings from services performed. Most other income not derived from current work (e.g., Social Security benefits, other government and private pensions, veterans' benefits, workers' compensation, and in-kind support and maintenance) is considered "unearned." In-kind support and maintenance includes food, clothing, or shelter that is given to an individual. If an individual (or couple) meets all other SSI eligibility requirements (including the resource test described below), their monthly SSI payment equals the federal benefit rate minus their countable income. Treatment of Assets Held in Trusts Generally, assets held in a trust that could be used for the benefit of an individual are considered a resource for SSI purposes unless there is no circumstance under which a payment from the trust could ever be made for the benefit of the individual or the individual's spouse. The Foster Care Independence Act of 1999 ( P.L. 106-169 ) changed the status of irrevocable trusts for SSI benefit calculations. Before its passage, assets placed in irrevocable trusts were not considered assets when determining benefit eligibility. P.L. 106-169 changed SSI eligibility requirements so that the value of income and resources from both irrevocable and revocable trusts are considered in determining eligibility and payment amounts. However, the Commissioner of Social Security may waive this provision if it would cause undue hardship for certain individuals. Documentation for Income and Asset Verification When applying for SSI, an individual must provide documentation that the Social Security Administration uses to determine income and resource eligibility, such as a Social Security card or record of a Social Security number; a birth certificate or other proof of age; a copy of a mortgage or lease and landlord's name; payroll slips, bank records, insurance policies, car registration, and other income information; medical information if applying for disability; and proof of immigration status (if not a U.S. citizen). Resources and Accounts Exempt from SSI Eligibility and Benefit Determinations Not all resources are counted for the purposes of determining SSI eligibility. Excluded resources include an individual's home, a car used for essential transportation (or, if not essential, up to $4,500 of its current value), property essential to income-producing activity, household goods and personal effects totaling $2,000 or less, and life insurance policies with a combined face value of $1,500 or less. Earned and Unearned Income Exclusions A certain amount of monthly earned and unearned income is excluded from SSI eligibility and benefit determinations. Monthly unearned income exclusions include a general income exclusion of $20 per month that applies to non needs-based income. Monthly earned income exclusions include any unused portion of the $20 general income exclusion, the first $65 of earnings, one-half of earnings over $65, and impairment-related expenses for blind and disabled workers. Laws governing several federal benefit programs prohibit the SSA from counting benefits paid under these programs as resources and include food stamps, housing and energy assistance, state and local needs-based assistance, in-kind support and maintenance from nonprofit organizations, and student grants and scholarships used for educational expenses. In addition, the Social Security Act and federal regulations provide various types of resource exclusions that allow individuals or couples to own certain assets and not have them counted against their $2,000 or $3,000 resource limit. The following section of this report will detail the four types of accounts that a person or couple may deposit money and not have that money counted as a resource for the purposes of determining their SSI eligibility. Burial Accounts Money set aside by an SSI recipient to pay for his or her burial expenses can be excluded from the SSI resource limits. Each person may set aside up to $1,500 for burial expenses, and these expenses must be separately identifiable from other assets and money held. A burial plot owned by an individual or a couple is not considered a resource and its value is not counted against the $2,000 or $3,000 resource limit. There are two cases in which the amount of the burial expense exclusion may be reduced. First, the total amount permitted to be excluded is reduced by the face value of all life insurance policies held by the individual or his or her spouse. The face value of a policy is the amount the insurer agrees to pay the beneficiary upon the death of the insured. Second, the excluded amount of burial expenses is reduced by the total amount of money held in an irrevocable trust (commonly called an irrevocable burial trust) available to meet the burial expenses of the individual or his or her spouse. Plans for Achieving Self-Support A Plan for Achieving Self-Support (PASS) is an individual plan for employment designed by an SSI beneficiary. An SSI beneficiary designs his or her own PASS, usually with the assistance of a state Vocational Rehabilitation agency, disability service organization, or Ticket to Work Employment Network. The plan must be submitted in writing to the SSA and must be approved by a special network of SSA employees called the PASS Cadre. A PASS must include a specific goal for employment, such as a specific job type desired or a plan for setting up a small business. In addition, a PASS must include a timeline for achieving the employment goal. The PASS must also include a list of any goods, such as assistive devices or job-specific tools, or services, such as schooling, that will be needed by the beneficiary to achieve his or her goal and must include a timeline for the use of these goods or services and their cost. Resources included in an approved PASS are not counted against the SSI resource limits. There is no limit to the amount of resources that can be excluded as part of a PASS and these resources can include money set aside to pay for elements of the PASS such as training or items purchased as part of the PASS such as assistive technology devices. If a beneficiary does not fulfill the terms of the PASS, then these resources can be counted and he or she may lose SSI eligibility and be required to reimburse the SSA for benefits paid after eligibility was lost. Individual Development Accounts Individual Development Accounts (IDAs) are matched savings accounts that allow families and persons with low incomes to set aside money for education, the purchase of a home, or the creation of a business. An individual may place money from his or her earnings into an IDA and have that amount of money matched by the state with funds from the state's Temporary Assistance for Needy Families (TANF) block grant. In addition, under the provisions of the Assets for Independence Act, P.L. 105-285 , nonprofit organizations, and state, local, or tribal governments may compete for grants to fund IDAs for low-income households. IDAs funded through this grant process are often referred to as Demonstration Project IDAs. Money saved in a TANF IDA or a Demonstration Project IDA, including the state contribution and any interest earned, is not counted as a resource for the purposes of determining SSI eligibility. There is no limit to the amount of money in an IDA that can be excluded from the SSI resource calculation. However, there are limits to the amounts states and other entities can contribute to IDAs. Dedicated Accounts for Children When a child SSI beneficiary is owed back SSI benefits of more than six months, his or her representative payee is required to place those benefits in a dedicated account at a financial institution. This dedicated account must be in the child's name and cannot be invested in stocks, bonds, or other types of securities. Any money placed in the account and any interest earned on the account is the property of the child. The representative payee may use the money from the dedicated account for the medical care or education and training needs of the child. In addition, money from this account can be used for personal needs assistance, special equipment, housing modifications, or therapy for the child based on his or her disability or for other items and services for the child approved in advance by the SSA. Money from a dedicated account cannot be used for the daily expenses, food, clothing, or shelter of the child. The representative payee is responsible for keeping records and receipts of all deposits and expenditures and is liable to the SSA for any misuse of money in a dedicated account. Money in a dedicated account for children is not counted as a resource for the purposes of determining the child's SSI eligibility or the SSI eligibility of the representative payee.

The Supplemental Security Income (SSI) program, authorized by Title XVI of the Social Security Act, is a means-tested income assistance program financed from general tax revenues. Under SSI, disabled, blind, or aged individuals who have low incomes and limited resources are eligible for benefits regardless of their work histories. In December 2013, more than 8.3 million individuals received SSI benefits, receiving monthly payments of $529.15 on average. The SSI program paid out over $4.6 billion in federally administered benefits that month. All but four states and the Commonwealth of the Northern Mariana Islands supplement the federal SSI benefit with additional payments, which may be made directly by the state or combined with the federal payment. As a means tested program, SSI places a limit on the assets or resources of its beneficiaries. However, there are four types of accounts that represent an important part of the overall SSI program and can be used by SSI beneficiaries to build assets or plan for the future, including (1) money placed into burial accounts, (2) money used as part of a Plan for Achieving Self-Support (PASS), (3) money placed in Individual Development Accounts (IDAs), and (4) money placed in dedicated accounts for children. For the purposes of determining SSI eligibility these accounts are not counted as resources and can be used by beneficiaries without affecting their eligibility. This report provides an overview of income and resource limits for SSI benefit determinations as well as the four types of accounts exempt from the SSI resource limitations.

End-of-Session Legislative Developments On October 18, the Senate agreed to the conference report ( H.Rept. 106-948 ) on H.R. 4461 , the FY2001 agriculture appropriations bill, by a vote of 86-8. It was signedinto law October 28 ( P.L. 106-387 ). Title IX of this bill allows the export of food and medicine toCuba and other countries against whom the United States has imposed economic sanctions forforeign policy purposes. In the case of Cuba, however, no U.S. assistance or financing may beprovided by any U.S. entity, public or private, for such sales. (The President may waive theprohibition of U.S. assistance for commercial exports to Iran, Libya, North Korea, or Sudan fornational security or humanitarian reasons.) Sales of food and medicine to Cuba may only be paidfor by cash in advance or through third country financing. The bill also codified existing embargoregulations by prohibiting both the importation of merchandise from Cuba and travel for tourismto Cuba. (For more, see sections on "Travel Restrictions" and on"Food and Medical Exports"below.) In the Victims of Trafficking and Violence Protection Act of 2000 ( P.L. 106-386 ), sections 2002 and 2003 direct the Secretary of the Treasury to pay compensatory damages for certain claimsagainst Cuba (and Iran). As provided for in this bill, President Clinton waived such payments inthe interest of national security when he signed the bill into law on October 28, 2000. Economic Conditions With the cutoff of assistance from the former Soviet Union, Cuba experienced severe economicdeterioration from 1989-1993, although there has been some improvement since 1994. Estimatesof economic decline in the 1989-93 period range from 35-50%. The economy reportedly grew 0.7%in 1994, 2.5% in 1995, and 7.8% in 1996. While the Cuban government originally was predictinga growth rate of 4-5% for 1997, growth for the year was just 2.5%, largely because of disappointingsugar production. For 1998, the government's goal was for a growth rate of 2.5-3.5%, but anotherpoor sugar harvest, a severe drought in eastern Cuba, and the effects of Hurricane Georges resultedin an estimated growth rate of just 1.2%. In 1999, the economy grew 6.2%, and a growth rate of 5%is projected for 2000. Socialist Cuba has prided itself on the nation's accomplishments in health and education. For example, according to the World Bank, the literacy rate is 94% and life expectancy is 76 years,compared to 79% and 68 years average for other middle-income developing countries. The UnitedNations Children's Fund (UNICEF) reports that Cuba's infant mortality rate (per 1,000 live births)was just 7.9 in 1996, the lowest rate in Latin America and among the world's top 20 countries forthis indicator. Nevertheless, the country's economic decline has reduced living standardsconsiderably and resulted in shortages in medicines and medical supplies. When Cuba's economic slide began in 1989, the government showed little willingness to adopt any significant market-oriented economic reforms, but in 1993, faced with unprecedented economicdecline, Cuba began to change policy direction. Since 1993, Cubans have been allowed to own anduse U.S. dollars and to shop at dollar-only shops previously limited to tourists and diplomats. Self-employment was authorized in more than 100 occupations in 1993, most in the service sector,and by 1996 that figure had grown to more than 150 occupations. Other Cuban economic reformsincluded breaking up large state farms into smaller, more autonomous, agricultural cooperatives(Basic Units of Cooperative Production, UBPCs) in 1993; opening agricultural markets in September1994 where farmers could sell part of their produce on the open market; opening artisan markets inOctober 1994 for the sale of handicrafts; allowing private food catering, including home restaurants( paladares ) in June 1995 (in effect legalizing activities that were already taking place); approvinga new foreign investment law in September 1995 that allows fully owned investments by foreignersin all sectors of the economy with the exception of defense, health, and education; and authorizingthe establishment of free trade zones with tariff reductions typical of such zones in June 1996. InMay 1997, the government enacted legislation to reform the banking system and established a newCentral Bank (BCC) to operate as an autonomous and independent entity. Despite these measures, the quality of life for many Cubans remains difficult, characterized by low wages, high prices for many basic goods, shortages of medicines, and power outages. Moreover,some analysts fear that the government has begun to backtrack on its reform efforts. Regulationsand new taxes have made it extremely difficult for many of the nation's self-employed (at one pointestimated at more than 200,000, but now estimated at 160,000 or lower, out of a total labor force ofsome 4.5 million). Some home restaurants have been forced to close because of the regulations. Some foreign investors in Cuba have also begun to complain that the government has backed out ofdeals or forced them out of business. (1) Political Conditions Although Cuba has undertaken some limited economic reforms, politically the country remainsa hard-line Communist state. Fidel Castro, who turned 73 on August 13, 1999, has ruled since the1959 Cuban Revolution, which ousted the corrupt government of Fulgencio Batista from power. Castro soon laid the foundations for an authoritarian regime by consolidating power and forcingmoderates out of the government. In April 1961, Castro admitted that the Cuban Revolution wassocialist, and in December 1961, he proclaimed himself to be a Marxist-Leninist. From 1959 until1976, Castro ruled by decree. A constitution was enacted in 1976 setting forth the Communist Party as the leading force in the state and in society (with power centered in a Politburo headed by Fidel Castro). Theconstitution also outlined national, provincial, and local governmental structures. Executive poweris vested in a Council of Ministers, headed by Fidel Castro as President. Legislative authority isvested in a National Assembly of People's Power, currently with 601 members, that meets twiceannually for brief periods. While Assembly members were directly elected for the first time inFebruary 1993, only a single slate of candidates was offered. Elections for the National Assemblywere held for a second time in January 1998. Voters again were not offered a choice of candidates.From October 8-10, 1997, the Cuban Communist Party held its 5th Congress (the prior one was heldin 1991) in which the party reaffirmed its commitment to a single party state and reelected Fidel andRaul Castro as the party's first and second secretaries. Pope John Paul II visited Cuba from January 21-25, 1998, and conducted a series of open-air masses across the country that were televised in Cuba. Numerous Catholic groups from the UnitedStates traveled to Cuba for the Pope's visit as did thousands of journalists from around the world. While much of his visit was spent on pastoral issues, such as encouraging Cubans to come back tothe Church, the Pope also made more political statements. He criticized the U.S. embargo as "unjustand ethically unacceptable," but also criticized the Cuban government for denying freedom to theCuban people. He asked the government to release "prisoners of conscience," and Vatican officialsgave Cuba a list of more than 200 prisoners. On February 12, 1998, the Vatican announced that Cubahad freed dozens of detainees, noting that this step represented a prospect of hope for the future. There was much speculation about what effect the Pope's trip to Cuba might have on the political situation. The trip did not spark unrest from those opposed to the regime, nor did thegovernment take any actions to loosen the tight political control of the state and party. Over thelonger-term, however, the Pope's visit could result in elevating the profile of the Catholic Churchin such a way that it emerges as an important actor in Cuba's civil society. An enhanced profilecould improve its chances to influence the policies and actions of the government. Human Rights Cuba has a poor record on human rights, with the government sharply restricting basic rights, including freedom of expression, association, assembly, movement, and other basic rights. It hascracked down on dissent, arrested human rights activists and independent journalists, and stageddemonstrations against critics. Although some anticipated a relaxation of the government'soppressive tactics in the aftermath of the Pope's January 1998 visit, government attacks againsthuman rights activists and other dissidents have continued since that time. Estimates of the number of political prisoners in Cuba vary considerably since the Cuban government does not allow human rights organizations to monitor prisons. According to the StateDepartment's human rights report covering 1999, human rights groups inside Cuba estimate thenumber of political prisoners at between 350 and 400. The overall number of political prisonersprobably increased slightly in 1999, compared to 1998, when Cuba released almost 100 prisoners,many of whom were on a list given to Castro by Vatican officials during the Pope's visit. On July 23, 1999, Human Rights Watch issued a highly critical report on the human rights situation in Cuba, Cuba's Repressive Machinery: Human Rights Forty Years After the Revolution . The report describes how Cuba "has developed a highly effective machinery of repression," and hasused this "to restrict severely the exercise of fundamental human rights of expression, association,and assembly." According to the report: "In recent years, Cuba has added new repressive laws andcontinued prosecuting nonviolent dissidents while shrugging off international appeals for reform andplacating visiting dignitaries with occasional releases of political prisoners." (The full report isavailable on the Human Rights Watch site on the Internet at http://www.hrw.org/hrw/reports/1999/cuba/ .) The State Department maintains that the human rights situation deteriorated in 1999. According to its human rights report: "The authorities routinely continued to harass, threaten,arbitrarily arrest, detain, imprison, and defame human rights advocates and members of independentprofessional associations, including journalists, economists, doctors, and lawyers, often with the goalof coercing them into leaving the country." In early March 2000, the Cuban Commission for HumanRights and National Reconciliation noted that political repression increased considerably fromNovember 1999, when Cuba hosted the Ibero-American summit, through February 2000. In May 2000, Cuba released three prominent dissidents from prison. On May 23, Cuba released Rene Gomez Manzano, while Marta Beatriz Roque was set free on May 15 and Felix Bonne on May12. All three were leaders of the "Dissident Working Group" and had been imprisoned since July1997. All three have vowed to continue their peaceful opposition to the Cuban government. Oneremaining leader of the group, Vladimiro Roca, remains in prison. The four leaders were convictedby a Cuban court on March 15, 1999, on charges of "sedition" under the Cuban penal code after aone-day trial on March 1. Sentences ranged from 3 � years for Roque to 4 years for Bonne andGomez Manzano and 5 years for Roca. Just before the dissidents' trial, scores of human rightsadvocates, independent journalists, and other activists were detained so that they could not cover orprotest the trial. The four dissidents had released a document in June 1997 entitled, "The HomelandBelongs to Us All" http://www.cubanet.org/CNews/y97/jul97/homdoc.htm that strongly criticizeda draft report of the 5th Congress of the Cuban Communist Party that was going to be held thatOctober. The dissidents also urged Cubans not to vote in legislative elections and encouragedforeign investors not to invest in Cuba. UNCHR Resolutions. From 1991 until 1997, the U.N. Commission on Human Rights (UNCHR) called on the Cuban government to cooperate witha Special Representative (later upgraded to Special Rapporteur) designated by the Secretary Generalto investigate the human rights situation in Cuba. But Cuba refused to cooperate with the SpecialRapporteur, and the UNCHR annually approved resolutions condemning Cuba's human rightsrecord. On April 21, 1998, however, the UNCHR rejected -- by a vote of 16 to 19, with 18abstentions -- the annual resolution sponsored by the United States that would have condemnedCuba's rights record and would have extended the work of the Special Rapporteur for another year. U.S. officials and human rights activists expressed deep disappointment with the vote. Observersmaintained that the vote did not signify any improvement in human rights in Cuba, but rather wasan expression of disagreement with the United States over its policy toward Cuba. In 1999 and 2000,the UNCHR again approved resolutions criticizing Cuba for its human rights record, although it didnot appoint a Special Rapporteur. On April 23, 1999, the UNCHR resolution was approved by a voteof 21-20, with 12 abstentions. On April 18, 2000, the UNCHR resolution, sponsored by the CzechRepublic and Poland, was approved by a vote of 21-18, with 14 abstentions. Outlook Observers are divided over whether the Castro government will endure. While some believe that the demise of the government is imminent, there is considerable disagreement over when or howthis may occur. Varying scenarios range from a coup or popular uprising, possibly with support fromor acceptance by the Cuban military, to the voluntary resignation and self-exile of Castro. Somepoint to Castro's age and predict that the regime will collapse without Fidel at the helm. Otherobservers maintain that reports of the impending collapse of the Cuban government have beenexaggerated and that Castro may remain in power for years. They point to Cuba's strong securityapparatus and the extraordinary system of controls that prevents dissidents from gaining popularsupport. Moreover, observers maintain that Cuba's elite has no interest in Castro's overthrow, andthat Castro still enjoys some support, in part because of the social benefits of the Cuban revolution,but also because Cubans see no alternative to Castro. Even if Castro is overthrown or resigns, theimportant question remaining is the possibility or viability of a stable democratic Cuba after Castro. Analysts point out that the Castro government has successfully impeded the development ofindependent civil society, with no private sector, no independent labor movement, and no unifiedpolitical opposition. For this reason, they contend that building a democratic Cuba will be aformidable task, one that could meet stiff resistance from many Cubans. U.S. Policy Toward Cuba Overview In the early 1960s, U.S.-Cuban relations deteriorated sharply when Fidel Castro began to build a repressive communist dictatorship and moved his country toward close relations with the SovietUnion. The often tense and hostile nature of the U.S.-Cuban relationship is illustrated by such eventsand actions as: U.S. covert operations to overthrow the Castro government culminating in theill-fated April 1961 Bay of Pigs invasion; the October 1962 missile crisis in which the United Statesconfronted the Soviet Union over its attempt to place offensive nuclear missiles in Cuba; Cubansupport for guerrilla insurgencies and military support for revolutionary governments in Africa andthe Western Hemisphere; the 1980 exodus of around 125,000 Cubans to the United States in theso-called Mariel boatlift; the 1994 exodus of more than 30,000 Cubans who were interdicted andhoused at U.S. facilities in Guantanamo and Panama; and the February 1996 shootdown by Cubanfighter jets of two U.S. civilian planes, resulting in the death of four U.S. crew members. (2) Since the early 1960s, U.S. policy toward Cuba has consisted largely of isolating the island nation through comprehensive economic sanctions. The Clinton Administration has essentiallycontinued this policy of isolating Cuba. The principal tool of U.S. policy remains comprehensivesanctions, which were made stronger with the Cuban Democracy Act (CDA) of 1992 and with theCuban Liberty and Democratic Solidarity Act of 1996 ( P.L. 104-114 ), often referred to as theHelms/Burton legislation. The CDA prohibits U.S. subsidiaries from engaging in trade with Cubaand prohibits entry into the United States for any vessel to load or unload freight if it has engagedin trade with Cuba within the last 180 days. The Helms/Burton legislation -- enacted in theaftermath of Cuba's shooting down of two U.S. civilian planes in February 1996 -- combines avariety of measures to increase pressure on Cuba and provides for a plan to assist Cuba once itbegins the transition to democracy. Among the law's sanctions is a provision in Title III that holdsany person or government that traffics in U.S. property confiscated by the Cuban government liablefor monetary damages in U.S. federal court. Acting under provisions of the law, President Clintonhas suspended the implementation of Title III at six-month intervals. Another component of U.S. policy consists of support measures for the Cuban people, a so-called second track of U.S. policy. This includes U.S. private humanitarian donations, U.S.government support for democracy-building efforts for Cuba, and U.S.- sponsored radio andtelevision broadcasting to Cuba, Radio and TV Marti. According to the Administration, thetwo-track policy of isolating Cuba, but reaching out to the Cuban people, meets both U.S. strategicand humanitarian interests. In the aftermath of the Pope's January 1998 visit to Cuba, the Clinton Administration made several changes to U.S. policy intended to augment U.S. support for the Cuban people. In March1998, President Clinton announced: 1) the resumption of licensing for direct humanitarian charterflights to Cuba (which had been curtailed after the February 1996 shootdown of two U.S. civilianplanes); 2) the resumption of cash remittances up to $300 per quarter for the support of closerelatives in Cuba (which had been curtailed in August 1994 in response to the migration crisis withCuba); 3) the development of licensing procedures to streamline and expedite licenses for thecommercial sale of medicines and medical supplies and equipment to Cuba; and 4) a decision towork on a bipartisan basis with Congress on the transfer of food to the Cuban people. The Presidentstated that his actions would "build further on the impact of the Pope's visit to Cuba," "support therole of the Church and other elements of civil society in Cuba," and "help prepare the Cuban peoplefor a democratic transition." In January 1999, President Clinton announced five additional measures to support the Cuban people: 1) a broadening cash remittances to Cuba, so that all U.S. residents (not just those with closerelatives in Cuba) are allowed to send $300 per quarter to any Cuban family and licensing largerremittances by U.S. citizens and non-governmental organizations to entities independent of theCuban government; 2) an expansion of direct passenger charter flights to Cuba from additional U.S.cities other than the current flights from Miami, and to cities other than Havana (direct flights laterin the year began from Los Angeles and New York); 3) the re-establishment of direct mail serviceto Cuba, which was suspended in 1962 (this measure has not yet been negotiated with the Cubangovernment); 4) authorization for the commercial sale of food to independent entities in Cuba suchas religious groups and private restaurants and the sale of agricultural inputs to independent entitiessuch as private farmers and farmer cooperatives producing food for sale in private markets and 5)an expansion of people-to-people contact through two-way exchanges among academics, athletes,and scientists. Over the years, although U.S. policymakers have agreed on the overall objective of U.S. policy toward Cuba -- to help bring democracy and respect for human rights to the island -- there havebeen several schools of thought about how to achieve that objective. Some advocate a policy ofkeeping maximum pressure on the Cuban government until reforms are enacted, while continuingcurrent U.S. efforts to support the Cuban people. Others argue for an approach, sometimes referredto as constructive engagement, that would lift some U.S. sanctions that they believe are hurting theCuban people, and move toward engaging Cuba with dialogue. Still others call for a swiftnormalization of U.S.-Cuban relations by lifting the U.S. embargo. In general, those advocating a loosening of the sanctions-based policy toward Cuba make several policy arguments. They assert that if the United States moderated its policy toward Cuba -through increased travel, trade and diplomatic dialogue, that the seeds of reform would be plantedin Cuba, which would stimulate and strengthen forces for peaceful change on the island. They stressthe importance to the United States of avoiding violent change in Cuba, with the prospect of a massexodus to the United States and the potential of involving the United States in a civil war scenario.They argue that since Castro's demise does not appear imminent, the United States should espousea more realistic approach in trying to induce change in Cuba. Supporters of changing policy alsopoint to broad international support for lifting the U.S. embargo, to the missed opportunities to U.S.businesses because of the embargo, and to the increased suffering of the Cuban people because ofthe embargo. Proponents of change also argue that the United States should adhere to someconsistency in its policies with the world's few remaining Communist governments, and alsomaintain that moderating policy will help advance human rights in Cuba. On the other side, opponents of changing U.S. policy maintain that the current two-track policy of isolating Cuba, but reaching out to the Cuban people through measures of support, is the bestmeans for realizing political change in Cuba. They point out that the Cuban Liberty and DemocraticSolidarity Act of 1996 sets forth a road map for what steps Cuban needs to take in order for theUnited States to normalize relations, including lifting the embargo. They argue that softening U.S.policy at this time without concrete Cuban reforms would boost the Castro regime politically andeconomically, enabling the survival of the Communist regime. Opponents of softening U.S. policyargue that the United States should stay the course in its commitment to democracy and human rightsin Cuba; that sustained sanctions can work; and that the sanctions against Cuba have only come tofull impact with the loss of large subsidies from the former Soviet bloc. Opponents of looseningU.S. sanctions further argue that Cuba's failed economic policies, not the U.S. embargo, are thecauses of the economy's rapid decline. Numerous measures have been introduced in the 106th Congress that reflect the range of views on U.S. policy toward Cuba. Legislative action in the second session has focused on initiatives toease restrictions on U.S. food and medical exports to Cuba and initiatives to ease restrictions ontravel to Cuba. At the same time, there has been legislative action to increase sanctions: byconditioning aid to Russia on closing the Russian signals intelligence facility at Lourdes, Cuba; andby making it easier for enforcement of anti-terrorism judgments in U.S. courts, thereby allowing fora $187.6 million 1997 judgment against Cuba to be paid from Cuba's frozen assets in the UnitedStates to the families of three U.S. citizens killed when Cuba shot down two U.S. planes in 1996. Other initiatives introduced in the 106th Congress deal with such issues as Cuba's poor human rightssituation, cooperation with Cuba on drug trafficking efforts, and the Elian Gonzalez immigrationcase. (For a full list of initiatives, see "Legislative Initiatives in the 106th Congress" below.) Issues in U.S.-Cuban Relations Compensation for February 1996 Shootdown On February 24, 1996, Cuban Mig-29 fighter jets shot down two Cessna 337s in the Florida Straits, which resulted in the death of four members of the Cuban American group Brothers to theRescue. The group was known primarily for its humanitarian missions of spotting Cubans fleeingtheir island nation on rafts but had also become active in flying over Cuba and dropping leaflets. In 1996, President Clinton authorized $300,000 to each of the families of the four victims, which was drawn from a pot of $148.3 million in Cuban assets frozen in the United States. However, on December 17, 1997, a U.S. federal judge awarded $187.6 million ($49.9 million incompensatory damages and $137.7 million in punitive damages) to the families of three of theshootdown victims who sued under a provision in the Antiterrorism and Effective Death Penalty Actof 1996 ( P.L. 104-132 ). (The fourth shootdown victim was not a U.S. citizen, and therefore noteligible to sue under the Act.) Cuba refused to recognize the court's jurisdiction. In a federal lawsuit, relatives of three of the shootdown victims who were U.S. citizens are attempting to collect the judgment against the Cuban government through proceeds to Cuba fromU.S. telephone companies. On March 18, 1999, a federal judge awarded $6.2 million of thetelephone payments to the families' victims. Of this amount, $4.15 million would come from AT&T,$1.05 million would come from MCI, and the remainder would come from LDDS Communications,IDB Telecommunications Services, and WilTel LLC. On August 11, 1999, however, a federalappeals court overturned the lower court's decision and ruled that the families could not collect the$6.2 million, because the Cuban telephone company, ETECSA, is an entity separate from the Cubangovernment. A provision in the FY1999 omnibus appropriations measure ( P.L. 105-277 , H.R. 4328 ) could have affected the payment of the December 1997 judgment from Cuba's frozen assetsin the United States. That provision stipulates that foreign states are not immune from U.S.judgments for violations of international law. However, the provision also includes a presidentialwaiver for national security interests, which the President exercised October 21, 1998. The ClintonAdministration opposed the provision, maintaining that it would undermine the authority of thePresident to use assets of countries under economic sanctions as leverage when sanctions are usedto modify the behavior of a foreign state. Supporters maintain that it would let those nations whosponsor terrorism know that if they are found guilty in U.S. court, their assets will be liquidated inorder to serve justice. A provision in Section 118 of the Senate-approved version of H.R. 2490 , the FY2000 Treasury Appropriations bill, would have limited the ability of the President to preventfrozen assets from being seized, but the provision was not included in the September 14, 1999conference report. Subsequently, the provision was introduced as a freestanding bill, S. 1796 (Lautenberg), on October 26, 1999. S. 1796 would amend the enforcement of certainanti-terrorism judgments in U.S. courts under the Foreign Sovereign Immunities Act (28 USC1602-11) against foreign states designated to be state sponsors of terrorism, taking away the currentpresidential waiver for national security interests except for the protection of diplomatic property. The Senate Judiciary Committee reported the bill March 9, 2000, and the measure was placed on theSenate Legislative Calendar under General Orders. An identical House bill, H.R. 3485 (McCollum), was introduced November 18, 1999. The House Committee on the Judiciary reportedthe bill July 13, 2000 ( H.Rept. 106-733 ) and the measure was placed on the Union Calendar. Asupplemental report on H.R. 3485 was filed July 18, 2000 ( H.Rept. 106-733 , Part II). The House approved H.R. 3485 by voice vote on July 25, 2000. It was received in theSenate and placed on the Senate Legislative calendar under General Orders July 26, 2000. According to press reports, on July 21, 2000, the Clinton Administration reportedly proposed a settlement with the families of the three shootdown victims that would allow them to collectaround $50 million in compensatory damages from frozen Cuban assets in the United States. Thefamilies of the victims rejected the deal, saying it was unacceptable because they judged it would notpunish the Cuban government, but they said they would continue to negotiate if the ClintonAdministration agreed to include punitive damages in the settlement. (3) In the Victims of Trafficking and Violence Protection Act of 2000 ( P.L. 106-386 ), sections 2002 and 2003 direct the Secretary of the Treasury to pay compensatory damages for certain claimsagainst Cuba (and Iran). As provided for in this bill, President Clinton waived such payments in theinterest of national security when he signed the bill into law on October 28, 2000. Helms/Burton Legislation Major Provisions. As enacted into law March 12, 1996, the Cuban Liberty and Democratic Solidarity Act, P.L. 104-114 , contains three significantprovisions. Title I, Section 102(h) , codifies all existing Cuban embargo Executive Orders andregulations. No presidential waiver is provided for any of these codified embargo provisions. Thisprovision is significant because of the long-lasting effect on U.S. policy options toward Cuba. Ineffect, the Clinton Administration and subsequent administrations will be circumscribed in anychanges in U.S. policy toward Cuba. Title III allows U.S. nationals to sue for money damages in U.S. federal court those persons that traffic in property confiscated in Cuba. It extends the right to sue to Cuban Americans whobecame U.S. citizens after their properties were confiscated. The President has authority to delayimplementation for a period of six months at a time if he determines that such a delay would be inthe national interest and would expedite a transition to democracy in Cuba. Title IV of the law denies admission to the United States to aliens involved in the confiscationof U.S. property in Cuba or in the trafficking of confiscated U.S. property in Cuba. This includescorporate officers, principals, or shareholders with a controlling interest of an entity involved in theconfiscation of U.S. property or trafficking of U.S. property. It also includes the spouse, minor child,or agent of aliens who would be excludable under the provision. This provision is mandatory, andonly waiveable on a case-by-case basis for travel to the United States for humanitarian medicalreasons or for individuals to defend themselves in legal actions regarding confiscated property. Implementation of Title III and IV. With regard to Title III, since July 1996 President Clinton has suspended -- for six month periods, as providedfor under the act -- the right of individuals to file suit against those persons benefitting fromconfiscated U.S. property in Cuba. At the time of the first suspension on July 16, 1996, the Presidentannounced that he would allow Title III to go into effect, and as a result liability for trafficking underthe title became effective on November 1, 1996. According to the Clinton Administration, this putforeign companies in Cuba on notice that they face prospects of future lawsuits and significantliability in the United States. At the second suspension on January 3, 1997, President Clinton statedthat he would continue to suspend the right to file law suits "as long as America's friends and alliescontinued their stepped-up efforts to promote a transition to democracy in Cuba." The President hascontinued, at six-month intervals, to suspend the rights to file Title III lawsuits, with the most recentsuspension on January 15, 2000. With regard to Title IV of the legislation, to date the State Department has banned from the United States a number of executives and their families from three companies because of theirinvestment in confiscated U.S. property in Cuba: Grupos Domos, a Mexican telecommunicationscompany; Sherritt International, a Canadian mining company; and BM Group, an Israeli-ownedcitrus company. In 1997, Grupos Domos disinvested from U.S.-claimed property in Cuba, and asa result its executives are again eligible to enter the United States. Action against executives ofSTET, an Italian telecommunications company was averted by a July 1997 agreement in which thecompany agreed to pay the U.S.-based ITT Corporation $25 million for the use of ITT-claimedproperty in Cuba for ten years. In the 105th Congress, the FY1999 omnibus appropriations measure( P.L. 105-277 , H.R. 4328 ) included a provision that requires the Administration toreport on the implementation of Title IV of the Helms/Burton legislation. The State Department isinvestigating a Spanish hotel company, Sol Melia, for allegedly investing in property that wasconfiscated from U.S. citizens in Cuba's Holguin province in 1961. Foreign Reaction and the EU's WTO Challenge. Many U.S. allies -- including Canada, Japan, Mexico, and European Union (EU) nations -- havestrongly criticized the enactment of the Cuban Liberty and Democratic Solidarity Act. Theymaintain that the law's provisions allowing foreign persons to be sued in U.S. court constitute anextraterritorial application of U.S. law that is contrary to international principles. U.S. officialsmaintain that the United States, which reserves the right to protect its security interests, is wellwithin its obligations under NAFTA and the World Trade Organization (WTO). Until mid-April 1997, the EU had been pursuing its case at the WTO, in which it was challenging the Helms/Burton legislation as an extraterritorial application of U.S. law. Thebeginning of a settlement on the issue occurred on April 11, 1997, when an EU-U.S. understandingwas reached. In the understanding, both sides agreed to continue efforts to promote democracy inCuba and to work together to develop an agreement on agreed disciplines and principles for thestrengthening of investment protection relating to the confiscation of property by Cuba and othergovernments. As part of the understanding, the EU agreed that it would suspend its WTO disputesettlement case. Subsequently in mid-April 1998, the EU agreed to let its WTO challenge expire. Talks between the U.S. and the EU on investment disciplines proved difficult, with the EU wanting to cover only future investments and the U.S. wanting to cover past expropriations,especially in Cuba. Nevertheless, after months of negotiations, the EU and the United States reacheda second understanding on May 18, 1998. The understanding sets forth EU disciplines regardinginvestment in expropriated properties worldwide, in exchange for the Clinton Administration'ssuccess at obtaining a waiver from Congress for the legislation's Title IV visa restrictions. Futureinvestment in expropriated property would be barred. For past illegal expropriations, governmentsupport or assistance for transactions related to those expropriated properties would be denied. ARegistry of Claims would also be established to warn investors and government agencies providinginvestment support that a property has a record of claims. These investment disciplines would be applied at the same time that President Clinton's new Title IV waiver authority was exercised. Reaction was mixed among Members of Congress to the EU-U.S. accord, but opposition to the agreement by several senior Members has forestalled any amendment of Title IV in Congress. In aletter to Secretary of State Albright, Representative Gilman and Senator Helms criticized theunderstanding for not covering companies already invested in expropriated property. Among othercriticisms, they argued that the understanding only proposes a weak sanction (denying governmentsupport) that may not deter companies that are willing to invest in Cuba. (4) On the other side,however, some Members support the EU-U.S. understanding. They maintain that the understandingis important because it increases protection for the property of Americans worldwide and discouragesinvestment in illegally confiscated property in Cuba. Section 211 Trademark Provision Another potential EU challenge of U.S. law regarding Cuba in the WTO involves a dispute between the French spirits company, Pernod Ricard , and the Bermuda-based Bacardi Ltd. PernodRicard entered into a joint venture with the Cuban government to produce and export Havana Clubrum, but Bacardi maintains that it holds the right to the Havana Club name. A provision in theFY1999 omnibus appropriations measure (Section 211 of Division A, title II, P.L. 105-277 , signedinto law October 21, 1998) prevents the United States from accepting payment for trademark licensesthat were used in connection with a business or assets in Cuba that were confiscated unless theoriginal owner of the trademark has consented. The provision prohibits U.S. courts from recognizingsuch trademarks without the consent of the original owner. Although Pernod Ricard cannot marketHavana Club in the United States because of the trade embargo, it wants to protect its futuredistribution rights when the embargo is lifted. After Bacardi began selling rum in the United States under the Havana Club label, Pernod Ricard's joint venture unsuccessfully challenged Bacardi in U.S. federal court. In February 2000,the U.S. Court of Appeals for the Second Circuit in New York upheld a lower court's ruling that thejoint venture had no legal right to use the Havana Club name in the United States. Pernod Ricard has vowed to take the issue to the U.S. Supreme Court. (5) Formal U.S.-EU consultations on the issue were held in September and December 1999 without resolution. In late 1999 EU.-U.S. talks, the EU reportedly proposed a resolution for the issue thatwould involve making the law only prospective, but the United States has not responded to thatproposal. (6) In July 2000, the EU requested a WTOdispute resolution panel to consider the issue,maintaining that it violates the Agreement on Trade-Related Aspects of Intellectual Property(TRIPS), but the United States blocked the EU's request. Reportedly the EU will make anotherrequest for the WTO dispute settlement body to rule on the issue when the body meets again in lateSeptember 2000, in which case the United States would not be allowed to block the EU's requestfor a second time. (7) The Clinton Administration did not support the trademark provision in the FY1999 omnibus appropriations bill. According to an internal memo prepared for the United States TradeRepresentative that was cited in the press, the language of the provision "violates our obligationsunder the TRIPS (Trade Related Aspects on Intellectual Property Rights) Agreement." (8) However,the Administration did not move to make any changes to the provision of the law. Food and Medical Exports In recent years, the U.S. sanctions regime has allowed the sale of both food and medical exports, but with restrictions. The agricultural appropriations bill for FY2001 that was passed byCongress in October 2000 ( P.L. 106-387 ) terminates unilateral medical and agricultural sanctions,broadening what can be sold and to whom. But it also maintains the prohibition against the U.S.financing of such sales, and limits licenses to one year. Several restrictions on commercial medical exports were set forth in the Cuban Democracy Act of 1992. On March 20, 1998, President Clinton announced that the Administration would developlicensing procedures to streamline and expedite licenses for the commercial sale of medicines andmedical supplies and equipment to Cuba. The simplified procedures were put in place by theCommerce and Treasury Departments in May 1998. With regard to commercial food sales, in 1999 President Clinton authorized the sale of food and agriculture inputs to independent entities in Cuba, such as religious groups, private farmers, andprivate restaurants. Treasury and Commerce Department regulations for these sales were issued May13, 1999 (with an effective date of May 10.) The Administration hoped the policy change wouldsupport Cuba's small private sector. To date, however, it appears that actual food sales have beennegligible. Some in the business community argue that the changes in policy have not amounted to much because they still do not allow financing for the sales. Nevertheless, U.S. agribusiness companiescontinue to explore the Cuban market for potential future sales. The Cuban government told a groupof U.S. farmers who traveled there in November, after passage of the new law, that it was interestedin buying U.S. agricultural exports but refuses to buy any U.S. food under the financing restrictionsimposed by that new law. Opponents of easing restrictions maintain that U.S. policy does not deny medical sales to Cuba, and since May 1999, does not deny food sales to independent groups in Cuba. Moreover, accordingto the State Department, since the Cuban Democracy Act was enacted in 1992, the United States haslicensed more than $2.5 billion in private humanitarian donations, including $227 million indonations of medicines and medical equipment. Opponents of easing U.S. sanctions further arguethat easing pressure on the Cuban government would in effect be lending support and extending theduration of the Castro regime. They maintain that the United States should remain steadfast in itsopposition to any easing of pressure on Cuba that could prolong the Castro regime and its repressivepolicies. Supporters of easing restrictions on food and medical exports to Cuba argue that the restrictions harm the health and nutrition of the Cuban population. They argue that licensing procedures set upfor the commercial sale of medical exports to Cuba are so complex that they essentially constitutea ban on such exports because of long delays and increased costs. They argue that although the U.S.government may have licensed more than $2.5 billion in humanitarian donations to Cuba since 1992,in fact much smaller amounts have actually been sent to Cuba. Some supporters of easing sanctionsbelieve the embargo plays into Castro's hands by allowing him to use U.S. policy as a scapegoat forhis failed economic policies and as a rationale for political repression. Other supporters of easedrestrictions argue that U.S. policy has complicated relations with our allies who have adopted a"constructive engagement" approach toward Cuba. U.S. agribusiness companies that support theremoval of trade restrictions on agricultural exports to Cuba believe that U.S. farmers are missingout on a market of some $700 million so close to the United States. Legislative Initiatives in the 106th Congress. Themost significant action in the first session of the 106th Congress occurred during August 4, 1999Senate consideration of the FY2000 Agriculture Appropriations bill, S. 1233 . Amodified Ashcroft amendment was approved requiring congressional approval before the impositionof any unilateral agricultural or medical sanction against a foreign country. However, under themodified amendment, agricultural and medical exports to state sponsors of international terrorism-- which includes Cuba -- would be allowed pursuant to one year licenses issued by the U.S.government, and without any federal financing or export assistance. An attempt to table the Ashcroftamendment, before it was modified to restrict exports to sponsors of international terrorism, wasdefeated by a vote of 28 to 70 on August 3, 1999. The Senate subsequently approved S. 1233 and incorporated the language into H.R. 1906 , with the Ashcroft amendmentincluded as subsection 748 (k). The House version of the bill had no such provision, and ultimatelythe Ashcroft provision was not included in the conference report. Several Senators expressed strongdisapproval with the manner in which the issue was decided. When the conference committee cameto a stalemate over the Ashcroft provision on sanctions and another provision on dairy prices, theHouse and Senate Majority Leadership brokered an agreement that dropped the Ashcroft provision. In the second session of the 106th Congress, there have been efforts in three legislative vehicles - the foreign aid authorization bill ( S. 2382 ), FY2001 agriculture appropriations bill( H.R. 4461 ), and the FY2001 Treasury Department appropriations bill( H.R. 4871 )- to lift restrictions on food and medical exports to Cuba. On March 23,2000, the Senate Foreign Relations Committee included a provision in its FY2001 foreign aidauthorization bill, S. 2382 , the Technical Assistance, Trade Promotion, andAnti-Corruption Act. As reported by the Committee on April 7, 2000 ( S.Rept. 106-257 ), the billcontains a provision similar to the Ashcroft provision on sanctions in the Senate version of theFY2000 agriculture appropriations bill described above. Title I, Subtitle C of S. 2382 would lift restrictions on food and medicine exports and allow licensed exports of these goods tocountries classified as state sponsors of international terrorism, which includes Cuba. Agriculturaland medical exports to these countries would be allowed pursuant to one-year licenses issued by theU.S. government. Both the House and Senate versions of the FY2001 agriculture appropriations bill ( H.R. 4461 and S. 2536 ) as reported out of their respective committeesincluded a provision similar to that in the foreign aid authorization bill that effectively would allowU.S. food and medical exports to Cuba. In the Senate bill, the provision was approved by voice votein the Senate Appropriations Committee on May 9 through an amendment offered by Senator ByronDorgan. The full Senate approved H.R. 4461 on July 20, 2000, which included the titleallowing food and medical exports to Cuba. In the House version of the bill, on May 4, 2000, the House Appropriations Committee's Subcommittee on Agriculture approved an amendment by Representative George Nethercutt thatwould lift restrictions on food and medical exports and allow licensed exports of these goods tocountries classified as state sponsors of international terrorism, which includes Cuba. Subsequently,on May 10, the full House Appropriations Committee defeated (by a vote of 24-35) an attempt byRepresentative Tom DeLay to delete the title in H.R. 4461 that would lift restrictionson U.S. food and medical exports worldwide. Continued opposition by the House GOP leadershipand some Members to the sanctions-loosening effort led to a June 27 compromise agreementhammered out among the House GOP leadership, the House sponsors of the provision, and Memberswho opposed the initiative. Under the reported compromise, U.S. food and medical exports to Cubawould be allowed pursuant to one-year licenses, but no U.S. government or U.S. private financingcould be provided for the transactions. The agreement includes a provision stating that licensed U.S.travel to Cuba may not include travel for tourist activities, as well as another provision that wouldprohibit all U.S. government assistance to Cuba without any presidential waiver authority. Criticscharged that the restrictions were so great that sales would be practically impossible, and that thenew provisions on travel would tighten restrictions on certain categories of non-tourist travelcurrently allowed by the Treasury Department regulations. When the House debated H.R. 4461 , on July 10, 2000, the title dealing with food and medical exports was deleted on a point of order by Representative Diaz-Balart against legislationin an appropriation measure. However, the compromise language agreed to on June 27 wasreportedly the basis of the House position in the conference to H.R. 4461 . TheSenate-passed provision was less restrictive than the June 27 compromise agreement. Another Housefloor amendment by Representative Rangel that sought to ease restrictions on trade with Cuba byeliminating funding to implement provisions in the foreign assistance and other statutes that prohibitU.S. exports to Cuba was ruled to be non-germane. In the final version of the FY2001 Agriculture appropriations bill that was signed into law on October 28, 2000, the sale of agricultural and medical products to Cuba is allowed, but any U.S.financing - public or private - is prohibited. The bill also codified existing embargo regulations byprohibiting imports from Cuba and travel for tourism to Cuba. During House consideration of the FY2001 Treasury Department appropriations bill, H.R. 4871 , the House approved (301-116) a Moran (KS) amendment that wouldprohibit any funds in the bill from being used to implement any U.S. sanction on private commercialsales of agricultural commodities or medicine or medical supplies to Cuba. Although passage of theamendment marked a significant departure from the longstanding sanctions-oriented policy towardCuba, its language was eliminated from a new version of the FY2001 Treasury Departmentappropriations bill, H.R. 4985 , introduced on July 26. This version, with no mentionof Cuba, was subsequently appended to the Legislative Branch appropriations bill, H.R. 4516 , on July 27. Travel Restrictions Restrictions on travel to Cuba have been a key component in U.S. efforts to isolate the communist government of Fidel Castro for much of the past 40 years. Over time there have beennumerous changes to the restrictions and for 5 years, from 1977 until 1982, there were no restrictionson travel. On June 30, 1999, an attempt in the Senate to end the restrictions was defeated (55-43)during consideration of the foreign aid appropriations bill, S. 1234 , but similar freestanding legislation was introduced in each body, S. 1919 (Dodd), H.R. 259 (Serrano), and H.R. 4471 (Sanford). Moreover, on July 20, 2000, duringconsideration of the FY2001 Treasury Department appropriations bill, H.R. 4871 , aSanford amendment was approved (232-186) that would prohibit funds in the bill from being usedto administer or enforce the Cuban Assets Control Regulations with respect to any travel ortravel-related transaction. While passage of the amendment marked a significant departure from thelongstanding sanctions-oriented policy toward Cuba, the language of the amendment was eliminatedfrom a new version of the FY2001 Treasury Department appropriations bill, H.R. 4985 ,which was appended to the conference report ( H.Rept. 106-796 ) on the Legislative Branchappropriations bill, H.R. 4516 , on July 27. As noted above in the discussion of H.R. 4461 , the FY2001 agriculture appropriations bill, the final version of the food and medical provision states that licensed U.S. travelto Cuba may not include travel for tourist activities. Moreover, the law imposed tighter restrictionson non-tourist travel previously allowed by the Treasury Department regulations. Major arguments made for lifting the Cuba travel ban are: it hinders efforts to influence conditions in Cuba and may be aiding Castro by helping restrict the flow of information; it abridgesthe rights of ordinary Americans; and Americans can travel to other countries with communist orauthoritarian governments. Major arguments in opposition to lifting the Cuba travel ban are:American tourist travel would support Castro's rule by providing his government with millions ofdollars in tourist receipts; there are legal provisions allowing travel to Cuba for humanitarianpurposes that are used by thousands of Americans each year; and the President should be free torestrict travel for foreign policy reasons. (For more details, see CRS Report RS20409, Cuba: U.S.Restrictions on Travel and Legislative Initiatives in the 106th Congress. ) Drug Trafficking Cooperation Because of Cuba's geographic location, its waters and airspace are used by drug traffickers to transit low levels of cocaine and marijuana for ultimate destination to the United States. Cubanofficials have expressed concerns over the use of their waters and airspace for drug transit as wellas increased domestic drug use by way of the growing tourist sector. Cuba has made a number of lawenforcement efforts to deal with the drug problem, including legislation to stiffen penalties fortraffickers and cooperation with a number of countries on anti-drug efforts. The United Statescooperates with Cuba on anti-drug efforts on a case-by-case basis, and there are undergoing effortsto make bilateral cooperation more systematic. On June 21, 1999, U.S. and Cuban officials met in Havana to discuss ways of improving anti-drug cooperation. According to the State Department, Cuba accepted an upgrading of thecurrent telex link between the Cuban Border Guard and the U.S. Coast Guard as well as thestationing of a U.S. Coast Guard officer at the U.S. Interests Section in Havana. Barry McCaffrey,Director of the Office of National Drug Control Policy, has stated that Cuba had demonstrated awillingness to help the United States in anti-narcotics efforts but has been ineffective because of alack of resources. Some Members have called for closer U.S.-Cuban cooperation on anti-drugmeasures (see H.R. 2365 ), while some, strongly opposing such efforts, have called onCuba to be added to the State Department's list of major-drug producing or transit countries (see H.R. 2422 ). They believe that the Cuban government is involved in the drug trade,although the State Department asserts that the United States has no credible evidence of recenthigh-level official drug-related corruption in Cuba. H.R. 3427 , the Foreign RelationsAuthorization Act for FY2000 and FY2001, enacted into law by reference in P.L. 106-113 , requiresa report within 120 days on the extent of international drug trafficking through Cuba since 1990. On November 10, 1999, the Clinton Administration decided not to add Cuba to the annual list of major drug transit countries. According to the Department of State, "Cuba was not placed on thelist of major drug transit countries because there is no clear evidence that cocaine or heroin aretransiting Cuba on the way to the United States in quantities that significantly affect the UnitedStates." (Daily Press Briefing, November 10, 1999) Some Members of Congress strongly objectedto Cuba not being included on the list. A hearing on the issue was held November 17, 1999, beforethe House Government Reform Committee's Subcommittee on Criminal Justice, Drug Policy, andHuman Resources. During June 21, 2000 Senate consideration of the FY2001 foreign aid appropriations bill, S. 2522 , the Senate approved by voice vote an amendment offered by Senator Specterfor up to $1 million to fund the Secretary of Defense to work with Cuba to provide for greatercooperation, coordination, and other assistance in the interdiction of illicit drugs. The final billomitted that language. Russian Intelligence Facility in Cuba Some Members of Congress have raised concerns about the Russian signals intelligence facility at Lourdes, Cuba. The facility at Lourdes was built in the aftermath of the Cuban missile crisis of1962. It allows Russia to monitor U.S. communications, including military communications thatRussians contend ensure compliance with arms control agreements. In the 104th Congress, the enacted Cuban Liberty and Democratic Solidarity Act ( P.L. 104-114 ) contains a provision that would reduce U.S. assistance for Russia by an amount equal to the sum ofassistance and credits provided in support of intelligence facilities in Cuba. However, the legislationalso provides that such a restriction does not apply to most categories of assistance. Moreover, thelegislation also provides a presidential waiver if such assistance is important to U.S. national security and ifRussia has assured the United States that it is not sharing intelligence collected at the Lourdes facilitywith officials or agents of the Cuban government. In the 106th Congress, on July 19, 2000 the House approved (275-146) H.R. 4118 , the Russian-American Trust and Cooperation Act of 2000, that would have prohibited therescheduling or forgiveness of any outstanding bilateral debt owed to the United States by Russiauntil the President certified that Russia had ceased all its operations at, removed all personnel from,and permanently closed the intelligence facility at Lourdes, Cuba. The bill would have provided thePresident with a national interests waiver for the prohibition against rescheduling bilateral debt owedto the United States by Russia, but not for debt forgiveness. The bill also required the President toinstruct the U.S. representative to the Paris Club of official creditors to use the voice and vote of theU.S. to oppose rescheduling or forgiveness of any outstanding bilateral debt owed by Russia. Nopresidential waiver was provided for this provision. The Senate version, S. 2748 ,remained in committee. Those supporting the bill argue that the listening post, which reportedly has been upgraded in recent years, permits the collection of U.S. military, diplomatic, and commercial data and allows theinvasion of Americans' privacy. They argue the compensation paid by Russia to Cuba, estimated atbetween $100-$300 million annually, helps prop up the Castro government financially. Thoseopposed to the bill argue that facilities such as that at Lourdes help both Russia and the United Statesto have confidence that international arms controls agreements are being respected. They maintainthat the bill attempts to undermine U.S. leadership on engagement with Russia and could threatenU.S. leadership in Paris Club negotiations for debt rescheduling and forgiveness. The ClintonAdministration opposes the legislation, maintaining that it could call into question U.S. signalsintelligence facilities that perform activities similar to the facility at Lourdes. (Also see CRS Report RS20636, Russia's Paris Club Debt: U.S. Interests ) Bipartisan Commission Proposal In mid-October 1998, Senator John Warner along with 14 other senators from both parties wrote to President Clinton calling for the formation of a "National Bipartisan Commission on Cuba," to conduct an analysis of current U.S. policy that would help shape and strengthen the futureU.S.-Cuban relationship. Another 9 senators signed on to the letter in December, bringing the totalnumber of senators to 24. The senators recommended that the commission members be chosen froma bipartisan list of distinguished Americans experienced in international relations representing across section of U.S. interests. Some Members opposed the formation of such a commission,maintaining that the idea was intended to alter U.S. policy. On January 4, 1999, State Departmentofficials stated that the Clinton Administration had decided not to set up a bipartisan commissionat that time. A year and half later, the issue of a bipartisan commission was raised in a legislative proposal by Senator Christopher Dodd. On June 20, 2000 during consideration of S. 2549 , theFY2001 defense authorization bill, the Senate tabled, by a vote of 59-41, a Dodd amendment thatwould have established a National Bipartisan Commission on Cuba to evaluate U.S. policy towardCuba. The original proponent of such a commission, Senator Warner, did not support the Doddamendment because he believed it could be an impediment to the passage of the defenseauthorization measure. Those arguing in favor of such a commission maintained: that the work ofthe commission would provide new ideas and thoughts for the next presidential administration totake office in 2001; that human rights activists inside Cuba support a rethinking of U.S. policy; andthat there is a double standard regarding the sanctions-based U.S. policy toward Cuba, whichcontrasts with the U.S. policy of engagement toward such nations as China, Vietnam, and now evenNorth Korea. Those opposing the establishment of such a commission argued: that it was a politicalattempt to change U.S. policy toward Cuba outside of the normal conduct of foreign policy by thelegislative and executive branches; that it would tie the hands of the next President to set his ownCuba policy; and that there should be no movement to change U.S. policy until there is politicalchange in Cuba. Radio and TV Marti U.S.-government sponsored radio and television broadcasting to Cuba (Radio and TV Marti), begun in 1985 and 1990 respectively, have at times been the focus of controversies, includingadherence to broadcast standards. Over the years there have been various attempts to cut fundingfor the programs, especially for TV Marti which has not had an audience because of Cuban jammingefforts. TV Marti offers its daily broadcasts between the hours of 3:30 am - 8:00 am. (Forbackground on Cuba broadcasting through 1994, see CRS Report 94-636(pdf) F, Radio and TelevisionBroadcasting to Cuba: Background and Issues Through 1994 .) FY2000 Funding. For FY2000, the Administration requested $22.743 million for broadcasting to Cuba, with $13.12 million for RadioMarti operations and $9.623 million for TV Marti operations. The FY2000 omnibus appropriationsmeasure, P.L. 106-113 , which enacts H.R. 3421 by reference, appropriates $22.095million for Cuba broadcasting. The omnibus bill also enacted by reference H.R. 3427 ,the Foreign Relations Authorization Act for FY2000 and FY2001, which authorizes $22.743 millionfor Cuba broadcasting for each of FY2000 and FY2001. FY2001 Funding. For FY2001, the Administration requested $23.456 million for broadcasting to Cuba for both Radio and TV Marti. Of that amount, $650,000 is for the purchase of a 100 kilowatt solid state transmitter to improve theoperation, reliability, and efficiency of Radio Marti broadcasts to Cuba. The House-passed versionof H.R. 4690 , the FY2001 Commerce, Justice, and State Department appropriations bill,provided for Cuba broadcasting within the larger funding account for international broadcastingoperations. However, in the report to the bill ( H.Rept. 106-680 ), the House AppropriationsCommittee recommended $22.806 for Cuba broadcasting. The Senate version of H.R. 4690 , reported on July 21, 2000, would have provided $22.095 million for radio and televisionbroadcasting to Cuba. H.R. 5548 , a subsequent bill making appropriations for the Departments of Commerce, Justice, and State; the Judiciary; and related agencies, was incorporated into the H.R. 4942 conference report ( H.Rept. 106-1005 ). Signed into law December 21, 2000( P.L. 106-553 ), it provides $22.095 million for radio and television broadcasting to Cuba. Migration In 1994 and 1995, Cuba and the United States reached two migration accords designed to stem the mass exodus of Cubans attempting to reach the United States by boat. On the minds of U.S.policymakers was the 1980 Mariel boatlift in which 125,000 Cubans fled to the United States. Inresponse to Castro's threat to unleash another Mariel, U.S. officials reiterated U.S. resolve not toallow another exodus. Amidst escalating numbers of fleeing Cubans, on August 19, 1994, PresidentClinton abruptly changed U.S. migration policy, under which Cubans attempting to flee theirhomeland were allowed into the United States, and announced that the U.S. Coast Guard and Navywould take Cubans rescued at sea to the U.S. naval base at Guantanamo Bay, Cuba. Despite thechange in policy, Cubans continued fleeing in large numbers. As a result, in early September 1994, Cuba and the United States began talks that culminated in a September 9, 1994 bilateral agreement to stem the flow of Cubans fleeing to the United Statesby boat. In the agreement, the United States and Cuba agreed to facilitate safe, legal, and orderlyCuban migration to the United States, consistent with a 1984 migration agreement. The UnitedStates agreed to ensure that total legal Cuban migration to the United States would be a minimumof 20,000 each year, not including immediate relatives of U.S. citizens. In a change of policy, theUnited States agreed to discontinue the practice of granting parole to all Cuban migrants who reachthe United States, while Cuba agreed to take measures to prevent unsafe departures from Cuba. In May 1995, the United States reached another accord with Cuba under which the United States would parole the more than 30,000 Cubans housed at Guantanamo into the United States, butwould intercept future Cuban migrants attempting to enter the United States by sea and would returnthem to Cuba. The two countries would cooperate jointly in the effort. Both countries also pledgedto ensure that no action would be taken against those migrants returned to Cuba as a consequenceof their attempt to immigrate illegally. On January 31, 1996, the Department of Defense announcedthat the last of some 32,000 Cubans intercepted at sea and housed at Guantanamo had left the U.S.Naval Base, most having been paroled into the United States. Periodic U.S.-Cuban talks have beenheld on the implementation of the migration accords. Since the 1995 migration accord, the U.S. Coast Guard has interdicted more than 3,500 Cubans at sea and returned them to their country, while those deemed at risk for persecution have beentransferred to Guantanamo and then found asylum in a third country. Those Cubans who reach shoreare allowed to apply for permanent resident status in one year. Tensions in South Florida heightened after a June 29, 1999 incident -- televised live by local news helicopters -- in which the U.S. Coast Guard used a water cannon and pepper spray to preventsix Cubans from reaching Surfside beach in Florida. The incident prompted outrage from the CubanAmerican community in Florida and several Members of Congress. President Clinton characterizedthe incident as "outrageous," and stated that the treatment was not authorized (Associated Press, July1, 1999). Another incident occurred on July 9, 1999, when a boat being interdicted by the CoastGuard capsized and resulted in the drowning of a Cuban woman. The State Department expressedregret over the incident and noted that the Department of Justice and the Immigration andNaturalization Service would investigate whether this was a case of alien smuggling. The Cuban government has taken forceful action against individuals engaging in alien smuggling. Prison sentences of up to three years may be imposed against those engaging in aliensmuggling, and for incidents involving death or violence, a life sentence may be imposed. As of lateJuly 1999, 30 U.S. residents were being held by the Cuban government on charges of aliensmuggling, and Cuba has offered to return them to the United States to stand trial. In late September1999, a Cuban court convicted two U.S. residents to jail terms of life and 30 years, respectively, forthe smuggling of migrants. Elian Gonzalez Case. On November 25, 1999, a boat with 13 Cubans attempting to reach the United States capsized off the coast of Florida.Among the 3 survivors was a 5-year old boy, Elian Gonzalez, who was found clinging to an innertube off the coast of Fort Lauderdale. The boy's mother drowned in the incident. The Immigrationand Naturalization Service released the boy into the care of relatives in Florida, who said that theywould request political asylum for the child. The boy's father in Cuba called for his return. After interviewing the boy's father in Cuba and the boy's great-uncle and lawyers in Miami, the INS ruled on January 4, 2000, that the boy's father "has the sole legal authority to speak onbehalf of his son, Elian, regarding Elian's immigration status in the United States." According tothe INS ruling: "Both U.S. and international law recognize the unique relationship between parentand child, and family reunification has long been a cornerstone of both immigration law and INSpractice." The INS decision called for Elian to be returned to his father by January 14, 2000. Subsequently, efforts by the boy's Miami relatives to challenge the ruling resulted in the AttorneyGeneral extending the January 14, 2000 deadline in order to accommodate any federal courtproceedings. On January 10, a Florida circuit court judge ruled that the boy's return to Cuba couldcause the child "imminent harm" and scheduled a hearing on the case for March 6. Meanwhile, theFlorida judge issued a temporary protective order for the child to keep him with his Miami relativesuntil the March hearing. However, on January 12, 2000. Attorney General Janet Reno reaffirmedthe INS January 4 ruling, and asserted that the Florida state court had no right to intervene in thecase. She maintained that Florida's court order has no force or effect with regard to the INS'sadministration of immigration laws and that any challenge must take place in federal court. On January 19, 2000, attorneys for the boy's Miami relatives filed a federal lawsuit in Miami in an effort to block Elian's return to Cuba. The lawsuit contended that the boy's constitutionalrights were violated when petitions for political asylum filed on his behalf were not considered. OnMarch 21, federal district court judge Michael Moore dismissed the request to force the INS to grantElian an asylum hearing. On April 6, Elian's father, Juan Miguel Gonzalez, traveled to Washingtonwith his wife and six-month old son, with the intention of reuniting with his son Elian and takinghim back to Cuba. On April 19, a U.S. Court of Appeals for the Eleventh Circuit in Atlanta orderedthat Elian must stay in the United States for the duration of the Miami family's court appeal. On April 22, Attorney General Janet Reno ordered the forced removal of Elian from the home of the Miami relatives by INS agents, after which he was flown to Andrews Air Force Base in Marylandand reunited with his father. Critics of the boy's removal argued that the INS used excessive force,while supporters contended that the government was forced to act by the intransigence of the Miamirelatives. Elian Gonzalez and his father stayed at the secluded Wye River Plantation in Marylanduntil May 25, when they (along with other family members, a teacher, and classmates who joinedthem in late April) moved to a home in Washington, D.C. owned by the Youth for UnderstandingInternational Exchange. In the next legal phase of the case, on May 11, the U.S. Court of Appeals in Atlanta heard oral arguments on whether the INS should be instructed to consider the asylum request filed for ElianGonzalez by his Miami relatives. The three-judge panel ruled on June 1 that the INS acted withinthe law and its policy rights when it refused to consider the asylum request. On June 23, the fullAppeals court rejected another appeal by the Miami relatives and refused to reconsider its June 1ruling. On June 26, the Miami relatives petitioned the Supreme Court to block Elian's return toCuba. On June 28, the Supreme Court rejected an appeal by the Miami relatives to block Elian'sreturn to Cuba and to seek a political asylum hearing for him. The previous injunction of theAppeals Court for Elian to remain in the United States expired at 4:00 p.m. on June 28, and the boyand his father returned to Cuba the same day. In late January 2000, it appeared that Congress would consider legislative action on the issue. Some Members supported legislation granting U.S. citizenship or legal residency to the boy( S. 1999 , H.R. 3531 , H.R. 3532 , S. 2314 ). Thosesupporting citizenship argued that the case should have been considered in family court and that thelegislation would ensure this. In contrast, other Members, who believed that Congress should notintervene in the matter, maintained that the INS should proceed with its decision to return the boyto his father ( H.Con.Res. 240 and S.Con.Res. 79 ). Administration officialsmaintained that the issue should be resolved in federal court, not in Congress. The Senate JudiciaryCommittee held a hearing on the issue on March 1, 2000, and the Committee planned hearings toinvestigate the INS's armed removal from the home of the Miami relatives. In Cuba, Fidel Castro demanded the return of the boy in early December 1999, and Cuba held numerous mass demonstrations until the boy's return in June 2000. While the Cuban governmentorganized the mass demonstrations and used the media to influence the Cuban population, the issuein itself generated an outpouring of emotion among the Cuban population as well as in south Florida. Legislative Initiatives and Actions in the 106th Congress Any legislation passed by the 106th Congress is noted as Public Law (P.L.) at the top of eachsection. The latest action made before the end of the 106th session is noted on all other legislation. P.L. 106-113 ( H.R. 3194 ) Consolidated Appropriations Act for FY2000. Enacts by reference H.R. 3421 , theCommerce, Justice and State appropriations bill for FY2000, and H.R. 3427 , theForeign Relations Authorization Act for FY2000 and FY2001, as introduced November 17, 1999. H.R. 3194 signed into law November 29, 1999. H.R. 3421 appropriates$22.095 million for Cuba broadcasting for FY2000. H.R. 3427 includes the followingCuba provisions: Section 108 (b) (3) authorizes $6,000 for each of FY2000 and FY2001 for theinvestigation and dissemination of information on violations of freedom of expression by Cuba;Section 121 authorizes $22.743 million for broadcasting to Cuba for each of FY2000 and FY2001;Section 206 requires a report from the Secretary of State not later than 120 days after enactment ofthe Act on the extent of international drug trafficking through Cuba since 1990. P.L. 106-429 ( H.R. 4811 ) FY2001 Foreign Operations appropriations bill. On October 28, the conference report ( H.Rept.106-997 ) struck H.R. 4811 and enacted by reference H.R. 5526 . Section507 prohibits direct funding of assistance or reparations to Cuba (and other countries). Section 523prohibits indirect assistance or reparations to Cuba unless the President certifies that withholdingsuch funds is contrary to U.S. national interests. Initiatives Regarding Compensation for the February 1996 Shootdown P.L. 106-386 ( H.R. 3244 ) Victims of Trafficking and Violence Protection Act of 2000. Sections 2002 and 2003 directthe Secretary of the Treasury to pay compensatory damages for certain claims against Cuba (andIran). As provided for in the bill, President Clinton waived such payments in the interest of nationalsecurity when he signed the bill into law on October 28, 2000. S. 1796 (Lautenberg) / H.R. 3485 (McCollum) S. 1796 would amend the enforcement of certain anti-terrorism judgments in U.S.courts under the Foreign Sovereign Immunities Act (28 USC 1602-11) against foreign statesdesignated to be state sponsors of terrorism, taking away the current presidential waiver for nationalsecurity interests except for the protection of diplomatic property. The Senate Judiciary Committeereported the bill March 9, 2000, and the measure was placed on the Senate Legislative Calendarunder General Orders. An identical House bill, H.R. 3485 (McCollum), was introducedNovember 18, 1999. The House Committee on the Judiciary reported the bill July 13, 2000 ( H.Rept.106-733 ) and the measure was placed on the Union Calendar. A supplemental report on H.R. 3485 was filed July 18, 2000 ( H.Rept. 106-733 , Part II). The House approved H.R. 3485 by voice vote on July 25, 2000. It was received in the Senate and placed onthe Senate Legislative calendar under General Orders July 26, 2000. Initiatives to Strengthen Sanctions on Cuba H.R. 181 (McCollum) Introduced January 6, 1999; referred to House Committee on International Relations. March23, 1999 referred to House subcommittee. Repeals the authority of the President to suspend theeffective date of Title III of the Cuban Liberty and Democratic Solidarity Act. H.R. 3329 (Rothman) Introduced November 10, 1999; referred to Committee on International Relations. November17, 1999 referred to House subcommittee. Amends the Cuban Liberty and Democratic SolidarityAct to require, in order to determine that a democratically elected government in Cuba exists, thegovernment extradite to the United States convicted felon Joanne Chesimard and all other U.S.fugitives from justice. H.R. 4118 (Ros-Lehtinen) / S. 2748 (Mack) Russian-American Trust and Cooperation Act of 2000. Prohibits the rescheduling orforgiveness of any outstanding bilateral debt owed to the United States by Russia until the Presidentcertifies to Congress that Russia has closed the intelligence facility at Lourdes. H.R. 4118 introduced Mar. 29, 2000. House International Relations Committee approved by voice voteMay 4, 2000, after it was amended to include a presidential national interest waiver. Reported byHouse International Relations Committee June 12, 2000 ( H.Rept. 106-668 ). House approved(275-146) July 19, 2000. S. 2748 , introduced June 16, 2000 and referred to theCommittee on Foreign Relations, is identical to the House-approved bill. S. 1796 (Lautenberg) / H.R. 3485 (McCollum) Justice for Victims of Terrorism Act. Modifies the enforcement of certain anti-terrorismjudgments in U.S. courts under the Foreign Sovereign Immunities Act (28 USC 1602-11) againstforeign states designated to be state sponsors of terrorism, taking away the current presidentialwaiver for national security interests. The two bills relate to Cuba because they could affect thepayment of a December 1997 $187.6 million U.S. Federal court judgment against Cuba to be paidfrom Cuba's frozen assets in the United States to the families of three victims killed in Cuba's 1996shootdown of two U.S. civilian planes. S. 1796 introduced October 26, 1999; SenateJudiciary Committee reported the bill March 9, 2000, and the measure was placed on the SenateLegislative Calendar under General Orders. H.R. 3485 introduced November 18, 1999;House Committee on the Judiciary reported the bill July 13, 2000 ( H.Rept. 106-733 ) and July 18,2000 ( H.Rept. 106-733 , Part II) and the measure was placed on the Union Calendar. The Houseapproved H.R. 3485 by voice vote on July 25, 2000; received in Senate and placed onSenate Legislative Calendar under General Orders July 26, 2000. S. 1829 (Helms) Introduced October 29, 1999; referred to Committee on Foreign Relations. Prohibits thepayment of debts incurred by the communist government of Cuba. Initiatives to Ease Sanctions on Cuba P.L. 106-387 ( H.R. 4461 / S. 2536 ) Agriculture, Rural Development, Food and Drug Administration, and Related AgenciesAppropriations Act, FY2001. Title IX of the bill, Trade Sanctions Reform and Export Enhancement,terminates unilateral sanctions on food and medical exports from economic sanctions imposed forforeign policy purposes. It allows one-year licenses for exports of these goods to countries classifiedas state sponsors of international terrorism, which includes Cuba, but without any U.S. financing (thePresident may waive the prohibition of U.S. assistance for commercial exports to Iran, Libya, NorthKorea, or Sudan for national security or humanitarian reasons but may not do so for Cuba). Prohibitstravel to Cuba for tourism, restricts non-tourist travel to Cuba to that expressly authorized in currentfederal regulations. Signed into law October 28, 2000. H.R. 229 (Rangel) Introduced January 6, 1999; referred to Committee on International Relations, and in additionto Committees on Ways and Means, Commerce, and Government Reform. March 23, 1999 referredto House subcommittee. Lifts the trade embargo on Cuba and for other purposes. H.R. 230 (Rangel) Introduced January 6, 1999; referred to Committee on International Relations, and in additionto the Committee on Ways and Means. March 23, 1999 referred to House subcommittee. Makesan exception to the embargo on trade with Cuba for the export of food, medicines, medical supplies,medical instruments or medical equipment. H.R. 256 (Serrano) Introduced January 6, 1999; referred to Committee on International Relations. March 23, 1999referred to House subcommittee. Repeals the Cuban Democracy Act of 1992 and the Cuban Libertyand Democratic Solidarity Act of 1996. H.R. 257 (Serrano) Introduced January 6, 1999; referred to Committee on International Relations. March 23, 1999referred to House subcommittee. Reinstates the authorization of cash remittances to family membersin Cuba under the Cuban Assets Control Regulations. H.R. 258 (Serrano) Introduced January 6, 1999; referred to Committee on International Relations. March 23, 1999referred to House subcommittee. Allows for news bureau exchanges between the United States andCuba. H.R. 259 (Serrano) Introduced January 6, 1999; referred to Committee on International Relations. March 23, 1999referred to House subcommittee. Allows travel and cultural exchanges between the United Statesand Cuba. H.R. 262 (Serrano) Introduced January 6, 1999; referred to Committee on International Relations, and in additionto the Committee on the Judiciary. March 23, 1999 referred to House subcommittee. Waives certainprohibitions with respect to nationals of Cuba coming to the United States to play organizedprofessional baseball. H.R. 1181 (Paul) Introduced March 18, 1999; referred to Committee on International Relations, and in additionto the Committees on Ways and Means, Commerce, and Government Reform. April 7, 1999referred to House subcommittee. Lifts the trade embargo on Cuba and for other purposes. H.R. 1644 (Serrano) / S. 926 (Dodd) Cuban Food and Medicine Security Act of 1999. H.R. 1644 introduced April 29,1999; referred to House Committees on International Relations and on Agriculture. June 15, 1999referred to House subcommittee. S. 926 introduced April 29, 1999; referred toCommittee on Foreign Relations. Eases restrictions on the sale of food and medicines to Cuba. H.R. 4471 (Sanford) Introduced May 16, 2000; referred to Committee on International Relations. June 12, 2000referred to House subcommittee. Allows travel between the United States and Cuba. H.R. 4856 (Rangel) / S. 2896 (Baucus) H.R. 4856 introduced July 13, 2000; referred to Committee on Ways and Means. S. 2896 introduced July 20, 2000; referred to the Committee on Finance. Identical billsto normalize trade relations with Cuba. H.R. 4871 (Kolbe) S. 2900 (Campbell) FY2001 Treasury appropriations bill. H.R. 4871 reported by House AppropriationsCommittee July 18, 2000 ( H.Rept. 106-756 ). House passed (216-202) July 20, 2000. During floorconsideration July 20, the House approved two amendments that would loosen economic sanctionson Cuba. A Sanford amendment was approved (232-186) that would prohibit funds in the bill frombeing used to administer or enforce the Cuban Assets Control Regulations with respect to any travelor travel-related transaction. A Moran (KS) amendment was approved (301-116) that would prohibitany funds in the bill from being used to implement any U.S. sanction on private commercial salesof agricultural commodities or medicine or medical supplies to Cuba. A broader Rangel amendmentwas defeated (174-241) that would have prohibited funds in the bill from enforcing the economicembargo of Cuba. S. 2900 reported by Senate Appropriations Committee July 20, 2000.(Note: a new version of the Treasury appropriations bill, H.R. 4985 , was introduced July26, 2000, which did not include the two House-approved Cuba amendments. On July 27, H.R. 4985 as introduced was appended to the conference report ( H.Rept. 106-796 ) onthe Legislative Branch appropriations bill, H.R. 4516 .) S. 73 (Moynihan) Introduced January 19, 1999; referred to the Committee on Foreign Relations. Makes availablefunds under the Mutual Educational and Cultural Exchange Act of 1961 to provide Fulbrightscholarships for Cuban nationals to undertake graduate study in the social sciences. S. 566 (Lugar) Introduced March 8, 1999; reported by Committee on Agriculture September 13, 1999 (SenateReport 106-157) and placed on the Senate Legislative Calendar under General Orders. Exemptscommercial sales of agricultural commodities, livestock, and value-added products from unilateraleconomic sanctions. S. 1771 (Ashcroft) / H.R. 3140 (Nethercutt) S. 1771 introduced October 22, 1999; placed on Senate Legislative Calendar underGeneral Orders October 25, 1999. H.R. 3140 introduced October 25, 1999; referred toCommittee on International Relations, and in addition to Committees on Rules and on Agriculture. November 16, 1999 referred to House subcommittee. Requires congressional approval before theimposition of any unilateral agricultural or medical sanction against a foreign country or foreignentity. S. 1919 (Dodd) Introduced November 10, 1999; referred Committee on Foreign Relations. Permits travel to orfrom Cuba. S. 2382 (Helms) Technical Assistance, Trade Promotion, and Anti-Corruption Act of 2000. Senate ForeignRelations Committee ordered reported Mar. 23, 2000; reported by Committee April 7, 2000 ( S.Rept.106-257 ). Referred to Senate Committee on Banking, Housing, and Urban Affairs April 11, 2000.Title I, Subtitle C, of the bill would lift restrictions on food and medicine exports, albeit with someconditions on exports to countries classified as state sponsors of international terrorism, whichincludes Cuba. Agricultural and medical exports to these countries would be allowed pursuant toone-year licenses issued by the U.S. government. S. 2617 (Baucus) Introduced May 24, 2000; referred to Committee on Finance. Lifts the trade embargo on Cuba. Initiatives Regarding Cuba's Human Rights Situation H.Res. 99 (Ros-Lehtinen) Introduced March 9, 1999. House approved March 23, 1999, by voice vote. Expresses the senseof the House regarding the human rights situation in Cuba, including a condemnation of Cuba'srepressive crackdown against the internal opposition and independent press; a call for theAdministration to secure support for a UNCHR resolution condemning Cuba for its human rightsabuses and for the reinstatement of a UNCHR Special Rapporteur on Cuba; and a call for theAdministration to nominate a special envoy to advocate internationally for the establishment of therule of law for the Cuban people. S.Res. 57 (Graham) Introduced March 4, 1999. Senate approved (98-0) March 25, 1999. Expresses the sense ofthe Senate that the United States should make all efforts to pass a UNCHR resolution criticizingCuba's human rights abuses and securing the appointment of a Special Rapporteur. S.Res. 289 (Torricelli) Introduced April 12, 2000; reported by the Senate Committee on Foreign Relations April 13,2000, without written report; placed on Senate Legislative Calendar under General Orders April 13,2000. Expresses the sense of the Senate supporting a United National Commission on Human Rightsresolution on Cuba. H.R. 4537 (Diaz-Balart) Introduced May 24, 2000; referred to Committee on International Relations. Assists the internalopposition in Cuba. Initiatives Regarding Drug Trafficking Issues H.R. 2365 (Rangel) Introduced June 25, 1999; referred to Committee on International Relations. Authorizes theDirector of the Office of National Drug Control Policy to enter into negotiations with representativesof Cuba to provide for increased cooperation between Cuba and the United States on druginterdiction efforts. H.R. 2422 (Burton) Introduced July 1, 1999; referred to Committee on International Relations. Provides for thedetermination that Cuba is a major drug-transit country for purposes of Section 490(h) of the ForeignAssistance Act of 1961. H.R. 4811 (Callahan)/ S. 2522 (McConnell) FY2001 Foreign Operations appropriations bill. House approved (239-185) H.R. 4811 July 13, 2000. Senate approved H.R. 4811 July 18, 2000 by unanimous consent,substituting the language of S. 2522 , which had been approved (95-4) by the SenateJune 22; asked for conference. Senate version of H.R. 4811 , section 599F, providesfor up to $1 million to fund the Secretary of Defense to work with Cuba to provide for greatercooperation, coordination, and other mutual assistance in the interdiction of illicit drugs beingtransported over Cuban airspace and waters. Before such assistance may be provided, the Presidentmust determine and certify to Congress that 1) Cuba has appropriate procedures in place to protectagainst innocent loss of life in the air and on the ground in connection with interdiction of illegaldrugs; and 2) that there is no evidence of the involvement of the government of Cuba in drugtrafficking. This provision was dropped in conference from final version of bill. On October 28,the conference report ( H.Rept. 106-997 ) struck H.R. 4811 and enacted by reference H.R. 5526 . Section 507 prohibits direct funding of assistance or reparations to Cuba(and other countries). Section 523 prohibits indirect assistance or reparations to Cuba unless thePresident certifies that withholding such funds is contrary to U.S. national interests. Initiative to Evaluate U.S. Policy on Cuba S. 2549 (Warner) Department of Defense authorization bill FY2001. Reported by Senate Committee on ArmedServices May 12, 2000 (Senate Report 106-292). During floor consideration on June 20, the Senatetabled, by a vote of 59-41, a Dodd amendment that would have established a National BipartisanCommission on Cuba to evaluate U.S. policy. Senate incorporated this measure in H.R. 4205 as an amendment on July 13, 2000. Initiatives Related to the Elian Gonzalez Case H.Con.Res. 240 (Rangel)/ S.Con.Res. 79 (Dodd) H.Con.Res. 240 introduced January 24, 2000; referred to House Committee on theJudiciary. July 11, 2000 referred to House subcommittee. S.Con.Res. 79 introducedJanuary 26, 2000; referred to Senate Committee on the Judiciary. Both resolutions express the senseof Congress that Elian Gonzalez should be reunited with his father in Cuba. H.R. 3532 (Menendez) Introduced January 24, 2000; referred to Committee on the Judiciary. July 11, 2000 referredto House subcommittee. Provides for legal residency for Elian Gonzalez. H.Res. 480 (Shadegg) Introduced April 13, 2000; referred to Committee on the Judiciary. July 11, 2000 referred toHouse subcommittee. Urges the Attorney General to take no irrevocable action with respect to ElianGonzalez until a hearing concerning an asylum application is held. S. 1999 (Mack) / H.R. 3531 (McCollum) S. 1999 introduced January 24, 2000; placed on Senate Legislative Calendar underGeneral Orders January 25, 2000. H.R. 3531 introduced January 24, 2000; referred toHouse Committee on the Judiciary. July 11, 2000 referred to House subcommittee. Provides thatElian Gonzalez shall be considered a naturalized U.S. citizen. S. 2314 (Smith) Introduced March 29, 2000; placed on Senate Legislative Calendar under General Orders March30, 2000. Provides permanent resident status for Elian Gonzalez and other family members. Funding For Radio and TV Marti P.L. 106-553 ( H.R. 4942 ) Appropriations for the District of Columbia government and for other purposes. H.R. 5548 , making appropriations for the Departments of Commerce, Justice, and State;the Judiciary; and related agencies, was incorporated into the H.R. 4942 conferencereport ( H.Rept. 106-1005 ). Signed into law December 21, 2000. Provides $22.095 million for radioand television broadcasting to Cuba. H.R. 4690 (Rogers) Department of Commerce, Justice, and State, the Judiciary, and Related AgenciesAppropriations Act, 2001. House Committee on Appropriations reported the bill June 19, 2000( H.Rept. 106-680 ). House passed (214-195) on June 26, 2000. Senate Appropriations Committeereported its version of the bill on July 21, 2000, without written report, and the measure was placedon the Senate Legislative Calendar under General Orders. House version would provide for Cubabroadcasting within the larger funding account for international broadcasting operations. However,in the report to the bill ( H.Rept. 106-680 ), the House Appropriations Committee recommends $22.806 for Cuba broadcasting. The Senate version of H.R. 4690 would provide$22.095 million for radio and television broadcasting to Cuba. Senate filed report ( S.Rept. 106-404 )September 8, 2000. For Additional Reading CRS Report RS20450(pdf) , The Case of Elian Gonzalez: Legal Basics, by [author name scrubbed]. CRS Report RL30386(pdf) , Cuba-U.S. Relations: Chronology of Key Events Since 1959, by Mark P.Sullivan. CRS Report 94-759(pdf) , Cuba-U.S. Relations: Should the United States Reexamine Its Policy? , by MarkP. Sullivan. CRS Report RS20409, Cuba: U.S. Restrictions on Travel and Legislative Initiatives in the 106thCongress, by [author name scrubbed]. CRS Report RS20468 , Cuban Migration Policy and Issues, by [author name scrubbed]. CRS Report RL30108(pdf) , Economic Sanctions and U.S. Agricultural Exports, by Remy Jurenas. CRS Report RL30384 , Economic Sanctions: Legislation in the 106th Congress, by Dianne E.Rennack. CRS Report 97-949(pdf) , Economic Sanctions to Achieve U.S. Foreign Policy Goals: Discussion and Guide to Current Law, by [author name scrubbed] and [author name scrubbed]. CRS Report RL30570, Elian Gonzalez: Chronology and Issues, by [author name scrubbed]. CRS Issue Brief IB10061, Exempting Food and Agriculture Products from U.S. Economic Sanctions: Current Issues and Proposals, by [author name scrubbed]. CRS Report RS20449, Private Bills for Citizenship or Permanent Residency: A Brief Overview, by[author name scrubbed]. CRS Report 94-636(pdf) , Radio and Television Broadcasting to Cuba: Background and Issues Through 1994, by [author name scrubbed] and [author name scrubbed].

Cuba remains a hard-line Communist state, with a poor record on human rights. Fidel Castro has ruled since he led the Cuban Revolution, ousting the corrupt government of Fulgencio Batistafrom power in 1959. With the cutoff of assistance from the former Soviet Union, Cuba experiencedsevere economic deterioration from 1989-1993, although there has been some improvement since1994 as Cuba has implemented limited reforms. Since the early 1960s, U.S. policy has consisted largely of isolating the island nation through comprehensive economic sanctions. The Clinton Administration essentially continued this isolationpolicy. The principal tool of policy remains comprehensive sanctions, which were made strongerwith the Cuban Democracy Act (CDA) in 1992 and the Cuban Liberty and Democratic SolidarityAct in 1996, often referred to as the Helms/Burton legislation. Another component of U.S. policyconsists of support measures for the people of Cuba. This includes private humanitarian donationsand U.S.-sponsored radio and television broadcasting to the island. Under this rubric of support forthe Cuban people, President Clinton announced several policy actions in March 1998. Theseincluded the resumption of direct charter flights and cash remittances to Cuba and the streamliningof licensing procedures for the sale of medicines. In January 1999, the President announcedadditional measures, including a broadening of permissible cash remittances, increasing directcharter flights, expanding people-to-people contact, and authorizing the sale of food and agriculturalinputs to independent entities in Cuba. Although U.S. policymakers agree on the overall objective of U.S. policy toward Cuba -- to help bring democracy and respect for human rights to the island -- there have been several schoolsof thought about how to achieve that objective. Some advocate a policy of keeping maximumpressure on the Cuban government until reforms are enacted, while continuing current U.S. effortsto support the Cuban people. Others argue for an approach, sometimes referred to as constructiveengagement, that would lift some U.S. sanctions that they believe are hurting the Cuban people andmove toward engaging Cuba in dialogue. Still others call for a swift normalization of U.S.-Cubanrelations by lifting the U.S. embargo. Numerous measures were introduced in the 106th Congress that reflected the range of views on U.S. policy toward Cuba. Legislative initiatives proposed both easing and increasing sanctions. Inthe end, legislation passed reflected both approaches: it allowed the export of food and medicine butprohibited any U.S. financing, both public and private, of such exports. Travel to Cuba for tourismwas also prohibited. Another law facilitated enforcement of anti-terrorism judgments in U.S. courtsto allow for the payment of a $187.6 million 1997 judgment against Cuba to be paid from Cuba'sfrozen assets in the United States to the families of three U.S. citizens killed when Cuba shot downtwo U.S. planes in 1996. President Clinton waived the provision, however, upon signing the rest ofthe bill into law.

Introduction U.S. dairy farmers are facing low returns in 2009 following a sharp decline in milk prices since late 2008 and continuation of relatively high feed costs that have adversely affected their businesses. Organizations representing dairy farmers are seeking assistance to deal with the situation. Among the requests has been the reactivation of the Dairy Export Incentive Program (DEIP). Reauthorized under the 2008 farm bill ( P.L. 110-246 ), DEIP can be used to subsidize U.S. dairy exports under certain conditions. Under DEIP, the U.S. Department of Agriculture (USDA) makes cash payments, on a bid basis, to entities that export U.S. dairy products. Exporters can then sell certain U.S. dairy products at prices lower than what it cost to acquire them. While the principal objective of the program is to develop export markets where the United States competes with other exporters who subsidize their products, DEIP can also increase the U.S. farm price of milk if enough dairy products are removed from the domestic market. DEIP has not been active since 2004 because, until late in 2008, market conditions were relatively strong and U.S. negotiators have been pursuing the elimination of all agricultural export subsidies as a trade policy objective. USDA is considering reactivating DEIP and is in the process of consulting with other agencies, including the U.S. Trade Representative's office. Should a decision be made to reactivate DEIP, the President's FY2010 budget includes placeholders for DEIP subsidies in both FY2009 and FY2010. Citing recent changes in market conditions including declining competitor prices and reduced demand that have brought about lower U.S. commercial export sales of dairy products, the USDA budget includes an assumed funding level for DEIP of $100 million in FY2009 and $25 million in 2010. The funding level is lower in 2010 because USDA assumes that most of the allowable quantity of subsidized exports under the U.S. commitments to the World Trade Organization (WTO) would occur in FY2009. DEIP advocates say its use would increase dairy farmer income during the current period of financial distress in the industry. Moreover, they have argued that reactivation of DEIP is a way for U.S. dairy products to compete against recently restarted European Union (EU) dairy export subsidies. Weak milk prices worldwide led the EU to restart its dairy export subsidies in early 2009. Both the EU and United States are allowed to subsidize dairy exports under WTO limits. This report describes the current dairy market situation, the DEIP authorization and program operations, potential effectiveness of DEIP for addressing the current milk price environment, and the trade policy implications of reactivating DEIP. Dairy Market Situation In 2007 and for most of 2008, U.S. milk prices were historically high, lifted by strong export demand amid a lower-valued dollar and reduced milk output in Australia and New Zealand (and other countries). In the second half of 2008, these factors began to reverse, and economies worldwide started to slip. Demand fell for dairy products overseas and for domestic restaurant-based sales of dairy products. The sudden drop-off in demand has created a mismatch with U.S. milk production, driving down U.S. farm prices for milk. The all-milk price received by farmers averaged $12.23 per hundredweight (cwt.) during January-March 2009, down 36% from the record quarterly average of $19.23 per cwt. set a year earlier. USDA forecasts the 2009 average annual farm price at roughly $12.10 per cwt., down 18% from the 10-year average of $14.83 per cwt. The decline in milk prices has been especially painful for dairy producers because feed costs remain relatively high. For example, the farm price of alfalfa, a primary feedstuff for many dairy farms, averaged $143 per ton during January-March 2009, up 3% from a year earlier and up 31% from the 10-year annual average of $109 per ton. Price and Income Support for Dairy Producers Declines in the farm milk price have already triggered two federal government programs designed to financially support dairy farmers. In fall 2008, under the dairy product price support program, the Commodity Credit Corporation (CCC) began purchasing nonfat dry milk and butter from dairy processors at purchase prices established in the 2008 farm bill. The program indirectly supports the farm price of milk. The second program, the Milk Income Loss Contract (MILC) program, was activated when declining milk prices in February 2009 triggered direct payments to producers. Payments have continued this spring because milk prices remain below the target price established in the 2008 farm bill. The Federal Milk Marketing Order (FMMO) system is another major federal program, which operates regardless of the market situation. FMMOs mandate minimum prices that processors pay producers for milk. These minimums, however, are derived from dairy product prices established in the marketplace rather than by law. For more information on these federal programs, see CRS Report R40205, Dairy Market and Policy Issues ; and CRS Report RL34036, Dairy Policy and the 2008 Farm Bill . Dairy Export Incentive Program (DEIP): Authorization, Funding, and Operation The Dairy Export Incentive Program (DEIP) is a federal dairy policy tool that provides cash bonuses to exporters of U.S. dairy products. The program was initially intended to counter foreign dairy subsidies, mostly by the EU. During periods of large supplies, such as the late 1990s, when almost all U.S. milk powder exports were DEIP-assisted, the program essentially served as a de facto surplus removal program. As a result, DEIP helped reduce expenditures associated with supporting the price of milk. Subsequent farm bill reauthorizations have added market development (establishing and sustaining sales) to the role of DEIP. Authorization The Food Security Act of 1985 ( P.L. 99-198 ) first authorized DEIP through FY1989. The Secretary of Agriculture was directed to issue regulations that included assurances that any DEIP-assisted sales would not displace commercial sales by other exporters. Authorization has been extended under subsequent legislation, most recently by Section 1503 of the Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 , the 2008 farm bill), which extends DEIP through December 31, 2012. USDA's Foreign Agricultural Service operates the program. Funding Source and Outlays DEIP funding is a mandatory account provided through the Commodity Credit Corporation (CCC) borrowing authority from the U.S. Treasury, rather than through annual USDA appropriations bills. Early bonus payments were in the form of sales from CCC-owned dairy product stocks; later they were generic commodity certificates from CCC inventories; now they are cash payments. Expenditures since the program's inception have totaled $1.1 billion. DEIP was active throughout the 1990s, peaking in 1993 with $162 million in bonuses ( Figure 1 ). The primary product receiving a subsidy was nonfat dry milk, reflecting its relative abundance. DEIP has not been used since FY2004 due to increased market strength and less perceived need to subsidize exports. On a volume basis, DEIP has helped move more than 1 million metric tons of dairy products. Annual volume peaked at nearly 250,000 tons in FY1995, with annual amounts mostly between 50,000 and 100,000 tons in subsequent years when the program was operational. During the late 1990s, the program primarily moved nonfat dry milk that likely would have otherwise been accumulated in government-owned stocks under the dairy price support program. Program Operation All DEIP-assisted sales are made by private exporters, not the U.S. government. When in operation, the program uses a bid process to determine awards (called bonuses) to be paid to exporters of skim milk powder, butterfat, and various cheeses. The awards, usually paid per metric ton of product exported, reimburse the exporter for the difference between the cost of purchasing the domestic product and the selling price in the importing country. Participating exporters must provide information on their company, including business structure and previous activity with federally administered programs. Once an invitation for bids is issued, companies negotiate selling prices (and other terms) with buyers, often contingent on USDA's approval of a DEIP bonus. Prospective exporters then submit bids to USDA requesting a cash bonus that would allow the sale to take place. USDA reviews all bids and decides to accept or reject them based on the competitiveness of the bonus value. If a bid is accepted, the exporter receives the cash bonus once it provides evidence that the specified commodity was shipped to the target destination. USDA announces regional market allocations by product (e.g., specified quantity of nonfat dry milk to Africa and Middle East). WTO Dairy Export Subsidy Limits The United States' ability to provide export subsidies under DEIP is constrained by World Trade Organization (WTO) annual limits on quantities and budgetary outlays that can be provided as export subsidies. The allowable quantities and budgetary outlays for agricultural export subsidies, including dairy export subsidies, were negotiated as part of the WTO Uruguay Round Agreement on Agriculture. Maximum WTO allowable export subsidies for dairy products in the European Union (EU) dwarf those of the United States ( Table 1 ). The EU can subsidize nearly 2 million metric tons of butter, skim milk powder (SMP), cheese and other milk products, while DEIP is limited to less than 93,000 metric tons of dairy products—about one-twentieth of the EU quantity. As to value, the EU's allowable maximum is over 2.3 billion Euros (about $3.1 billion at the exchange rate in early May) compared to the United States' $116.6 million. The quantity limits represent about 0.5% to 1% of U.S. production and about 12% to 15% of EU production. In the year ending in June 2007, the year preceding the EU's suspension of dairy export subsidies, EU outlays were 478.3 million Euros for approximately 1 million tons of dairy product, 21% and 50% respectively of its maximum allowable WTO subsidy limits. For the reporting period ending in 2004, the most recent year for U.S. DEIP activity, U.S. budget outlays were $2.7 million and quantities were 68,201 metric tons of SMP and 3,030 metric tons of cheese. Budgetary outlays were 3.5% of the maximum allowable outlay for those two commodities, but equal to the commitment level for quantity. EU Resumption of Dairy Export Subsidies On January 15, 2009, the European Commission announced measures to help the EU dairy sector in the face of declining prices for milk and milk products. As world market supplies of dairy products have increased and demand weakens, market prices in the EU have been pushed down to or below so-called intervention prices for dairy products. (The intervention price is the price at which public or private "intervention agencies" in each member state of the EU are obliged to accept butter and skim milk powder offered to them at the pre-determined intervention price.) The EU resumed intervention buying of butter and SMP in March 2009 and will continue buying until the end of August 2009. At the same time, the Commission announced it was reactivating export refunds (subsidies) for dairy products. Products eligible to receive refunds are butter and SMP and also whole milk powder and cheese. Dairy export refunds had been suspended since June 2007, a period when high prices prevailed on world dairy markets. Market conditions have reversed, according to the Commission, and EU exporters are unable to compete. The situation is made worse, the Commission statement said, because of the difficulty exporters face as a result of the global financial/credit crisis. Export refunds will be made available through a process of tendering. In this case, the Commission announces that it is making available a quantity of product for export. Exporters then make bids for specific volumes at specific refunds. Export licenses are awarded to exporters by a management committee. Traders who bid for refunds at or below the maximum level set by the committee are granted licenses. Those who bid higher than the maximum refund level are not awarded licenses. Like DEIP, EU dairy export refunds are intended to compensate exporters for buying products at higher prices than can be sold for in the world market. The Commission stated that refunds would be used only "to the extent necessary." Refunds also would be provided in conformity with EU rights and obligations under the WTO. The specific amount of refunds would depend on offers received and the application of management committee criteria for accepting bids and awarding licenses. DEIP Impacts The potential impacts of reactivating DEIP can be segmented into two categories. The first is the impact on the U.S. milk market and dairy farm income. The second concerns how well DEIP may counteract foreign subsidies or help develop foreign markets, and how its use could affect U.S. trade policy. Impact on Farm Milk Prices Exports under DEIP would increase demand for dairy products, at least to the extent that subsidized exports do not substitute for commercial exports. As the domestic market rations the remaining supplies, milk prices should rise, thereby enhancing farm income. The potential for market impact, therefore, depends on how much milk (or in this case milk-equivalent via product exports) is removed relative to the total market (i.e., total U.S. milk production). When converted to a milk-equivalent basis, the maximum quantity of subsidized U.S. exports allowed under WTO limits is about 1 to 2 billion cwt. of milk out of 190 billion cwt. of annual U.S. milk production in 2008, or between 0.5% and 1% of total U.S. production. Given that the calculated quantity is a small share of total U.S. milk production, DEIP-assisted exports would be expected to have a relatively small effect on U.S. milk prices and income for U.S. dairy farmers. Two sets of research results quantify the potential market impact of DEIP. Both point to a limited impact of DEIP on dairy farm income. While these analyses consider removing DEIP during a particular baseline period rather than reactivating it in today's market, conclusions offer insight into the program's potential impacts. A USDA analysis in 2004 implies that eliminating DEIP would reduce the farm price of milk by $0.13 per cwt., on average per year, or 1% relative to the baseline (base period of 2002-2007). Gross receipts for dairy farmers (including higher government payments under the MILC program) would decline $267 million, on average per year, or about 1.5%. As an indication of the positive impact on consumers, the price of Class I milk (used for fluid consumption) would decline $0.16 per cwt., on average, or about 1% relative to the baseline price. Most of the price impact occurs during the first year of the baseline period as the market absorbs larger supplies. Similar results were implied in a study by the Food and Agricultural Policy Research Institute in 2003. Eliminating DEIP during a 2003-2007 base period would have reduced the all-milk price by $0.14 per cwt., on average, or about 1% of the baseline price. The associated decline in producer receipts was about $240 million per year or about 1%. Counteracting Foreign Subsidies and Market Development One of the initial aims of DEIP was to counter the export subsidies and unfair trade practices of competing dairy exporters, particularly the EU. Subsequently the aim of increasing the U.S. market share in targeted overseas markets was added to the authorizing statute in 1996. However, there have been few evaluations of DEIP to assess its effectiveness in achieving these aims. A 2006 Office of Management and Budget (OMB) assessment of DEIP determined that it was a moderately effective program, but that globally, the Export Enhancement Program (EEP) and DEIP "have not been able to demonstrate an ability to permanently expand exports or build U.S. market share in targeted countries." OMB does point out, however, that DEIP was successful in offsetting EU export subsidies for dairy products to Mexico, which permitted the United States to develop and sustain a market for U.S. dairy product exports there. For example, in 2008, the United States enjoyed a 90% market share of Mexican imports of nonfat dry milk. DEIP was probably not the only factor and perhaps not the major factor in establishing the United States as the dominant foreign supplier of dairy products to the Mexican market. Mexico's proximity to expanding dairy areas of the western United States and trade liberalization under the North American Free Trade Agreement are also factors in explaining dairy product trade flows from the United States to Mexico. Trade Policy Implications of Activating DEIP Both the EU and the United States maintain that their dairy export subsidy programs comply with rules agreed to in the WTO. Nevertheless, the EU decision to restart dairy export subsidies has been criticized by other major dairy exporting countries. The government of New Zealand, the world's largest exporter of dairy products, expressed its disappointment that the EU had decided to reintroduce export refunds for dairy products after a two-year hiatus. New Zealand's Trade and Agriculture Ministers expressed concern that restarting export refunds would send a negative signal at a time when efforts were being made to reject protectionism and remove distortions in world agricultural markets. The Cairns Group of agricultural exporting countries, which negotiates as a group in multilateral trade negotiations, expressed their concerns about the EU's decision to resume dairy export subsidies. The Cairns Group statement said in part: "Export subsidies are a seriously damaging form of trade-distorting support measures and the Cairns Group has campaigned relentlessly for their elimination, including in the context of the Doha Round of trade negotiations." The United States and other WTO member countries reached agreement at a WTO ministerial meeting (Hong Kong 2005) to eliminate export subsidies by 2013. Making good on this commitment is contingent on reaching a comprehensive agreement in WTO Doha Round negotiations, which are currently stalled. Elimination of agricultural export subsidies, especially those of the EU, has been a long-standing objective of U.S. agricultural trade policy. The 2008 farm bill repealed legislative authority for the Export Enhancement Program (EEP), historically the largest U.S. agricultural export subsidy program. Some interpreted this repeal as a U.S. gesture in support of the Doha Round preliminary agreement to end agricultural export subsidies. The 2005 WTO proposal would require the elimination of DEIP, a much smaller export subsidy program than EEP. In the absence of a comprehensive Doha Round agreement on agriculture that eliminates export subsidies, the United States would be acting within its WTO rights and obligations if it decided to restart DEIP. On the other hand, long-standing U.S. opposition to export subsidies, especially to EU export subsidies, the opposition of trading partners like New Zealand and the Cairns Group, and the contingent agreement in the Doha Round to eliminate export subsidies could all be factors in a U.S. decision of whether to reactivate DEIP.

U.S. dairy farmers are facing low returns in 2009 following a sharp decline in milk prices since late 2008 and continuation of relatively high feed costs that have adversely affected their businesses. Organizations representing dairy farmers are seeking assistance to deal with the situation. Among the requests has been the reactivation of the Dairy Export Incentive Program (DEIP). The principal objective of the program is to develop export markets where the United States competes with exporters who subsidize their products, but DEIP could also increase the U.S. price of milk if enough dairy products are removed from the domestic market. The U.S. Department of Agriculture (USDA) is considering reactivating DEIP and is in the process of consulting with other agencies, including the U.S. Trade Representative's office. Reauthorized through 2012 under the 2008 farm bill (P.L. 110-246), DEIP can be used to subsidize U.S. dairy product exports under certain conditions. Under DEIP, USDA makes cash payments, on a bid basis, to entities that export U.S. dairy products. DEIP has not been active since 2004 because, until late in 2008, market conditions were relatively strong and U.S. trade negotiators have been pursuing the elimination of all agricultural export subsidies as a trade policy objective. The United States' ability to provide export subsidies under DEIP is constrained by World Trade Organization (WTO) limits on quantities and budgetary outlays that can be provided as export subsidies. The allowable quantities and budgetary outlays for agricultural export subsidies, including dairy export subsidies, were negotiated as part of the WTO Uruguay Round Agreement on Agriculture. The potential for impact on farm milk prices and dairy farmer income depends on how much milk (or in this case milk-equivalent via dairy product exports) is removed relative to the total market. When converted to a milk-equivalent basis, the maximum quantity of subsidized U.S. exports allowed under WTO limits is between 0.5% and 1.0% of total U.S. production. Given that the calculated quantity is a small share of total U.S. milk production, DEIP-assisted exports would be expected to have a relatively small effect on U.S. milk prices and income for U.S. dairy farmers. There have been few evaluations of DEIP to assess its effectiveness in achieving its aims, including increasing U.S. market share in targeted overseas markets. A 2006 Office of Management and Budget assessment determined that DEIP was only a moderately effective program, although it pointed out that DEIP was successful in offsetting European Union export subsidies for dairy products to Mexico, which permitted the United States to develop and sustain a market for U.S. dairy product exports there. The United States and other WTO member countries reached agreement in 2005 to eliminate export subsidies by 2013. Making good on this commitment is contingent on reaching a comprehensive agreement in WTO Doha Round negotiations, which are currently stalled. The 2005 WTO proposal would require the elimination of DEIP, but in the absence of a comprehensive Doha Round agreement on agriculture that eliminates export subsidies, the United States would be acting within its WTO rights and obligations if it decided to restart DEIP. On the other hand, long-standing U.S. opposition to export subsidies, especially to EU export subsidies, the opposition of trading partners like New Zealand and the Cairns Group, and the contingent agreement in the Doha Round to eliminate export subsidies could all be factors in a U.S. decision of whether to reactivate DEIP.

Introduction and Overview The Energy and Water Development appropriations bill includes funding for civil works projects of the U.S. Army Corps of Engineers (Corps), the Department of the Interior's Central Utah Project (CUP) and Bureau of Reclamation (Reclamation), the Department of Energy (DOE), and a number of independent agencies, including the Nuclear Regulatory Commission (NRC) and the Appalachian Regional Commission (ARC). Figure 1 compares the major components of the FY2018 Energy and Water Development bill at each stage of consideration, along with the FY2017 enacted levels. President Trump submitted his FY2018 budget proposal to Congress on May 23, 2017. The budget requests for agencies included in the Energy and Water Development appropriations bill totaled $34.189 billion (including offsets)—$4.261 billion (11.1%) below the FY2017 appropriation. The largest proposed increase was for DOE nuclear weapons activities, up by $994 million (10.7%). For the first time since FY2010, under the request, DOE would have received new funding to pursue an NRC license for a proposed nuclear waste repository at Yucca Mountain, NV, totaling $120 million (including funding for interim nuclear waste storage). The FY2018 budget request proposed substantial reductions from the FY2017 level for DOE energy research and development (R&D) programs, including a cut of $1.454 billion (69.6%) in energy efficiency and renewable energy, $388 million (58.1%) in fossil fuels, and $314 million (30.8%) in nuclear. DOE science programs would have been cut by $920 million (17.1%). Programs targeted by the budget for elimination or phaseout included the Advanced Research Projects Agency—Energy (ARPA-E), loan guarantee programs, and the ARC. Funding would have been cut for the Army Corps by $1.035 billion (17.0%), and the Bureau of Reclamation and CUP by $211 million (16.0%). After passing a series of continuing resolutions, Congress largely rejected the Administration's proposed FY2018 budget cuts in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), which was signed into law March 23, 2018. Funding tables and other details are provided in an accompanying Explanatory Statement. Appropriations for energy and water development programs, provided by Division D of the act, rose by a total of $4.768 billion over the FY2017 level (12.4%), to $43.219 billion. That total is $9.030 billion (26.4%) above the Administration's FY2018 request. DOE programs receiving major funding increases for FY2018 include energy efficiency and renewable energy programs (totaling $2.322 billion, up 11.1%), nuclear energy R&D ($1.205 billion, up 18.5%), science programs ($6.260 billion, up 16.1%), ARPA-E ($353 million, up 15.5%) and atomic energy defense activities ($21.605 billion, up 9.2%). The Administration's request for the Yucca Mountain Repository and interim nuclear waste storage was not approved. Funding for the Corps totaled $6.827 billion (up 13.1%), and for Reclamation and CUP $1.480 billion (up 12.4%). Leading up to the enactment of the omnibus funding measure, the House Appropriations Committee approved its version of the FY2018 Energy and Water Development Appropriations bill with a manager's amendment by voice vote on July 12, 2017. The committee-approved bill had total funding of $37.641 billion without scorekeeping adjustments—$809 million below FY2017 and $3.45 billion above the Administration request ( H.R. 3266 , H.Rept. 115-230 ). H.R. 3266 was combined with three other appropriations bill into H.R. 3219 , the Make America Secure Appropriations Act, 2018, which was passed with amendments by the House on July 27, 1017. The text of H.R. 3219 was then included without further amendment in an FY2018 omnibus appropriations measure ( H.R. 3354 ) that was passed by the House on September 14, 2017. The House-passed omnibus bill includes the Administration's proposed funding increase for DOE weapons activities, funding for Yucca Mountain, a decrease in funding for energy efficiency and renewable energy (EERE) R&D, and the elimination of ARPA-E and the loan programs. Most of the Administration's proposed reductions in nuclear and fossil energy R&D were not agreed to by the House, nor was the proposed elimination of the ARC. The Senate Appropriations Committee approved its version of the Energy and Water Development appropriations bill (S. 1609, S.Rept. 115-132 ) on July 20, 2017, with total funding of $39.27 billion, including $545.4 million in rescissions. The committee recommended funding increases to DOE's weapons activities, funding for support of nuclear waste storage at private facilities, a decrease in funding for EERE R&D, and elimination of the Title 17 Loan Guarantee program. The committee recommended against the elimination of ARPA-E, instead approving an increase from the FY2017 enacted level. For FY2017, funding for energy and water development programs was provided by Division D of the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ), an omnibus funding measure passed by Congress May 4, 2017, and signed into law the following day. Total funding for Division D was $38.89 billion, offset by $436 million in rescissions. That total was $1.27 billion above the Obama Administration request and $1.54 billion over the FY2016 level, excluding rescissions. The Obama Administration also had proposed $2.26 billion in new mandatory funding for DOE, which was not approved. Proposed reductions for the Corps, Reclamation, and CUP were also rejected. For more information, see CRS Report R44465, Energy and Water Development: FY2017 Appropriations , by Mark Holt . Budgetary Limits Congressional consideration of the annual Energy and Water Development appropriations bill is affected by certain procedural and statutory budget enforcement measures. The procedural budget enforcement is primarily through limits associated with the budget resolution on total discretionary spending and subdivisions of this amount that apply to spending under the jurisdiction of each appropriations subcommittee. Statutory budget enforcement is derived from the Budget Control Act of 2011 (BCA; P.L. 112-25 ). The BCA established separate limits on defense and nondefense discretionary spending. These limits are in effect for each of the fiscal years from FY2012 through FY2021, and are primarily enforced by an automatic spending reduction process called sequestration, in which a breach of a spending limit would trigger across-the-board cuts of spending within that spending category. The BCA's statutory discretionary spending limits were increased for FY2018 and FY2019 by the Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123 ), enacted February 9, 2018. For FY2018 BBA 2018 increased the defense limit by $80 billion (to $629 billion) and increased the nondefense limit by $63 billion (to $579 billion); for FY2019 it increased the defense limit by $85 billion (to $647 billion) and increased the nondefense limit by $68 billion (to $597 billion). (For more information, see CRS Report R44874, The Budget Control Act: Frequently Asked Questions , by Grant A. Driessen and Megan S. Lynch.) Funding Issues and Initiatives Several issues generated controversy during congressional consideration of Energy and Water Development appropriations for FY2018. The issues described in this section—listed approximately in the order they appear in the Energy and Water Development bill—were selected based on the total funding involved and the percentage of increases or decreases, the amount of congressional attention received, and their impact on broader public policy considerations. Proposed Reductions to Corps and Reclamation Budgets For the Army Corps of Engineers, the Trump Administration requested $5.002 billion for FY2018, which is $1.026 billion (17.2%) below the FY2017 appropriation. The deepest proposed cuts in the Corps budget were for Construction (45.6%), Mississippi River and Tributaries (30.1%), and Investigations (28.9%). The FY2018 request for the Bureau of Reclamation was $1.097 billion, a reduction of $209 million (14.3%) below FY2017. The Consolidated Appropriations Act for FY2018 provided $6.827 billion for the Corps (13.1% above FY2017) and $1.470 billion for Reclamation (an increase of 12.5%). The House would have provided a 2% total increase for the Corps and a 5.9% decrease for Reclamation from the FY2017 appropriation. The Senate Appropriations Committee would have provided a 2.1% increase for the Corps and a 1.4% boost for Reclamation from their FY2017 levels. For more details, see CRS In Focus IF10671, Army Corps of Engineers: FY2018 Appropriations , by Nicole T. Carter, and CRS In Focus IF10692, Bureau of Reclamation: FY2018 Appropriations , by Charles V. Stern. Termination of Energy Efficiency Grants The FY2018 budget request proposed to terminate both the DOE Weatherization Assistance Program and the State Energy Program (SEP). The Weatherization Assistance Program provides formula grants to states to fund energy efficiency improvements for low-income households to reduce their energy bills and save energy. The SEP provides grants and technical assistance to states for planning and implementation of energy programs. Both programs are under DOE's Office of Energy Efficiency and Renewable Energy (EERE). The weatherization program received $228 million and SEP $50 million for FY2017. According to the DOE budget justification, "These programs are not aligned with EERE's focus in FY2018 on early stage applied research and development for energy efficiency and renewable energy technologies." However, the Consolidated Appropriations Act for FY2018 increased the grants by 10.1% from their FY2017 levels. For further background, see CRS Report R44980, DOE's Office of Energy Efficiency and Renewable Energy (EERE): Appropriations Status , by Corrie E. Clark. Proposed Cuts in Energy R&D Appropriations for DOE research and development on energy efficiency, renewable energy, nuclear energy, and fossil energy would have been cut from $3.497 billion in FY2017 to $1.619 billion (53.7%) under the Administration's FY2018 budget request. This includes all funding except grants within EERE. "The FY2018 Budget Request for the Department of Energy is guided by the reassertion of the proper federal role as a supporter of early-stage R&D—in which the private sector has less incentive to invest—and an increased reliance on the private sector to fund later-stage R&D including demonstration and commercial deployment," according to the budget justification. Major proposed reductions included carbon capture and storage (-84%), nuclear fuel cycle R&D (-57%), sustainable transportation (-70%), renewable energy (-70%), advanced manufacturing (-68%), and building technologies (-66%). The proposed reductions within building technologies would also have eliminated the Home Performance with ENERGY STAR Program and all test procedure development and performance verification for ENERGY STAR. The proposed energy R&D reductions were not included in the Consolidated Appropriations Act, which instead increased R&D funding for energy efficiency and renewable energy by 11.2% over the FY2017 level, nuclear energy by 18.5%, and fossil energy by 8.8%. The explanatory statement directs DOE to work with the Environmental Protection Agency (EPA) to review its 2009 Memorandum of Understanding (MOU) related to the ENERGY STAR program and to provide a report to Congress within 90 days of enactment on whether the expected efficiencies for home appliance products have been achieved. The House had approved most of the Administration's proposed cuts in energy efficiency and renewable energy R&D but reduced nuclear and fossil energy R&D by only 4.7% and 0.0%, respectively, from their FY2017 levels. The Senate Appropriations Committee had denied most of the Administration's proposed reductions in EERE R&D and recommended a review of the 2009 MOU between DOE and EPA, and a report to Congress on the whether shifting responsibilities as described under the MOU achieved expected efficiencies for home appliance products. The panel also called for reducing R&D on nuclear energy by 9.8% and fossil energy by 14.3% from their FY2017 levels. Nuclear Waste Management The Administration's budget request would have provided new funding for the first time since FY2010 for a proposed nuclear waste repository at Yucca Mountain, NV, but it was not included in the Consolidated Appropriations Act for FY2018. Under the Administration request, DOE was to receive $110 million to seek an NRC license for the repository, and NRC would have received $30 million to consider DOE's application. DOE would also have received $10 million to develop interim nuclear waste storage facilities. DOE's total of $120 million in nuclear waste funding was to come from two appropriations accounts: $90 million from Nuclear Waste Disposal and $30 million from Defense Nuclear Waste Disposal (to pay for defense-related nuclear waste that would be disposed of in Yucca Mountain). DOE submitted a license application for the Yucca Mountain repository in 2008, but NRC suspended consideration in 2011 for lack of funding. The Obama Administration had declared the Yucca Mountain site "unworkable" because of opposition from the State of Nevada. The House voted to provide the proposed Yucca Mountain funding for FY2018, but the Senate Appropriations Committee did not, as has been the pattern in recent years. Also as in recent years, the Senate panel included an authorization for a pilot program to develop an interim nuclear waste storage facility at a volunteer site (§307). For more background, see CRS Report RL33461, Civilian Nuclear Waste Disposal , by Mark Holt. Elimination of Energy Loans and Loan Guarantees The FY2018 budget request would have halted further loans and loan guarantees under DOE's Advanced Technology Vehicles Manufacturing Loan Program and the Title 17 Innovative Technology Loan Guarantee Program. However, the Administration's proposal to terminate the two programs was not included in the Consolidated Appropriations Act for FY2018. The proposed elimination of the loan programs "reflects an increased reliance on the private sector to fund later-stage research, development, and commercialization of energy technologies and focuses resources toward early-stage research and development," according to the DOE budget justification. Under the budget proposal, DOE would have continued to administer its existing portfolio of loans and loan guarantees. According to the request, those administrative costs were to be covered by prior-year appropriations, except for $2 million in new appropriations for the innovative loan guarantee program, which would have been entirely offset by fees from existing loan guarantee recipients. Unobligated prior-year appropriations to cover potential government losses from the DOE loan programs (called "subsidy costs") would have been permanently cancelled. Unused prior-year authority, or ceiling levels, for loan guarantee commitments would have been rescinded. The Administration's proposal to terminate further Title 17 loan guarantees was included in both the House and the Senate Appropriations Committee bills. Both would have rescinded $160.6 million in remaining appropriations for paying subsidy costs for renewable energy and efficiency projects, and both would have rescinded the remaining authority to issue Title 17 loan guarantees. International Thermonuclear Experimental Reactor The International Thermonuclear Experimental Reactor (ITER), under construction in France, continues to draw congressional concerns about management, schedule, and cost. The United States is to pay 9.09% of the project's construction costs, including contributions of components, cash, and personnel. Other collaborators in the project include the European Union, Russia, Japan, India, South Korea, and China. The total U.S. share of the cost was estimated in 2015 at between $4.0 billion and $6.5 billion, up from $1.45 billion to $2.2 billion in 2008. As directed by P.L. 114-113 , DOE issued a report in May 2016 on whether the United States should continue as an ITER partner or terminate its participation. DOE recommended that U.S. participation continue at least two more years but be reevaluated before FY2019. Congress appropriated $50 million for FY2017. DOE's request for FY2018 is $63 million. The House Appropriations Committee approved the request, saying in its report, "The Committee continues to believe the ITER project represents an important step forward for energy sciences and has the potential to revolutionize the current understanding of fusion energy." The Senate Appropriations Committee disapproved the request, recommending no further funding for ITER. The Consolidated Appropriations Act for FY2018 provided $122 million for the project. Elimination of Advanced Research Projects Agency—Energy The Trump Administration FY2018 budget would have eliminated the Advanced Research Projects Agency—Energy (ARPA-E), which funds research on technologies that are determined to have potential to transform energy production, storage, and use. However, funding for ARPA-E was increased by 15.5% by the Consolidated Appropriations Act for FY2018—to $353.3 million. The Administration had proposed to end the program because "the private sector is better positioned to finance disruptive energy research and development and to commercialize innovative technologies." Because ARPA-E provides advance funding for projects for up to three years, oversight and management of the program would have been required through FY2021 even if funding for new projects were halted after FY2017, as proposed by the Administration. The FY2018 budget justification called for $20 million in new appropriations to be supplemented by $45 million in previous funding provided for research projects, which would have been reallocated for closing out the program. The ARPA-E office would have closed in FY2019, "at which point remaining monitoring and contract closeout activities would be transferred elsewhere within DOE." The House approved the Administration's proposal to terminate ARPA-E, but the Senate Appropriations Committee recommended that ARPA-E receive a $24 million increase over FY2017, to $330 million. Upgrading Nuclear Weapons Infrastructure The Weapons Activities account in DOE's National Nuclear Security Administration (NNSA) supports programs that maintain U.S. nuclear missile warheads and gravity bombs and the infrastructure programs that support that mission. In hearings on the FY2017 budget, NNSA Administrator Frank G. Klotz testified, "The age and condition of NNSA's infrastructure will, if not addressed, put the mission, the safety of our workers, the public, and the environment at risk. More than half of NNSA's facilities are over 40 years old while 30% of them date back to the Manhattan Project era." For FY2018, the Administration requested a 10.7% increase in Weapons Activities over the FY2017 level, to $10.239 billion. Infrastructure and Operations would get nearly flat funding (-0.2%), but the request showed some shifting of funds to bolster maintenance and recapitalization. The House approved the Administration's funding request. However, the Senate Appropriations Committee recommended $239.3 million less than the request, $10.0 billion, still an 8.2% increase over the FY2017 level. The Consolidated Appropriations Act for FY2018 provided $10.642 billion for Weapons Activities, up 15.1% from FY2017. For more information, see CRS Report R44442, Energy and Water Development Appropriations: Nuclear Weapons Activities , by Amy F. Woolf. Surplus Plutonium Disposition The Mixed-Oxide (MOX) Fuel Fabrication Facility (MFFF), which would make fuel for nuclear reactors out of surplus weapons plutonium, has faced sharply escalating construction and operation cost estimates. Because of the rising costs and schedule delays, the Obama Administration proposed terminating MFFF in FY2015, FY2016, and FY2017 and pursuing alternative ways to dispose of surplus plutonium. However, Congress continued to appropriate construction funds for MFFF, including $335 million for FY2017. For FY2018, the Trump Administration also proposed to end the MFFF project, requesting $279 million to begin the termination process. The Trump Administration requested $9 million to begin a new Surplus Plutonium Disposition Project that would dilute surplus plutonium for disposal in a deep repository. The Obama Administration had also recommended the dilute-and-dispose option. The National Defense Authorization Act for FY2018 ( P.L. 115-91 , section 3121) authorized DOE to pursue an alternative plutonium disposal option if its total costs were determined to be "less than approximately half of the estimated remaining lifecycle cost of the mixed-oxide fuel program." The Consolidated Appropriations Act for FY2018 (section 309) continues MFFF funding at $335 million but allows DOE to pursue an alternative disposal method using the procedure in the defense authorization act. The House had approved $340 million to continue MFFF construction in FY2018 and prohibited "the use of MOX funding to terminate the project while the Congress is considering an alternative approach for disposing of these materials." The Senate Appropriations Committee accepted the Administration's request for $270 million to terminate MFFF construction and $9 million for the Administration's alternative plutonium disposal project. Supporters of MFFF contend that the project is needed to satisfy an agreement with Russia on disposition of surplus weapons plutonium and promises to the State of South Carolina, where MFFF is located (at DOE's Savannah River Site). For more information, see CRS Report R43125, Mixed-Oxide Fuel Fabrication Plant and Plutonium Disposition: Management and Policy Issues , by Mark Holt and Mary Beth D. Nikitin. Cleanup of Former Nuclear Sites DOE's Office of Environmental Management (EM) is responsible for environmental cleanup and waste management at the department's nuclear facilities. The total FY2018 appropriations request for EM activities was $6.508 billion, an increase of $88 million (1.4%) from the FY2017 enacted appropriation. The three EM appropriations accounts are Defense Environmental Cleanup, which the Administration proposed to increase $132 million (2.4%) over FY2017; Non-Defense Environmental Cleanup, down $28.6 million (11.6%); and the Uranium Enrichment Decontamination and Decommissioning (D&D) Fund, down $15.3 million (2.0%). The Consolidated Appropriations Act for FY2018 provided $7.126 billion for EM, up 11.0% from FY2017. The House had voted to provide flat funding for Defense Environmental Cleanup and Uranium Enrichment D&D, and a 10.0% reduction in Non-Defense Environmental Cleanup from the FY2017 appropriation. The Senate Appropriations Committee would have provided an increase for a total of $6.6 billion for EM activities. Although the Administration's request generally called for continued funding for ongoing cleanup and waste management projects across the complex of sites (with some decreases for specific projects), DOE noted that it may seek to negotiate with federal and state regulators to modify the "milestones" for certain projects. Milestones establish schedules for the completion of specific work under enforceable compliance agreements. Previous Administrations have taken a similar approach to modifying milestones that later may become infeasible to attain due to resource constraints or technical challenges. Divest Transmission Infrastructure and Repeal Borrowing Authority for Power Marketing Administrations DOE's FY2018 budget request included two mandatory proposals related to the Power Marketing Administrations (PMAs)—Bonneville Power Administration (BPA), Southeastern Power Administration (SEPA), Southwestern Power Administration (SWPA), and Western Area Power Administration (WAPA). PMAs sell the power generated by the dams operated by the Bureau of Reclamation and the Army Corps of Engineers. The Administration proposed to divest the assets of the three PMAs that own transmission infrastructure: BPA, SWPA, and WAPA. These assets consist of thousands of miles of high voltage transmission lines and hundreds of power substations. The budget request projected that mandatory savings would total approximately $5.5 billion over a 10-year horizon associated with the sale of these assets, which could not be carried out without authorizing legislation. The proposal has been opposed by the American Public Power Association and the National Rural Electrical Cooperative Association, and was the subject of opposition letters to the Administration from bipartisan groups of 21 western Senators and 12 Pacific Northwest Members of Congress. The Administration's budget also called for repealing $3.25 billion in borrowing authority provided to WAPA for transmission projects enacted under the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). The proposal is estimated to save $4.4 billion over a 10-year horizon. Similar to the divestiture proposal, it also would need to be enacted in authorizing legislation. No congressional action was taken on those proposals. Bill Status and Recent Funding History Table 1 indicates the steps taken during consideration of FY2018 Energy and Water Development appropriations. (For more details, see the CRS Appropriations Status Table at http://www.crs.gov/AppropriationsStatusTable/Index .) Table 2 includes budget totals for energy and water development appropriations enacted for FY2010 through FY2017, plus the Trump Administration's FY2018 request. Description of Major Energy and Water Programs The annual Energy and Water Development Appropriations bill includes four titles: Title I—Corps of Engineers—Civil; Title II—Department of the Interior (Central Utah Project and Bureau of Reclamation); Title III—Department of Energy; and Title IV—Independent Agencies, as shown in Table 3 . Major programs in the bill are described in this section in the approximate order they appear in the bill. Previous appropriations and recommendations for FY2018 are shown in the accompanying tables, and additional details about many of these programs are provided in separate CRS reports as indicated. For a discussion of current funding issues related to these programs, see " Funding Issues and Initiatives ," above. Agency Budget Justifications FY2018 budget justifications for the largest agencies funded by the annual Energy and Water Development Appropriations bill can be found on the following web sites: Title I, Army Corps of Engineers, Civil Works, http://www.usace.army.mil/Missions/CivilWorks/Budget.aspx Title II Bureau of Reclamation, https://www.usbr.gov/budget/ Central Utah Project, https://www.doi.gov/sites/doi.gov/files/uploads/fy2018_cupca_budget_justification.pdf Title III, Department of Energy, https://www.energy.gov/cfo/downloads/fy-2018-budget-justification Title IV, Independent Agencies Nuclear Regulatory Commission, http://www.nrc.gov/reading-rm/doc-collections/nuregs/staff/sr1100/ Defense Nuclear Facilities Safety Board, https://www.dnfsb.gov/content/fy-2018-congressional-budget-justification Nuclear Waste Technical Review Board, http://www.nwtrb.gov/plans/2018-CBJ.pdf Army Corps of Engineers The U.S. Army Corps of Engineers (USACE) is an agency in the Department of Defense with both military and civilian responsibilities. Under its civil works program, which is funded by the Energy and Water Appropriations bill, the Corps plans, builds, operates, and in some cases maintains water resources facilities for coastal and inland navigation, riverine and coastal flood risk reduction, and aquatic ecosystem restoration. In recent decades, Corps studies, construction projects, and other activities have been generally authorized in Water Resources Development Acts before they were considered eligible for Corps appropriations. Congress enacted water resources development acts in June 2014, the Water Resources Reform and Development Act of 2014 (WRRDA, P.L. 113-121 ), and in December 2016, the Water Resources Development Act of 2016 (Title I of P.L. 114-322 ). These bills authorized new Corps projects and altered numerous Corps policies and procedures. Unlike highways and municipal water infrastructure programs, federal funds for the Corps are not distributed to states or projects based on a formula or delivered via competitive grants. Instead, the Corps generally is directly involved in the planning, design, and construction of projects that are cost-shared with nonfederal project sponsors. In addition to the President's annual budget request for the Corps identifying funding for site-specific projects, Congress identified during the discretionary appropriations process many additional Corps projects to receive funding or adjusted the funding levels for the projects identified in the President's request. In the 112 th Congress, site-specific project line items added by Congress (i.e., earmarks) became subject to House and Senate earmark moratorium policies. As a result, Congress generally has not added funding at the project level since FY2010. In lieu of the traditional project-based increases, Congress has included "additional funding" for select categories of Corps projects and provided direction and limitations on the use of these funds. For more information, see CRS In Focus IF10671, Army Corps of Engineers: FY2018 Appropriations , by Nicole T. Carter; CRS In Focus IF10361, Army Corps of Engineers: FY2017 Appropriations , by Charles V. Stern; and CRS In Focus IF10176, Army Corps of Engineers: FY2016 Appropriations , by Charles V. Stern. Previous appropriations and recommendations for FY2018 are shown in Table 4 . Bureau of Reclamation Most of the large dams and water diversion structures in the West were built by, or with the assistance of, the Bureau of Reclamation. While the Army Corps of Engineers built hundreds of flood control and navigation projects, Reclamation's original mission was to develop water supplies, primarily for irrigation to reclaim arid lands in the West for farming and ranching. Reclamation has evolved into an agency that assists in meeting the water demands in the West while protecting the environment and the public's investment in Reclamation infrastructure. The agency's municipal and industrial water deliveries have more than doubled since 1970. Today, Reclamation manages hundreds of dams and diversion projects, including more than 300 storage reservoirs, in 17 western states. These projects provide water to approximately 10 million acres of farmland and a population of 31 million. Reclamation is the largest wholesale supplier of water in the 17 western states and the second-largest hydroelectric power producer in the nation. Reclamation facilities also provide substantial flood control, recreation, and fish and wildlife benefits. Operations of Reclamation facilities are often controversial, particularly for their effect on fish and wildlife species and conflicts among competing water users during drought conditions. As with the Corps of Engineers, the Reclamation budget is made up largely of individual project funding lines and relatively few "programs." Also as with the Corps, these Reclamation projects have often been subject to earmark disclosure rules. The current moratorium on earmarks restricts congressional steering of money directly toward specific Reclamation projects. Reclamation's single largest account, Water and Related Resources, encompasses the agency's traditional programs and projects, including construction, operations and maintenance, dam safety, and ecosystem restoration, among others. Reclamation also typically requests funds in a number of smaller accounts, and has proposed additional accounts in recent years. Implementation and oversight of the Central Utah Project (CUP), also funded by Title II, is conducted by a separate office within the Department of the Interior. For more information, see CRS In Focus IF10692, Bureau of Reclamation: FY2018 Appropriations , by Charles V. Stern. Previous appropriations and recommendations for FY2018 are shown in Table 5 . Department of Energy The Energy and Water Development bill has funded all DOE programs since FY2005. Major DOE activities include research and development (R&D) on renewable energy, energy efficiency, nuclear power, and fossil energy; the Strategic Petroleum Reserve; energy statistics; general science; environmental cleanup; and nuclear weapons and nonproliferation programs. Table 6 provides the recent funding history for DOE programs, which are briefly described further below. Energy Efficiency and Renewable Energy DOE's Office of Energy Efficiency and Renewable Energy (EERE) conducts research and development on transportation energy technology, energy efficiency in buildings and manufacturing processes, and the production of solar, wind, geothermal, and other renewable energy. EERE also administers formula grants to states for making energy efficiency improvements to low-income households and for state energy planning. The Sustainable Transportation program area includes electric vehicles, vehicle efficiency, and alternative fuels. DOE's electric vehicle program aims to cut costs in half for battery and electric drivetrains for plug-in electric vehicles (EVs) by 2022. A key supporting technology goal is to cut the cost of battery capacity from $264/kilowatt-hour (kwh) in 2015 to $125/kwh by 2022. The fuel cell program targets a cost of $40 per kilowatt (kw) and a durability of 5,000 hours (equivalent to 150,000 miles) by 2020. For hydrogen produced from renewable resources, the target is to bring the cost below $4.00 per gasoline gallon-equivalent (gge) by 2020. Bioenergy goals include the development of "drop-in" fuels that would be largely compatible with existing energy infrastructure. Renewable power programs focus on electricity generation from solar, wind, water, and geothermal sources. DOE's SunShot Initiative is aimed at making solar energy a low cost electricity source, with a goal of achieving costs of 3 cents per kwh for unsubsidized, utility-scale photovoltaics (PV) by 2030. For land-based windfarms, there is a cost target of 5.2 cents/kwh by 2020. For offshore wind settings, the target is 14.9 cents/kwh by 2020. The geothermal program aims to lower the risk of resource exploration and cut power production costs to 6 cents/kwh for newly developed technologies by 2030. In the energy efficiency program area, the advanced manufacturing program is intended to "catalyze research, development and adoption of energy-related advanced manufacturing technologies and practices." The building technologies program has a goal of reducing building energy use intensity 30% by 2030. According to EERE, the program is "paving the way for high performing buildings that could use 50-70% less energy than typical buildings." For more details, see CRS Report R44980, DOE's Office of Energy Efficiency and Renewable Energy (EERE): Appropriations Status , by Corrie E. Clark. Electricity Delivery and Energy Reliability The DOE Office of Electricity Delivery and Energy Reliability (OE) has the mission of supporting more economically competitive, environmentally responsible, secure, and resilient U.S. energy infrastructure. To achieve that mission, OE supports electric grid modernization and resiliency through research and development, demonstration projects, partnerships, facilitation, modeling and analytics, and emergency preparedness and response. It is the federal government's lead entity for energy sector-specific responses to energy security emergencies—whether caused by physical infrastructure problems or by cybersecurity issues. DOE's 2015 Grid Modernization Multi-Year Program Plan describes the department's vision for "a future electric grid that provides a critical platform for U.S. prosperity, competitiveness, and innovation by delivering reliable, affordable, and clean electricity to consumers where they want it, when they want it, how they want it." To help achieve this vision, DOE has established three key national goals: 10% reduction in the economic costs of power outages by 2025; 33% decrease in the cost of reserve margins while maintaining reliability by 2025; and 50% decrease in the net integration costs of distributed energy resources by 2025. For more details, see CRS In Focus IF10874, DOE Office of Electricity Delivery and Energy Reliability: Organization and FY2019 Budget Request , by Corrie E. Clark, and CRS Report R44357, DOE's Office of Electricity Delivery and Energy Reliability (OE): A Primer, with Appropriations for FY2017 , by Corrie E. Clark. Nuclear Energy DOE's FY2018 budget request for the Office of Nuclear Energy (NE) provides this mission statement: "To ensure that nuclear energy remains a viable energy option for the Nation, NE supports research and development activities designed to resolve the technical, cost, safety, waste management, proliferation resistance, and security challenges of nuclear energy." The Reactor Concepts program area includes research on advanced reactors, including advanced small modular reactors, and research to enhance the "sustainability" of existing commercial light water reactors. Advanced reactor research focuses on "Generation IV" reactors, as opposed to the existing fleet of commercial light water reactors, which are generally classified as generations II and III. R&D under this program focuses on advanced coolants, fuels, materials, and other technology areas that could apply to a variety of advanced reactors. The program also is supporting NRC efforts to develop a new, "technology neutral" licensing framework for advanced reactors. Cost-shared research with the nuclear industry is also conducted on extending the life of existing commercial light water reactors beyond 60 years, the maximum operating period currently licensed by NRC. This subprogram is also conducting research to understand the Fukushima disaster and to develop accident prevention and mitigation measures. NE completed a program in FY2017 that provided design and licensing funding for small modular reactors (SMRs), which range from about 40 to 300 megawatts of electrical capacity. Support under this subprogram was provided to the NuScale Power SMR, which has a generating capacity of 50 megawatts, and for licensing two potential SMR sites. Under the company's current concept, up to 12 reactors would be housed in a single pool of water, which would provide emergency cooling. A design certification application for the NuScale SMR was fully submitted to NRC on January 25, 2017. Funding for first-of-a-kind (FOAK) engineering and other support for next-generation reactors, including SMRs, has continued under the Advanced Reactor Technologies subprogram. DOE awarded NuScale a $40 million FOAK matching grant on April 27, 2018. The Fuel Cycle Research and Development program conducts generic research on nuclear waste management and disposal. In general, the program is investigating ways to separate radioactive constituents of spent fuel for reuse or to be bonded into stable waste forms. Other major research areas in the Fuel Cycle R&D program include the development of accident-tolerant fuels for existing commercial reactors, evaluation of fuel cycle options, and development of improved technologies to prevent diversion of nuclear materials for weapons. Fossil Energy Research and Development Much of DOE's Fossil Energy R&D Program focuses on carbon capture and storage for power plants fueled by coal and natural gas. Major activities include the following: Carbon Capture subprogram for separating CO 2 in both precombustion and postcombustion systems; Carbon Storage subprogram on long-term geologic storage of CO 2 , including storage site characterization, brine extraction storage tests, and postinjection monitoring technologies; Advanced Energy Systems subprogram on advanced fossil energy systems integrated with CO 2 capture and sequestration; and Cross-Cutting Research and Analysis on innovative systems. For more information, see CRS In Focus IF10589, FY2019 Funding for CCS and Other DOE Fossil Energy R&D , by Peter Folger, CRS In Focus IF10589, FY2019 Funding for CCS and Other DOE Fossil Energy R&D , by Peter Folger, and CRS Report R44472, Funding for Carbon Capture and Sequestration (CCS) at DOE: In Brief , by Peter Folger. Strategic Petroleum Reserve The Strategic Petroleum Reserve (SPR), authorized by the Energy Policy and Conservation Act ( P.L. 94-163 ) in 1975, consists of caverns built within naturally occurring salt domes in Louisiana and Texas. The SPR provides strategic and economic security against foreign and domestic disruptions in U.S. oil supplies via an emergency stockpile of crude oil. The program fulfills U.S. obligations under the International Energy Program, which avails the United States of International Energy Agency (IEA) assistance through its coordinated energy emergency response plans, and provides a deterrent against energy supply disruptions. By early 2010, the SPR's capacity reached 727 million barrels. The federal government has not purchased oil for the SPR since 1994. Beginning in 2000, additions to the SPR were made with royalty-in-kind (RIK) oil acquired by DOE in lieu of cash royalties paid on production from federal offshore leases. In September 2009, the Secretary of the Interior announced a transitional phasing out of the RIK Program. DOE has been conducting a major maintenance program to address aging infrastructure and a deferred maintenance backlog at SPR facilities. In the summer of 2011, President Obama ordered an SPR sale in coordination with an International Energy Administration sale under treaty obligation because of Libya's supply curtailment. The U.S. sale of 30.6 million barrels reduced the SPR inventory to 695.9 million barrels. In March 2014, DOE's Office of Petroleum Reserves conducted a test sale that delivered 5.0 million barrels of crude oil over a 47-day period that netted $468.6 million in cash receipts to the U.S. government (SPR Petroleum Account). In 2015, DOE purchased 4.2 million barrels of crude oil for the SPR using proceeds from the 2014 test sale. According to the DOE budget justification, the SPR's drawdown capacity in FY2017 will be 4.25 million barrels per day. Currently, the SPR contains about 685 million barrels. The Bipartisan Budget Act of 2015 ( P.L. 114-74 ) authorizes the sale of 58 million barrels of oil from the SPR. The authorized sales total 5 million barrels per fiscal year for 2018-2021, 8 million barrels in FY2022, and 10 million barrels per year in FY2023-FY2025. In addition, the Fixing America's Surface Transportation Act ( P.L. 114-94 ) authorizes the sale of 66 million barrels of oil from the SPR. The authorized sales would total 16 million barrels in FY2023 and 25 million barrels in each of fiscal years 2024 and 2025. For more information, see CRS Report R42460, The Strategic Petroleum Reserve: Authorization, Operation, and Drawdown Policy , by Robert Pirog. Science and ARPA-E The DOE Office of Science conducts basic research in six program areas: advanced scientific computing research, basic energy sciences, biological and environmental research, fusion energy sciences, high-energy physics, and nuclear physics. According to DOE's FY2018 budget justification, the Office of Science "is the Nation's largest Federal sponsor of basic research in the physical sciences and the lead Federal agency supporting fundamental scientific research for our Nation's energy future." DOE's Advanced Scientific Computing Research (ASCR) program focuses on developing and maintaining computing and networking capabilities for science and research in applied mathematics, computer science, and advanced networking. The program plays a key role in the DOE-wide effort to advance the development of exascale computing, which seeks to build a computer that can solve scientific problems 1,000 times faster than today's best machines. DOE has asserted that the department is on a path to have a capable exascale machine by the early 2020s. Basic Energy Sciences (BES), the largest program area in the Office of Science, focuses on understanding, predicting, and ultimately controlling matter and energy at the electronic, atomic, and molecular level. The program supports research in disciplines such as condensed matter and materials physics, chemistry, and geosciences. BES also provides funding for scientific user facilities (e.g., the National Synchrotron Light Source II, and the Linac Coherent Light Source-II), and certain DOE research centers and hubs (e.g., Energy Frontier Research Centers, as well as the Batteries and Energy Storage and Fuels from Sunlight Innovation Hubs). Biological and Environmental Research (BER) seeks a predictive understanding of complex biological, climate, and environmental systems across a continuum from the small scale (e.g., genomic research) to the large (e.g., Earth systems and climate). Within BER, Biological Systems Science focuses on plant and microbial systems, while Biological and Environmental Research supports climate-relevant atmospheric and ecosystem modeling and research. BER facilities and centers include three Bioenergy Research Centers and the Environmental Molecular Science Laboratory at Pacific Northwest National Laboratory. Fusion Energy Sciences (FES) seeks to increase understanding of the behavior of matter at very high temperatures and to establish the science needed to develop a fusion energy source. FES provides funding for the International Thermonuclear Experimental Reactor (ITER) project, a multinational effort to design and build an experimental fusion reactor. According to DOE, ITER "aims to generate fusion power 30 times the levels produced to date and to exceed the external power applied ... by at least a factor of ten." However, many U.S. analysts have expressed concern about ITER's cost, schedule, and management, as well as the budgetary impact on domestic fusion research. The High Energy Physics (HEP) program conducts research on the fundamental constituents of matter and energy, including studies of dark energy and the search for dark matter. Nuclear Physics supports research on the nature of matter, including its basic constituents and their interactions. A major project in the Nuclear Physics program is the construction of the Facility for Rare Isotope Beams at Michigan State University. A separate DOE office, the Advanced Research Projects Agency–Energy (ARPA-E), was authorized by the America COMPETES Act ( P.L. 110-69 ) to support transformational energy technology research projects. DOE budget documents describe ARPA-E's mission as overcoming long-term, high-risk technological barriers to the development of energy technologies. For more details, see CRS Report R44888, Federal Research and Development Funding: FY2018 , coordinated by John F. Sargent Jr. Loan Guarantees and Direct Loans DOE's Loan Programs Office provides loan guarantees for projects that deploy specified energy technologies, as authorized by Title 17 of the Energy Policy Act of 2005 (EPACT05, P.L. 109-58 ), and direct loans for advanced vehicle manufacturing technologies. Section 1703 of the act authorizes loan guarantees for advanced energy technologies that reduce greenhouse gas emissions, and Section 1705 established a temporary program for renewable energy and energy efficiency projects. Title 17 allows DOE to provide loan guarantees for up to 80% of construction costs for eligible energy projects. Successful applicants must pay an up-front fee, or "subsidy cost," to cover potential losses under the loan guarantee program. Under the loan guarantee agreements, the federal government would repay all covered loans if the borrower defaulted. This would reduce the risk to lenders and allow them to provide financing at below-market interest rates. The following is a summary of loan guarantee amounts that have been authorized (loan guarantee ceilings) for various technologies: $8.3 billion for non-nuclear technologies under Section 1703; $2 billion for unspecified projects from FY2007 under Section 1703; $18.5 billion ceiling for nuclear power plants ($8.3 billion committed); $4 billion allocated for loan guarantees for uranium enrichment plants; $1.183 billion ceiling for renewable energy and energy efficiency projects under Section 1703, in addition to other ceiling amounts, which can include applications that were pending under Section 1705 before it expired; and an appropriation of $161 million for subsidy costs for renewable energy and energy efficiency loan guarantees under Section 1703. If the subsidy costs averaged 10% of the loan guarantees, this funding could leverage loan guarantees totaling about $1.6 billion. The only loan guarantees under Section 1703 were $8.3 billion in guarantees provided to the consortium building two new reactors at the Vogtle plant in Georgia. DOE conditionally committed an additional $3.7 billion in loan guarantees for the Vogtle project on September 29, 2017. Another nuclear loan guarantee is being sought by NuScale Power to build a small modular reactor in Idaho. Nuclear Weapons Activities In the absence of explosive nuclear weapons testing, the United States has adopted a science-based program to maintain and sustain confidence in the reliability of the U.S. nuclear stockpile. Congress established the science-based Stockpile Stewardship Program in the National Defense Authorization Act for Fiscal Year 1994 ( P.L. 103-160 ). The goal of the program, as amended by the National Defense Authorization Act for Fiscal Year 2010 ( P.L. 111-84 , §3111), is to ensure "that the nuclear weapons stockpile is safe, secure, and reliable without the use of underground nuclear weapons testing." The program is operated by the National Nuclear Security Administration (NNSA), a semiautonomous agency within DOE that Congress established in the National Defense Authorization Act for Fiscal Year 2000 ( P.L. 106-65 , Title XXXII). NNSA implements the Stockpile Stewardship Program through the activities funded by Weapons Activities account in the NNSA budget. Most of NNSA's weapons activities take place at the nuclear weapons complex (the "complex"), which consists of three laboratories (Los Alamos National Laboratory, NM; Lawrence Livermore National Laboratory, CA; and Sandia National Laboratories, NM and CA); four production sites (Kansas City National Security Campus, MO; Pantex Plant, TX; Savannah River Site, SC; and Y-12 National Security Complex, TN); and the Nevada National Security Site (formerly Nevada Test Site). NNSA manages and sets policy for the complex; contractors to NNSA operate the eight sites. The President's budget requested $10.239 billion for the Weapons Activities account in FY2018. The House, in H.R. 3219 , the Make America Secure Appropriations Act, 2018, would have provided this amount. The Senate Appropriations Committee, in its version of the Energy and Water Development appropriations bill ( S. 1609 , S.Rept. 115-132 ), recommended $10 billion for Weapons Activities, a decrease of $239 million from the budget request. The Consolidated Appropriations Act for FY2018 provided $10.642 billion for Weapons Activities. There are three major program areas in the Weapons Activities account. Directed Stockpile Work involves work directly on nuclear weapons in the stockpile, such as monitoring their condition; maintaining them through repairs, refurbishment, life extension, and modifications; conducting R&D in support of specific warheads; and dismantlement. The number of warheads has fallen sharply since the end of the Cold War, and continues to decline. As a result, a major activity of Directed Stockpile Work is interim storage of warheads to be dismantled; dismantlement; and disposition (i.e., storing or eliminating warhead components and materials). Research, Development, Test, and Evaluation (RDT&E) includes five programs that focus on "efforts to develop and maintain critical capabilities, tools, and processes needed to support science based stockpile stewardship, refurbishment, and continued certification of the stockpile over the long-term in the absence of underground nuclear testing." This area includes operation of some large experimental facilities, such as the National Ignition Facility at Lawrence Livermore National Laboratory. Infrastructure and Operations has as its main funding elements material recycle and recovery, recapitalization of facilities, and construction of facilities. The latter included two controversial and expensive projects, the Uranium Processing Facility (UPF) at the Y-12 National Security Complex (TN) and the Chemistry and Metallurgy Research Replacement (CMRR) Project, which deals with plutonium, at Los Alamos National Laboratory (NM). Weapons Activities also has several smaller programs, including the following: Secure Transportation Asset, providing for safe and secure transport of nuclear weapons, components, and materials; Defense Nuclear Security , providing operations, maintenance, and construction funds for protective forces, physical security systems, personnel security, and related activities; Information Technology and Cybersecurity , whose elements include cybersecurity, enterprise secure computing, and Federal Unclassified Information Technology; and Legacy Contractor Pensions , providing supplemental funds for pensions for retirees from Los Alamos and Lawrence Livermore National Laboratories who began employment when the University of California was the contractor for those labs. For more information, see CRS Report R44442, Energy and Water Development Appropriations: Nuclear Weapons Activities , by Amy F. Woolf. Defense Nuclear Nonproliferation DOE's nonproliferation and national security programs provide technical capabilities to support U.S. efforts to prevent, detect, and counter the spread of nuclear weapons worldwide. These nonproliferation and national security programs are administered by NNSA's Office of Defense Nuclear Nonproliferation. Global Materials Security has three major program elements. International Nuclear Security focuses on increasing the security of vulnerable stockpiles of nuclear material in other countries. Radiological Security promotes the worldwide reduction and security of radioactive sources, including the removal of surplus sources and substitution of technologies that do not use radioactive materials. Nuclear Smuggling Detection and Deterrence works to improve the capability of other countries to halt illicit trafficking of nuclear materials. Materials Management and Minimization conducts activities to minimize and, where possible, eliminate stockpiles of weapons-useable material around the world. Major activities include conversion of reactors that use highly enriched uranium (useable for weapons) to low-enriched uranium, removal and consolidation of nuclear material stockpiles, and disposition of excess nuclear materials. Nonproliferation and Arms Control works to "control the spread of nuclear material, equipment, technology, and expertise" and pursue strategies for arms control and verification, according to the FY2018 justification. This program conducts reviews of nuclear export applications and technology transfer authorizations, implements treaty obligations, and analyzes nonproliferation policies and proposals. Other programs under Defense Nuclear Nonproliferation include research and development and construction, which advances nuclear detection and nuclear forensics technologies. The Nonproliferation Construction program consists of the Mixed Oxide (MOX) Fuel Fabrication Facility (described under " Surplus Plutonium Disposition " above), which the Obama and Trump administrations have proposed to terminate. Nuclear Counterterrorism and Incident Response provides "interagency policy, contingency planning, training, and capacity building" to counter nuclear terrorism, and supports "expert scientific teams and equipment to provide a technically trained, rapid response to nuclear or radiological incidents and accidents worldwide," according to the FY2018 budget justification. Cleanup of Former Nuclear Weapons Production and Research Sites The development and production of nuclear weapons for national defense purposes during half a century since the beginning of the Manhattan Project resulted in a waste and contamination legacy that continues to present substantial challenges today. In 1989, DOE established the Office of Environmental Management primarily to consolidate its responsibilities for the cleanup of former nuclear weapons production sites that had been administered under multiple offices. DOE's nuclear cleanup efforts are broad in scope and include the disposal of large quantities of radioactive and other hazardous wastes generated over decades; management and disposal of surplus nuclear materials; remediation of extensive contamination in soil and groundwater; decontamination and decommissioning of excess buildings and facilities; and safeguarding, securing, and maintaining facilities while cleanup is underway. The Office of Environmental Management also is responsible for the cleanup of DOE sites that were involved in civilian nuclear energy research, which also generated wastes and contamination. These research sites add a nondefense component to the office's mission, albeit smaller in terms of the scope of their cleanup and associated funding. DOE has identified more than 100 "geographic" sites in over 30 states that historically were involved in the production of nuclear weapons and nuclear energy research for civilian purposes. The geographic scope of these sites is substantial, collectively encompassing a land area of approximately 2 million acres. Cleanup remedies are in place and operational at the majority of these sites. The responsibility for the long-term stewardship of these sites has been transferred to the Office of Legacy Management and other offices within DOE for the operation and maintenance of cleanup remedies and monitoring. Some of the smaller sites for which DOE initially was responsible were transferred to the Army Corps of Engineers in 1997 under the Formerly Utilized Sites Remedial Action Program (FUSRAP). Once the Corps completes the cleanup of a FUSRAP site, it is transferred back to DOE for long-term stewardship under the Office of Legacy Management. Three appropriations accounts fund the Office of Environmental Management. The Defense Environmental Cleanup account is the largest in terms of funding, and it finances the cleanup of former nuclear weapons production sites. The Non-Defense Environmental Cleanup account funds the cleanup of federal nuclear energy research sites. Title XI of the Energy Policy Act of 1992 ( P.L. 102-486 ) established the Uranium Enrichment Decontamination and Decommissioning (D&D) Fund to pay for the cleanup of three federal facilities that enriched uranium for national defense and civilian purposes. Title X of P.L. 102-486 also authorized the reimbursement of uranium and thorium licensees for their costs of cleaning up contamination at sites that processed nuclear materials for national defense purposes at these federal facilities. The three federal uranium enrichment facilities are located near Paducah, KY; Piketon, OH (Portsmouth plant); and Oak Ridge, TN. The adequacy of funding for the Office of Environmental Management to attain cleanup milestones across the entire site inventory has been a recurring issue. Cleanup milestones are enforceable measures incorporated into compliance agreements negotiated among DOE, Environmental Protection Agency, and the states. These milestones establish time frames for the completion of specific actions to satisfy applicable requirements at individual sites. Power Marketing Administrations DOE's four Power Marketing Administrations (PMAs)—Bonneville Power Administration (BPA), Southeastern Power Administration (SEPA), Southwestern Power Administration (SWPA), and Western Area Power Administration (WAPA)—were established to sell the power generated by the dams operated by the Bureau of Reclamation and the Army Corps of Engineers. Preference in the sale of power is given to publicly owned and cooperatively owned utilities. The PMAs operate in 34 states; their assets consist primarily of transmission infrastructure in the form of more than 33,000 miles of high voltage transmission lines and 587 substations. PMA customers are responsible for repaying all power program expenses, plus the interest on capital projects. Since FY2011, power revenues associated with the PMAs have been classified as discretionary offsetting receipts (i.e., receipts that are available for spending by the PMAs), thus the agencies are sometimes noted as having a "net-zero" spending authority. Only the capital expenses of WAPA and SWPA require appropriations from Congress. Title IV: Independent Agencies Independent agencies that receive funding from the Energy and Water Development bill include the Nuclear Regulatory Commission (NRC), the Appalachian Regional Commission (ARC), and the Denali Commission. Their recent appropriations history is shown in Table 7 . Nuclear Regulatory Commission NRC is an independent agency that establishes and enforces safety and security standards for nuclear power plants and users of nuclear materials. Major appropriations categories for NRC are Nuclear Reactor Safety ($466.7 million requested and enacted for FY2018), Nuclear Materials and Waste Safety, including licensing of the proposed Yucca Mountain nuclear waste repository ($143.1 million requested, $113.1 million enacted), Decommissioning and Low-Level Waste ($28.0 million requested and enacted), Corporate Support ($301.4 million requested and enacted), and Integrated University Program (none requested, $15.0 million enacted). NRC is required by law to charge fees to nuclear reactors and other regulated entities that are equal to about 90% of its total budget, excluding specified items. As a result, NRC's net appropriation is only about 10% of its total funding level. Congressional Hearings The following hearings were held by the Energy and Water Development subcommittees of the House and Senate Appropriations Committees on the FY2018 budget request. Testimony and opening statements are posted on most of the web pages cited for each hearing, along with webcasts in many cases. House Corps of Engineers (Civil Works) and the Bureau of Reclamation , May 24, 2017, https://appropriations.house.gov/calendararchive/eventsingle.aspx?EventID=394880 . Department of Energy , June 20, 2017, https://appropriations.house.gov/calendararchive/eventsingle.aspx?EventID=394910 . Senate Nuclear Regulatory Commission , June 7, 2017, https://www.appropriations.senate.gov/hearings/review-of-the-fy2018-budget-request-for-the-nuclear-regulatory-commission . National Nuclear Security Administration , June 14, 2017, https://www.appropriations.senate.gov/hearings/review-of-the-fy2018-budget-request-for-the-national-nuclear-security-administration . Department of Energy , June 21, 2017, https://www.appropriations.senate.gov/hearings/review-of-the-fy2018-budget-request-for-the-us-department-of-energy . Army Corps of Engineers and Bureau of Reclamation , June 28, 2017, https://www.appropriations.senate.gov/hearings/review-of-the-fy2018-budget-requests-for-the-army-corps-of-engineers-and-bureau-of-reclamation .

The Energy and Water Development appropriations bill provides funding for civil works projects of the Army Corps of Engineers (Corps); the Department of the Interior's Bureau of Reclamation (Reclamation) and Central Utah Project (CUP); the Department of Energy (DOE); the Nuclear Regulatory Commission (NRC); and several other independent agencies. DOE typically accounts for about 80% of the bill's total funding. President Trump submitted his FY2018 budget proposal to Congress on May 23, 2017. The budget requests for agencies included in the Energy and Water Development appropriations bill totaled $34.189 billion (including offsets)—$4.261 billion (11.1%) below the FY2017 level. DOE nuclear weapons activities were proposed for a $994 million increase (10.7%). Final FY2018 funding for energy and water development programs was generally increased by the Consolidated Appropriations Act, 2018 (P.L. 115-141), which was signed by the President on March 23, 2018. Major Energy and Water Development funding issues for FY2018 include Water Agency Funding Reductions. The Trump Administration requested reductions of 17.2% for the Corps and 14.3% for Reclamation for FY2018. Those cuts were largely rejected by the House, the Senate Appropriations Committee, and the FY2018 Consolidated Appropriations Act. Termination of Energy Efficiency Grants. DOE's Weatherization Assistance Program and State Energy Program would have been terminated under the FY2018 budget request. The cuts were not included in the Consolidated Appropriation, and were also not approved by the House or by the Senate committee. Reductions in Energy Research and Development. Under the FY2018 budget request, DOE research and development appropriations would have been reduced for energy efficiency and renewable energy (EERE) by 69.6%, nuclear energy by 30.8%, and fossil energy by 58.1%. The House approved most of the reductions in EERE research and development (48.1% cut from FY2017 enacted levels) but largely did not follow the proposed nuclear and fossil energy reductions (4.7% and no cut, respectively). The Senate committee largely did not follow the proposed reductions in EERE, nuclear energy, and fossil energy and instead included reductions of 7.3%, 10.9%, and 16.6%, respectively. Energy R&D funding was increased 12.9% by the FY2018 Consolidated Appropriations Act. Nuclear Waste Repository. The Administration's budget request would have provided new funding for the first time since FY2010 for a proposed nuclear waste repository at Yucca Mountain, NV. DOE would have received $110 million to seek an NRC license for the repository, and NRC would have received $30 million to consider DOE's application. DOE would also have received $10 million to develop interim nuclear waste storage facilities. The requested funding for Yucca Mountain and interim storage was not included in the FY2018 Consolidated Appropriations Act. The House had approved the request but the Senate panel had not. Elimination of Advanced Research Projects Agency—Energy (ARPA-E). The Trump Administration proposed to eliminate funds for new research projects by ARPA-E, and called for terminating the program after currently funded projects were completed. The ARPA-E termination was approved by the House. The Senate committee recommended against the termination, providing $330 million—$24 million above the FY2017 level. The FY2018 Consolidated Appropriations Act increased funding for ARPA-E by 15.5%—to $353.3 million. Plutonium Disposition Plant Termination. Construction of the Mixed-Oxide Fuel Fabrication Facility (MFFF), which would make fuel for nuclear reactors out of surplus weapons plutonium, was proposed for termination under the Trump Administration request. The Obama Administration had recommended termination since FY2015, but Congress had provided funds to continue construction. For FY2018, the House bill would have continued construction, but the Senate panel accepted the Administration request to terminate the project. The FY2018 Consolidated Appropriations Act conforms to provisions in the National Defense Authorization Act, 2018 (P.L. 115-91) that allow DOE to pursue an alternative plutonium disposal program if sufficient cost savings are projected.

Introduction Natural gas markets in North America remained relatively stable compared to oil markets in 2007. The situation has tightened and prices have regained some upward momentum in 2008. This report examines current conditions and trends in the U.S. natural gas markets. Key market elements examined include prices, consumption, production, imports, and infrastructure. Expectations about the future, as reflected in recent official forecasts, are also incorporated here. Natural gas remains an important and environmentally attractive energy source for the United States. Its share of the power generation market has grown. Domestic supply has remained stable and even increased in recent months. New developments in Alaska increase the likelihood that a pipeline from the North Slope will proceed. The natural gas industry continues to attract capital for new pipeline and storage infrastructure. Liquefied natural gas (LNG) imports hit a record level in 2007, even as import facilities continue to have low utilization rates. Weather and the economy remain important factors in natural gas prices, as well. Given the generally adequate functioning of natural gas markets, congressional interest in the near term is likely to focus on unexpected price volatility or importation (or other supply) issues. In the longer term, industry pressure for increased access to public lands for exploration and production is expected to continue receiving congressional attention. This report reviews key factors likely to affect market outcomes. These factors include weather, the economy, oil prices, and infrastructure development. Tables A1 to A4 (in the Appendix) present selected highlight statistics that illustrate current market status. Briefly, important developments in natural gas markets include the following: The growth in natural gas for power generation has contributed to increased consumption and reduced seasonal variation in use because gas-for-power peaks in summer, versus the total natural gas use winter peak. In 2007, for the first time, the power generation sector used more natural gas than any other sector. The first quarter 2008 average spot price at Henry Hub increased 20% from the first quarter 2007 to $8.92 per thousand cubic feet (mcf), versus a 6% year-to-year increase from 2006 to 2007. During the 2007-2008 heating season (October to March), average wellhead prices increased more than 30%, according to EIA estimates. Storage levels towards the end of the heating season dropped below five year averages. In the first storage report after the 2007-2008 heating season, working gas storage was at 1,234 billion cubic feet—the lowest level since April 30, 2004. This may indicate that slack in the supply side is decreasing. The United States had record LNG imports in 2007, and increased LNG imports appear likely. Natural gas infrastructure development continued to advance, with many pipeline and storage projects successfully completed in 2007 and more underway in 2008 (including LNG import facilities). Industrial natural gas use had a small rebound in 2007. Background Unlike the global oil market, natural gas markets remain generally regional, with global trade in LNG growing. For the most part, North America has a continent-wide market that is integrated through a pipeline network that connects the lower-48 states, the most populous provinces of Canada, and parts of Mexico. Prices throughout this integrated market are influenced by demand (which may be influenced by weather, economic conditions, alternative fuel prices, and other factors), supply, and the capacity available to link supply sources and demand loads (transmission and distribution systems). The U.S. natural gas market is the major component of the North American natural gas market. It accounts for about 81% of North American consumption and about 69% of North American supply. The key price point in North America is Henry Hub. Henry Hub is a major pipeline hub in Erath, Louisiana, that is used as the designated pricing and delivery point for the New York Mercantile Exchange (NYMEX) gas futures contract and other transactions. The price difference between other locations and Henry Hub is called the "basis differential." When there is spare capacity available to move natural gas from Henry Hub, or the Gulf of Mexico region in general, to the relevant price point area, the basis differential tends to be low, approximating the costs of fuel used to move the gas to the location. When capacity availability is tight, basis differentials can grow because the driving force can become the value of the natural gas at the delivery point, rather than the cost of getting the natural gas to that point. Natural gas prices also incorporate costs for distributing the gas from the wholesale marketplace to retail customers. These rates are generally determined by state regulators and involve both (1) the approval of costs and rates of return and (2) the allocation of costs among customer classes (e.g., residential, commercial, industrial). Although the North American natural gas market remains a distinct regional market, it is increasingly connecting to a global gas marketplace through international LNG trade. Oil prices still affect U.S. natural gas prices and this relationship is changing. Market Conditions The key elements of the market are prices, consumption, and supply. This section provides highlights from recent market developments relating to these factors. Prices Prices remained fairly stable between 2006 and 2007. Early 2008 prices have increased at a faster pace than in 2007. According to EIA figures, average spot prices at Henry Hub increased about 6% between 2006 and 2007. (See Table 1 for price data.) The U.S. Energy Information Administration (EIA) reports producer price data for its wellhead price series. This price remained stable from 2006 to 2007, decreasing by $0.01 to $6.39 per mcf in 2007 (average). During the 2007-2008 heating season (October to March), EIA estimates the average wellhead price increased more than 30%, to $8.29 per mcf. The EIA citygate price series reflects the unit prices delivered to consuming areas. The U.S. average citygate price decreased $0.49 to $8.11 per mcf from 2006 to 2007. Complete import price data for 2007 are not yet available from EIA. From 2005 to 2006, LNG import prices decreased 11.6% to $7.14 per mcf. At the retail level, average U.S. residential natural gas prices were $13.01 per mcf in 2007, with a high of $16.65 in July. This average was a 5.4% decrease from 2006. The average commercial price was $11.31 per mcf, a decrease of 5.7% from 2006. Industrial prices decreased 4.6% on average to $7.58 per mcf. Natural gas sold for electric power use increased prices 2.8% to average $7.30 per mcf. See Table 2 for these data. Consumption Power sector use of natural gas increased most rapidly in 2007, followed by the weather-sensitive residential and commercial sectors. Total U.S. consumption of natural gas grew 6.5% from 2006 to 2007, according to EIA. Gas-for-power led the sectoral growth, increasing 10.5%. Residential consumption increased about 8.2%, primarily due to colder weather than 2006. The commercial and industrial (without lease and plant use) sectors also had modest increases in consumption, reversing drops in use in these sectors for 2005 to 2006. The power sector led end-use consumption for the first time in 2007. Table 3 shows these consumption data. Supply U.S. natural gas supply comes from domestic production, pipeline imports, imported LNG, and net withdrawals from storage. Both domestic and imported supplies increased between 2006 and 2007. Dry gas production increased by 4.3% from 2006 to 2007, to 19,278 billion cubic feet (Bcf). This reflects the increase in drilling activity in response to price increases, as indicated in the natural gas rig count. The U.S. natural gas rig count has trended upward since 2002. In 2002, the average monthly rig count was about 600. Recent data show the count at approximately 1,500. The U.S. natural gas reserve base increased recently. EIA reserves and production data indicate the latest reserves-to-production ratio (2006) is 11.4, an increase from the prior year's ratio of 11.1 and 2000's ratio of 9.2. In 2007, U.S. consumers received most of their supply, 84%, from domestic production. The domestic supply has shifted from shallow Gulf of Mexico to deep Gulf of Mexico and unconventional sources, in the Rocky Mountains and elsewhere. As these new resources grow in importance, industry pressure for increased gas leasing of on- and offshore federal lands is likely to be a continuing issue. Net imports (pipeline and LNG) increased almost 10%, to 3,793 Bcf. Imports via pipeline from Canada increased 5%. LNG imports increased more than 32%, growing from 584 Bcf in 2006 to 771 Bcf in 2007. Table 4 show these data. In 2007, the available spot LNG supplies were sometimes bid away to European terminals for higher prices. Nevertheless, new U.S. LNG infrastructure went into service in early 2008 and still more received approvals from the Federal Energy Regulatory Commission (FERC). To compete effectively for supply in the global LNG market, natural gas prices at the delivery points may have to increase further to attract LNG deliveries. Location of import facilities is an important factor in the value of landed LNG. EIA forecasts U.S. imports of 1,080 Bcf LNG for 2008, including regasified LNG from Mexico's Costa Azul terminal in Baja California. In addition, an LNG import facility in eastern Canada largely focused on exporting to the United States is expected to enter service in 2008. Market Trends There are several trends under way in natural gas markets of interest to policy makers. They include: a decrease in seasonal demand swings a growth in gas-for-power use a small rebound in industrial use of natural gas a growing international trade in LNG continuing progress in natural gas infrastructure development. Seasonality Consumption of natural gas in the United States remains highly seasonal for three important sectors. Reflecting the importance of space heating, residential and commercial use of natural gas peaks in winter. Reflecting the importance of air conditioning load and the role of natural gas as the marginal fuel source for power generation, electric power use of natural gas peaks in summer. Figure 1 illustrates that the combination of these seasonal patterns has led to a decrease in the overall seasonal swing and the development of a secondary peak in the summer due to gas-for-power use. Interestingly, while some continue to call for more storage because of the growing consumption of natural gas, the decrease in the seasonal swing (through a decrease in the high month volume and an increase in the low month volume) means that less storage may be able to serve the annual cycling needs of the U.S. markets. Those trading natural gas may want additional storage for arbitrage uses, but the fundamental needs related to system reliability may decrease somewhat with a decrease in the difference between the minimum and maximum consumption rates. Another noteworthy seasonal feature observed in 2007 by EIA found that natural gas price volatility is "considerably higher" in colder months than in other times. Increasing Gas-for-Power Use The natural gas consumption sector with the greatest increase from 2006 to 2007 was electric power. Deliveries to electric power customers increased by 615 Bcf, more than 45% of the consumption growth for the year. For the first time, electric power use of natural gas became the largest end-use sector for natural gas. Perhaps even more striking is the relative increase in electric generator use of natural gas during winter. In 2007, FERC's Division of Energy Market Oversight noted that November-March volumes increased 14% between winter 2005/06 and winter 2006/07. Industrial Gas Use Rebound Industrial natural gas use in 2006 was approximately 13% lower than the 7,507 Bcf consumed in 2002. In 2007, industrial use increased by 2% over the 2006 level. The decrease in price to industrial users may have played a role in this effect. Global LNG Trade In 2007, LNG monthly imports varied from a high of 98.7 Bcf in April to a low of 20.8 Bcf in December. Because little of the LNG is imported under long term contracts, U.S. importers compete on the global LNG spot market for deliveries. In December 2007, European natural gas prices were in the $10.20-$10.66 per million Btu range. U.S. prices varied above and below this. New England citygates were at $12.16 per million Btu and Henry Hub was at $7.15 (the Algonquin citygate figure represents several citygates in New England). Thus, some import points could compete successfully in the global spot market for LNG and others could not. There is excess physical capacity at existing LNG import facilities to handle more than three times the record imports of 2007. Infrastructure Progress During 2007, the North American natural gas industry continued its progress in adding new infrastructure to the system. According to EIA and the FERC, the following facilities went into service in the United States in 2007. These facilities appear responsive to serving fundamental market needs, such as new capacity from the growing Rocky Mountains production area. Although no new LNG facilities became operational in 2007, facilities are expected to achieve commercial operation in 2008. Forecasts There are a few noteworthy elements of recent EIA forecasts for the natural gas markets. In its Short Term Energy Outlook, EIA forecasts a 1% increase in natural gas use for 2008, relative to 2007. Weather changes and economic conditions are the reasons EIA mentioned for the slowed growth. Prices are also likely to reinforce a short term slowdown in use. EIA forecasts record U.S. consumption of 23.4 trillion cf in 2009. EIA forecasts increased U.S. production in 2008 of almost 3%, primarily from growth in deepwater Gulf of Mexico and unconventional gas production. LNG imports are expected to decline about 14% from 2007. EIA forecasts supply area natural gas prices (Henry Hub) to increase almost 20% in 2008 to $8.34 per million Btu. In EIA's long term forecast (through 2030), the reference case forecasts natural gas prices at the wellhead gradually decreasing to $5.27 per mcf during the 2015 to 2020 period before gradually increasing to $6.42 per mcf (2006 dollars) in 2030. EIA forecasts natural gas consumption growth to 24.4 trillion cubic feet (tcf) in 2015, declining to 23.4 tcf by 2030. Most of this increased use and the drop come from growth, then decline, in natural gas for power generation. EIA forecasts the arrival of Alaska Natural Gas to the lower-48 via pipeline in 2020, with deliveries reaching 2.4 tcf per year by 2030. This is a two year delay from EIA's 2007 forecast. Uncertainties EIA's forecast of gradual reductions in natural gas prices depends on certain assumptions embedded in the forecast. These factors have uncertainty associated with them, as discussed next. Weather Weather affects natural gas consumption through both the significant space heating loads in the residential and commercial sectors and the cooling load served by gas-fired power generation. EIA incorporates National Oceanic Atmospheric Administration (NOAA) weather forecasts in its short and long term forecasts. To the extent that actual heating degree days exceed the temperature scenario from NOAA, that will tend to increase demand for natural gas in the relevant heating seasons and increase prices for natural gas during those periods. Similarly, if the actual cooling degree day requirements exceed those incorporated in the EIA scenario, then this will increase natural gas use in the cooling season via increased gas-fired power for air conditioning and increase the price for natural gas in the relevant cooling season. Oil Prices Natural gas prices and oil prices have long had a correlation. As the extent of oil/gas fuel switching has declined, this linkage has changed. During 2007, as crude oil and petroleum product prices increased, relative prices for natural gas became lower than the historical pattern. In the recent past, natural gas and oil product price competition tended to exhibit itself most clearly around the New York metropolitan area, where there remained a fair amount of fuel switching capability. This fuel switching capability tended to keep natural gas prices at the New York citygate in a range bounded on the high side by distillate fuel oil prices and on the low side by low sulfur residual fuel oil prices. In 2007, the relevant natural gas prices tended to be below this range (see Figure 2 ). The shift to outside this fuel price range suggests that the consumers had done all the fuel switching to natural gas that remained feasible. Then, as oil prices moved above the relevant range, gas-on-gas competition could have become the market force determining the natural gas prices. Economy Economic growth affects consumers' demand for natural gas and their ability to purchase it. EIA appears to have incorporated an economic outlook for 2008 that expects less growth than in its recent forecasts. Given the relative stability in the residential and commercial sector demand, any change in economic outlook would most likely affect industrial natural gas use most directly, but it could also affect commodity prices and world oil prices. Recent Developments Since the end of 2007, several noteworthy developments have occurred in the natural gas markets: EIA reports natural gas price increases in 2008. For the 2007-2008 heating season (November-March), the average spot price at the wellhead increased more than 30% from the beginning to the end of heating season, to $8.06 per million Btu. Storage levels towards the end of the heating season dropped below five year averages. In the first storage report after the 2007-2008 heating season, working gas storage was at 1,234 billion cubic feet, the lowest level since April 30, 2004. This may indicate that slack in the supply side is decreasing. The opening of the Rockies Express natural gas pipeline out of the Rocky Mountain production region appears to have relieved transmission congestion there. This improved the net back price within the production area. The wellhead price in the Rockies area increased from $4.82 per million Btu in November 2007 to $8.41 in March 2008. This improves the incentives for producers to find and develop new supplies in this area. The natural gas pipeline from the North Slope of Alaska has made progress. In January 2008, the Governor of Alaska announced that one of the pipeline project applications under the state Alaska Gasline Inducement Act (AGIA) was judged complete. In April 2008, two of the North Slope gas producers, BP and ConocoPhillips, announced that they had joined together to start a potentially competing effort, the Denali Alaska Gas Pipeline, which has an open season target date (date when capacity will be offered to potential shippers) of 2010 and an in-service target of 2018 (stated by the producers as a 10-year target). In early April, the Independence Trail pipeline that serves the Independence Hub platform in the Gulf of Mexico was taken out of service for pipeline repairs that could take until mid-year to complete. Independence Hub produces almost 1 billion cubic feet per day, roughly 10% of U.S. Gulf of Mexico production. In May, the North American Electric Reliability Corporation concluded the natural gas supply outlook for the summer of 2008 is "healthy." Generally, these developments indicate that the nation's natural gas market is functioning in tune with fundamental supply and demand conditions. Conclusion Despite the problems arising in some parts of the energy system, natural gas fuel markets in North America have operated relatively well. The smooth natural gas market situation of 2007 appears to have evolved into different, tighter circumstances for 2008. If gas-on-gas competition declines and natural gas prices shift back into a competitive range with petroleum products, this will intensify the adverse effects of high oil prices. The decline in seasonal consumption swings, primarily due to the increased use of gas-for-power, can improve the efficiency with which the nation's natural gas pipeline and storage infrastructure is used. Construction of new pipeline and storage infrastructure has continued to progress in a way apparently consistent with supply and demand fundamentals. Finally, LNG infrastructure development also continues. The low current capacity factors at the capital-intensive existing LNG import facilities may indicate that the U.S. LNG purchasing power is not proving as competitive in the international LNG market as project developers or those reviewing the projects had anticipated. The location of LNG facilities has an important effect on this potential competitiveness, and this factor may require greater consideration for future projects. How weather and the economy perform will play an important role in whether prices continue to increase or downward pressure develops for natural gas as a commodity. Appendix.

The functioning of the natural gas market in 2007 appeared relatively stable and infrastructure development continued at an appropriate pace. A tighter demand/supply balance for 2008, however, has generated more upward spot price movement in this latest period. From the beginning to the end of the 2007-2008 heating season, the average wellhead price rose more than 30%, according to Energy Information Administration estimates. In the foreseeable future, weather and economic performance appear most likely to influence prices. Natural gas provided about 22% of U.S. energy requirements in 2007. It will continue to be a major element of the overall U.S. energy market for the foreseeable future. Given its environmental advantages, it will likely maintain an important market share in the growing electricity generation applications, along with other clean power sources. As Congress seeks to address energy security issues, the increasing importation of liquefied natural gas (LNG) is also a matter deserving careful attention. In 2007, LNG imports reached a record high and plans are to increase this fuel source. This report provides an update to Congress on recent natural gas market developments and trends that have implications for important energy policy considerations, such as prices, natural gas use for power generation, and liquefied natural gas imports. From 2006 to 2007, the average wellhead price reported to the U.S. Energy Information Administration (EIA) remained essentially unchanged at $6.39 per thousand cubic feet (mcf), down $0.01. The average citygate price increased about 3% to $6.98 per mcf. Domestic production grew, up about 0.8 trillion cubic feet, and domestic consumption increased more than 1 trillion cubic feet. This was the first increase in end-use consumption since 2004, according to EIA. Natural gas use for electric power generation increased in 2007 by 10.5% and for the first time became the largest sector for natural gas consumption in the period covered by EIA records. Residential use increased 8.2%, with weather as a major factor. Commercial and industrial consumption also increased, by 6% and 2%, respectively. The industrial growth reversed a decline of 1.5% from 2005 to 2006. On the supply side, onshore production in areas such as the Rocky Mountains and the Barnett Shales of Texas grew and liquefied natural gas (LNG) imports increased. LNG imports reached a record level of 0.8 trillion cubic feet. EIA's Short Term Energy Outlook anticipates the Henry Hub spot price increasing almost 20% in 2008, reflecting strong demand, relatively low working gas in storage, and domestic production growth of almost 3%. The Henry Hub spot price did increase about 20% between the first quarter 2007 and first quarter 2008. This report will be updated. This report supersedes CRS Report RL33714.

Introduction The space industry refers to economic activities related to the manufacture and delivery of components that go into Earth's orbit or beyond. The space industry is a subset of the U.S. aerospace industry and U.S. strength in aerospace has helped to provide U.S. strength in space. Bolstered by a large research and development establishment, the commercial space industry has a manufacturing component and a services component. The focus of this report is the global commercial space manufacturing sector (launch vehicles, spacecraft, satellites, and parts and equipment). The space industry also builds space ports, ground stations, and ground equipment. Together, the space and ground infrastructure enables a much larger space services sector that includes satellite telecommunications and broadcasting services and satellite remote sensing, among many other services. The space industry, broadly defined, is an important part of the U.S. industrial and technology base. Because of its economic importance and its close link to government space programs, the U.S. space manufacturing industry has historically been of great interest to Congress. This report discusses the current structure of the industry, looks at trends that may promote or inhibit space manufacturing, and examines current space manufacturing activities. It then lays out a number of federal policy issues that may affect the industry's growth. The U.S. commercial space manufacturing sector is small, but the companies that manufacture commercial satellites also manufacture satellites for the U.S. government. U.S. commercial satellite manufacturing generated estimated revenues of $3.4 billion (of $5.6 billion in total U.S. satellite manufacturing revenues ) and employed 26,611 private sector workers in 2010, while the U.S. commercial launch industry generated revenues of $307 million (of $1.2 billion in total U.S. launches) and employed 49,195 private-sector workers. In 2010, global revenues from satellite-enabled activities (i.e., the commercial products and services that are created using satellites) totaled $101.3 billion. Major products include direct-to-home television ($79.1 billion), satellite communications ($17.3 billion), satellite radio ($2.8 billion), consumer broadband ($1.1 billion), and Earth observation ($1.0 billion). Satellite services also generated worldwide sales of ground equipment that totaled $51.6 billion, including all of the infrastructure and technology needed to communicate with and manage satellites ($7.5 billion), as well as all of the end-user consumer equipment (satellite radios, satellite phones, satellite TV receivers and dishes, and satellite navigation equipment) ($44.1 billion). (See Figure 1 .) The U.S. government is by far the largest consumer of space products and services, accounting for 23% of global spending. The commercial space sector overlaps the government (civil and military) space sector in a number of different ways. Many manufacturers sell to both commercial and government customers, making use of common systems (for instance, satellites use standard buses ), common launch vehicles, and interdependent supply chains. Many of the largest commercial aerospace companies play a major role in the space industry, and some are almost entirely dependent on government space programs for their space-related work. Military and civil (i.e., non-military government) space programs provide economies of scale and scope to companies that are federal contractors. During the post-Cold War period, numerous mergers resulted in industry consolidation, with fewer firms spanning multiple sectors. Because of the size of government space programs, some of the largest U.S. space companies, especially those engaged in launch activities, withdrew from the commercial space sector to focus nearly exclusively on government contracts that are not open to foreign competitors. Nevertheless, the international commercial launch industry has continued to develop even as some of the largest U.S. space companies ceased to compete for those launches. During the last decade, the United States increasingly offered opportunities to smaller private companies to encourage entrepreneurial approaches to space activities as a means of spurring innovation, reducing costs, and promoting commercial engagement in space manufacturing and service provision. Orbital Sciences Corporation and Space Exploration Technologies Corporation (SpaceX) are two newer American companies that have successfully competed for commercial and government contracts. Launch vehicle, spacecraft, and satellite manufacturing is highly competitive internationally, with European, Russian, Chinese, Indian, and Japanese companies vying with U.S. firms for contracts to provide launch vehicles, spacecraft, and satellites to commercial customers. Some manufacturers of launch vehicles specialize in the manufacture and launch of those vehicles, while others also make spacecraft, satellites, and civil and defense aviation products, in addition to building and launching rockets. The supply chain for launch vehicles is moderately globalized, while satellites vary according to customer: military (low level of globalization), civil (moderate level of globalization), commercial (moderate to high level of globalized components). The major policy issues discussed in this report are limited to those that appear to have large effects on the competitiveness of the U.S. space manufacturing sector: classification of commercial satellites as munitions subject to stringent U.S. export controls laws and regulations; domestic and international spectrum regulations that may not have kept pace with the emergence of new technologies that appear to require much greater flexibility in terms of spectrum use; and the dramatically increased use of commercial satellites for Department of Defense communications needs. One major caveat regarding the statistical data used in this report needs to be mentioned. Publicly available U.S. government data for the manufacture of launch vehicles, spacecraft, satellites, and electronic components (especially search, detection, and navigation systems and instruments) are deficient in many respects. In some cases, data are suppressed because they would make it possible to identify a specific company; in others, data are aggregated to a level that makes it virtually impossible to distinguish between manufacturing for space activities, aviation, and telecommunications. Missiles, space launch equipment, and spacecraft cannot be differentiated using government data sources: for example, satellites, which are grouped with terrestrial telecommunications and broadcasting, are invisible in the data. CRS has used government data when available, but draws on reports by Futron Corporation, the Space Foundation, and others that provide estimates of the size of the global market and, in some cases, the U.S. market. Futron Corporation's data, in particular, are used by government agencies, the Government Accountability Office (GAO), and others as a basis for analyzing the space industry. Manufacturing for Commercial Space The space equipment industry comprises three distinct segments. Launch vehicles are used to place satellites and other spacecraft into orbit. Spacecraft and space systems are manned or unmanned vehicles that transport passengers or cargo. Satellites, with functions such as telecommunications and weather sensing, are the most common payloads aboard spacecraft. Most of the major companies manufacturing commercial space equipment compete in more than one of these sectors (see Table 1 ). Launch Vehicles Commercial launch vehicles carry various payloads into space, including manned or unmanned spacecraft and commercial satellites. The demand for commercial launch vehicles is small, and is tied directly to the demand for commercial launch services. In 2010, 23 commercial launches carried a worldwide total of 31 commercial payloads and 13 noncommercial payloads. Many commercial launch vehicles are also used for, or can readily be adapted for, government purposes, both civil and military. The main driver of commercial launch activity is commercial satellites, although many government-owned satellites also are launched with the same vehicles. Some, but not all, launch vehicle manufacturers also provide launch services. A commercial customer, such as a private company wishing to place a satellite in space, may contract separately for a launch vehicle and launch services or may obtain them from the same provider. The Federal Aviation Administration (FAA) defines a "commercial" launch as "a launch that is internationally competed or FAA-licensed, or privately-financed launch activity." Although many commercial launches carry commercial payloads, some carry mixed payloads (commercial and noncommercial) or purely military or civil government payloads. Boeing Launch Services, a Boeing subsidiary, and SpaceX were the only U.S. companies to conduct commercial launches in 2010, but, under the FAA's definition, Boeing's payloads were noncommercial. In 2011, there were 84 worldwide orbital launch attempts, of which 66 were non-commercial and 18 were commercial. With 18 commercial launches in 2011, Russia, with 10 commercial launches, had a 56% share of the international market, followed by Europe (4 commercial launches, 22%), China (2 commercial launches, 11%), and 2 commercial launches (11% of the commercial market in 2011) by Sea Launch AG, a company that the FAA describes as multinational: "a Swiss-based Russian majority-owned company." No U.S. commercial launches occurred in 2011. Worldwide commercial launch revenues amounted to $1.9 billion in 2011, a decrease of $526 million from 2010, with Russian commercial launch revenues at $707 million, European revenues at $808 million, Chinese revenues at $140 million, and Sea Launch revenues at approximately $200 million. U.S. commercial launch revenues were $0 in 2011. U.S. companies engaged in 18 non-commercial launches that carried 28 payloads into orbit, including 10 military payloads, and 9 civil and 9 non-profit payloads. Russia conducted 31 non-commercial launches with 53 payloads. U.S. companies engaged in commercial launch vehicle development, production, and launch activities include Boeing, Lockheed Martin, Orbital Sciences, and Space Exploration Technologies Corporation (SpaceX). Boeing, Lockheed Martin, and their 50/50 joint venture, United Launch Alliance (ULA), are focused primarily on the government launch market. In 2010, Boeing Launch Services placed two non-commercial payloads into orbit using ULA-built Delta launch vehicles: a National Oceanic and Atmospheric Administration weather satellite that was manufactured by Boeing and an Italian radar satellite built by Thales Alenia Space. One factor that may prevent Boeing and Lockheed Martin from more aggressively pursuing commercial launch opportunities has been a heavy U.S. government launch schedule that may crowd out commercial cargos. In 2011, U.S. launches were conducted by ULA, with 11 launches for the U.S. government; United Space Alliance (a Boeing/Lockheed Martin joint venture), with three successful Space Shuttle launches; and Orbital Sciences Corporation, with four launches. Three were successful. Orbital is an established commercial space company that manufactures launch vehicles, spacecraft, and satellites. In 2011, it had revenues of $1.3 billion, of which 71% came from the U.S. government. According to company reports, 38% of its revenues came from the Department of Defense and intelligence agencies; 33% from the National Aeronautics and Space Administration (NASA), other civilian government agencies, and universities; and 29% from commercial and international satellite operators. The company's newest launch vehicle, the Antares (formerly Taurus II) rocket, is expected to undergo its first test in summer 2012. SpaceX is a privately owned company founded 10 years ago by Elon Musk, a cofounder of PayPal and currently CEO of Tesla Motors. The company designs and builds launch vehicles and has launch contracts with NASA and numerous satellite companies that provide communication and broadcasting services to government and industry. The SpaceX order book includes future launches of communications satellites for Iridium (eight scheduled missions through 2017); ORBCOMM; Space Systems/Loral; and a number of foreign firms, such as SES (Europe), Thaicom (Thailand), AsiaSat, Spacecom (Israel), and EADS Astrium (Europe). SpaceX has made a strong push to develop a commercial order book for its Falcon 9 launch vehicle. Seeking lower costs and greater efficiencies, the U.S. Air Force, the National Reconnaissance Office (NRO), and NASA announced an agreement in October 2011 on a process that will allow a number of new U.S. companies to compete for contracts for space launch missions with the U.S. Air Force, the NRO, and NASA. In particular, the Air Force has announced that the Evolved Expendable Launch Vehicle (EELV) program, a Department of Defense program that dates back to 1995, will reserve two launches for SpaceX, Orbital, Virgin Galactic, or other commercial launch companies that are building EELV-class launch vehicles. This will allow smaller competitors to gain a foothold in a market currently served by one company, the United Launch Alliance. Both the SpaceX Falcon 9 and Orbital Antares launch vehicles are EELVs. SpaceX has been cleared by NASA for a mission to the International Space Station (ISS) under the Commercial Orbital Transportation Services (COTS) program, and Orbital is expected to be cleared in 2012. Spacecraft Spacecraft manufacturing has entered a new phase of development that is based on the provision of space transportation in commercially developed and launched vehicles. NASA will rely on commercial transportation of cargo and crews to the ISS through 2020—a decision taken by NASA in 2005 with the establishment of the Commercial Crew and Cargo Program. According to the Government Accountability Office (GAO), "NASA's decision to rely on the new commercial vehicles is inherently risky because the vehicles are still in development and not yet proven or fully operational." U.S. spacecraft currently under development are scheduled to begin ferrying cargo to the ISS in 2012 and are projected to begin using crew vehicles to transport astronauts to the ISS in 2017. In a recent editorial on the shift from a government-run manned space program managed entirely by NASA to a more entrepreneurial private sector-based approach, Joseph Anselmo, of Aviation Week and Space Technology , noted: "To be sure, outsourcing the job of launching astronauts to private companies is fraught with risk. SpaceX may have proven it can return a spacecraft from orbit, but safely transporting humans to space takes things to a whole new level. Given budget constraints, there may be no other choice." The United States government is funding commercial spacecraft development through NASA's Commercial Crew Development (CCDev) Program "to stimulate efforts within the private sector to develop and demonstrate safe, reliable, and cost-effective space transportation capabilities." Companies involved in the program (with or without NASA funding) include SpaceX (Hawthorne, CA), Orbital (Dulles, VA), Blue Origin (Kent, WA), Boeing (Houston, TX), Paragon (Tucson, AZ), United Launch Alliance (Denver, CO), and Sierra Nevada (Sparks, NV). Each of these companies is involved in developing commercial spacecraft capable of carrying passengers and cargo into space. In 2010, SpaceX conducted the first successful test flight of its Dragon spacecraft and, in 2012, is expected to rendezvous with the ISS on the first 2 of 12 flights scheduled through 2016. The SpaceX Dragon spacecraft will have the capability of returning significant amounts of cargo, including the results of scientific experiments, to Earth. Orbital Sciences' Cygnus spacecraft is currently scheduled to make one resupply flight to the ISS in 2012. Together, SpaceX and Orbital will fly 20 (71%) of the 28 scheduled resupply missions through 2016. In testimony before the House Science, Space, and Technology Committee on March 28, 2012, Christina Chaplain of GAO warned that "if the commercial vehicle launches do not occur as planned in 2012, the ISS could lose some ability to function and sustain research efforts due to a lack of alternative launch vehicles to support the ISS and return scientific experiments back to earth." Another witness, Lieutenant General Thomas P. Stafford, USAF (ret.), chairman of the NASA International Space Station Advisory Committee, testified that the NASA Aerospace Advisory Committee and his committee conducted a joint assessment and concluded that the commercial vehicle launch schedule was overly optimistic and we have not received sufficient data to conclude with confidence that the schedule could be met. This was the unanimous conclusion of both groups. Both commercial cargo contractors (Orbital Science Corporation and Space Exploration Corporation) continue to experience significant delays in their development, testing and launch dates. In his testimony, NASA Associate Administrator William H. Gerstenmaier stated that NASA was "pleased with the steady progress both companies [SpaceX and Orbital] continue to make in their cargo vehicle and launch systems development efforts." He also told the committee that the Commercial Crew Program "is a partnership between the Agency and the private sector to incentivize companies to build and operate safe, reliable, and cost-effective commercial human space transportation systems." Gerstenmaier also stated that safety was the key issue for the agency and said that both SpaceX and Orbital had to successfully reach each milestone before they would be paid. Satellites The major manufacturers of satellites include Boeing (U.S.), Lockheed Martin Space (U.S.), Space Systems/Loral (U.S.), Thales Alenia Space (Europe), and EADS Astrium (Europe). Other manufacturers include ATK (Virginia), Ball Aerospace (Colorado), Northrop Grumman Corporation (Virginia), and Sierra Nevada Corporation (Nevada). In the United States, as in Europe, commercial satellite manufacturers also build the government (military and civil) satellites that have been major drivers of space-enabled consumer products. Military satellites provide global positioning system (GPS) data, and the NOAA satellites furnish weather-related data for consumer electronics (cell phones, GPS devices, automobile navigation systems, etc.). The demand for mobile devices has also increased demand for commercial communications and broadcast satellites—a synergistic combination of government and commercial technologies that have created new markets and, in turn, new demand for space equipment. Because satellites are complex, custom-built platforms designed to operate in the harsh environment of space, the time it takes to order, design, build, and launch a satellite can be measured in years. U.S. satellite orders and deliveries rise and fall from year to year (see Figure 2 ), as does the U.S. share of global satellite manufacturing revenues, which are recorded only when a satellite is delivered. In 2010, U.S. revenues fell 27%, to $5.6 billion (including $3.4 billion in commercial satellite revenues), from $7.7 billion the previous year. Although U.S. satellite manufacturers captured nearly 52% of global satellite revenues in 2010, the U.S. share of global satellite revenues has fallen from 75% in 1995. U.S. aerospace industry groups assert that the decline in U.S. satellite market share has been exacerbated by 1998 legislation classifying all satellites and satellite parts and equipment as weapons subject to licensing under more stringent arms export control rules (see discussion below). The aerospace and satellite manufacturing industry believes that other countries have looked to non-U.S. manufacturers for satellites that do not contain U.S. parts or components that are subject to U.S. arms export controls. The U.S. commercial space industry may have become more dependent on U.S. military sales as foreign suppliers actively sought to displace U.S. manufacturers from the commercial satellite market. Between 2001 and 2010, the United States manufactured 386 satellites of a global total of 1,012, or 38.1%. European and Russian manufacturing shares remained relatively stable at 18.6% and 21.6%, respectively (see Figure 3 ). Other countries, including those with space programs (China, Japan, South Korea, and India), accounted for the remaining 21.7% of output. These data include satellites manufactured for commercial and government customers. The U.S. share of global satellite manufacturing revenues (at nearly 52%) in 2010 is well above the U.S. share of the total number of satellites built worldwide between 2001 and 2010 (38%). This difference reflects the higher value of U.S.-manufactured commercial satellites. In 2011, 11 U.S.-built commercial communications satellites were manufactured by Orbital Sciences (4), Space Systems/Loral (4), Lockheed Martin (1), and Spacequest (2). Three U.S.-built satellites were launched by Arianespace (a European company), one by Land Launch (using a Ukrainian Zenit vehicle launched from the Baikonur Cosmodrome in Kazakhstan); five by International Launch Services (ILS) (using a Russian Khrunichev-built Proton rocket launched from Baikonur, Kazakhstan), and two by International Space Company Kosmotras (using a Dnepr rocket launched from Dombarovskiy, Russia). Employment in the U.S. Space Industry U.S. government data on space-related employment provide only a broad indication of the number of workers employed in the space industry, and, because of industry definition issues and suppression of nondisclosable data, employment in specific manufacturing sectors cannot be accurately gauged. Data suppression makes it difficult to compare data from year to year. The Space Foundation provides estimates of employment in the space industry, broadly defined. The Space Foundation uses six broad categories that are defined in the North American Industry Classification system (NAICs) (see Table 2 ), some of which may contain non-space industry workers (e.g., search, detection, and navigation instruments) or include service sector (information technology) workers or NASA civilian employees engaged in launch or satellite operations. Other NAICS categories that contain space industry workers are omitted because they do not provide enough information to determine the number of space industry jobs. Another issue is that workers in three of the NAICS categories involving production of guided missiles and space vehicles are combined so that it is impossible to distinguish between workers who manufacture weapons from those who make launch equipment and/or spacecraft. Nevertheless, the Space Foundation's choice of data provides insight into the overall group of workers that comprise the space industry labor force, including engineers, scientists, and highly skilled production workers. Annual average earnings in the aerospace sector for production workers and engineers tend to be higher than the average for all industries. According to the Bureau of Labor Statistics, "Above-average earnings reflect, in part, the high levels of skill required by the industry due to the high quality standards of their products. The earnings may also reflect longer average hours worked each week in the industry. Nonproduction workers, such as engineering managers, engineers, and computer specialists, generally command higher pay because of their advanced education and training." BLS data (see Table 3 ) also indicate that employees in the space sector were, on average, somewhat better paid than workers in aircraft and aircraft parts manufacturing. In 2010, aircraft manufacturing workers averaged $88,737 in annual earnings, while guided missile and space vehicle manufacturing employees had average annual earnings of $106,830. The approximately 20,000 workers who manufactured propulsion units and parts or parts for guided missiles and space vehicles had lower average annual earnings than those involved in assembling guided missiles and space vehicles. Employees in the search, detection, and navigation instruments category earned more than aircraft manufacturing workers and more than guided missile propulsion and parts workers and guided missile and space vehicle parts and auxiliary equipment employees. The higher average annual earnings reflect the skills involved in creating and assembling the sophisticated electronics products that are critical to guided missiles, spacecraft, satellites, and ground infrastructure. The search, detection, and navigation instruments industry also includes jobs associated with the creation and assembly of consumer navigation equipment for automobiles and cell phones. With the exception of search, detection, and navigation instruments (NAICS 334511), data on space manufacturing employment are not available on a state-by-state basis. BLS data are available for California, but are suppressed for nearly all other states. California, with the largest number of workers in the aerospace industry (109,663 in 2010), had 59,580 employees in the space industry, of which nearly 41,000 (69%) worked in search, detection, and navigation instrument manufacturing. Missile and spacecraft manufacturing (NAICS 336414) had 106,830 employees in 2010, of which 15,585 (14.6%) worked in California. Eighteen states employed more than 1,000 workers in the manufacture of search, detection, and navigation instruments, with average annual earnings ranging from $130,414 in Colorado to $51,936 in Georgia. Policy Issues Federal laws and regulations are of major importance to the space equipment manufacturing industry. Although many of these measures were developed principally with reference to military concerns, they may also affect the U.S. commercial space industry because of the interrelationship between commercial and government use of space described earlier. Export Controls and Commercial Satellites39 In 1998, Congress passed the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999, which reclassified all satellites, including commercial satellites and their parts and components, as munitions. This transferred jurisdiction of export licensing approvals for satellites from the Department of Commerce, which licenses "dual-use" exports (i.e., exports that are primarily for civilian use, but which potentially have military uses) under the Export Administration Act, to the State Department, which administers the International Traffic in Arms Regulations (ITAR). ITAR designation means that satellites were placed on the U.S. Munitions List (USML) and thus became subject to a much higher degree of scrutiny because of a presumption that the export of munitions potentially threatens U.S. national security. In testimony before the House Foreign Affairs Committee in February 2012, Patricia Cooper, president of the Satellite Industry Association, noted that the reclassification of satellites "arose from concerns in the late 1990s that U.S. technology was not protected after two failures of Chinese launches of U.S.-made satellites." Cooper testified that a blanket imposition rather than a country-specific one had harmed the U.S. satellite industry. The reclassification of commercial satellites as munitions was highly controversial within the U.S. aerospace industry, due in part to the decision by the United States to impose unilateral export controls on commercial satellites without corresponding actions by European and Japanese governments. Foreign competitors immediately grasped the competitive disadvantage facing U.S. satellite exporters. In the early 2000s, Alcatel, a French company, announced that it would produce "ITAR-free" satellites for export and by 2004 had doubled its market share. Leading firms joined a European Space Agency (ESA) initiative in 2004 to develop technologies and systems hitherto available only from U.S. companies in an effort to boost European market share. Thales Group, formerly known as Thomson-CFS, acquired Alcatel's space business in 2007, and the space subsidiary, now Thales Alenia Space, sells ITAR-free satellites. According to SpaceNews.com , for more than three years the State Department has been conducting a so-called "Blue Lantern" inquiry into whether sales of the Spacebus, a satellite produced by Thales Alenia Space, violate U.S. export control laws. The company and the State Department are reportedly at an impasse over a State Department request for the complete design of the Spacebus and a list of all components. In a January 5, 2012, interview with Space News International , Edgar Buckley, Thales Group senior vice-president for Europe and NATO, said that the company could not provide the satellite design: "We will give an outline of the design. And we cannot give you a complete list of components. We cannot do that under French law." In her testimony, Cooper said that the number of ITAR-free satellites launched rose from 6 by April 2009 to 13 by February 2012, with another 7 on order. She also cited a Department of Defense study that estimated the amount of lost export sales due to ITAR controls between 2003 and 2006 at $2.35 billion. According to the Satellite Industry Association (SIA), a U.S.-based trade association that represents many U.S. and foreign satellite operators, service providers, manufacturers, launch service providers, and ground equipment suppliers, U.S. satellite manufacturers saw their share of the global market fall from 75% in 1995 to 41% in 2005; it has hovered between 35% and 50% since. Satellite revenues for the United States and the rest of the world averaged $10.7 billion per year between 1996 and 2010 (see Figure 4 ). The average U.S. share of global satellite manufacturing revenues for the period 1996 to 2010 was 49%. For 1996 to 1999, the U.S. share of the satellite market averaged 63%. From 2000 through 2010, when ITAR controls on satellite exports were fully in effect, that share fell to an annual average of 40%. After hitting a low below 30% in 2008, satellite deliveries recovered in 2009 (to 57%) before declining to 52% in 2010. U.S. satellite manufacturers' share of global revenues declined from an average of $6.6 billion per year between 1996 and 1999 to $4.7 billion per year between 2000 and 2010. Sales in 2009 and 2010 were generally more favorable, but whether this represents a trend or a bunching up of deliveries is not clear. In 2009, the Obama Administration initiated a comprehensive review of U.S. export controls, and in April 2010, then-Defense Secretary Robert Gates outlined measures for reform, including a single agency responsible for dual-use and munitions exports, a unified export control list, a single agency to coordinate enforcement activities, and an integrated information technology system to prevent exports to sanctioned and denied parties. The United States also participates in a number of multilateral export control regimes that are focused on chemical and biological weapons (the Australia Group); missile technologies (the Missile Technology Control Regime); nuclear materials, equipment, and technology (the Nuclear Suppliers Group); and the promotion of regional and international security and stability (the Wassenaar Arrangement). None of these international regimes control satellites as munitions. The National Defense Authorization Act for Fiscal Year 2010 ( P.L. 111-84 , Section 1248) provides that the Secretary of Defense and the Secretary of State shall carry out an assessment of the national security risks of removing satellites and related components from the United States Munitions List (USML). On April 18, 2012, the Departments of Defense and State issued a report to Congress that found that "if authorized by the Congress, the risks due to removing space-related dual-use items from the USML could be acceptably managed through controls and licensing policies under the CCL [Commodity Control List]." The report identified two types of satellites and related items "that are not purely defense-related": communications satellites that do not contain classified components and remote sensing satellites with performance parameters below certain thresholds, as well as the systems, subsystems, parts, and components associated with those satellites and with performance parameters below certain thresholds. The report calls for relaxed controls on allies and partners, continued controls as agreed upon in multilateral trade control arrangements, and "strict controls on transfers of non-critical space-related items to end-users and for end-uses that are likely to be used against the U.S. national interests," including prohibitions of exports or re-exports to countries that are subject to U.S. arms embargoes or to which exports or sales are prohibited under the ITAR. The report also calls for a return to the President of the authority to determine the export control jurisdictional status of satellites and related items. Legislation has been introduced in the 112 th Congress to shift control of satellites from the U.S. Munitions List to the Commodity Control List. Representative Rohrabacher introduced an amendment to the National Defense Authorization Act of 2012 ( H.Amdt. 331 , H.R. 1540 ) on May 25, 2011, to allow the President to transfer satellites and related components from the USML. The amendment's sponsor subsequently withdrew the amendment pending the release of the final Section 1248 report. Legislation ( H.R. 3288 ) to allow the President to transfer satellites and components from the USML was introduced by Representative Berman on November 1, 2011. That bill would continue the prohibition on satellite sales to or launches by China, or to countries designated as state sponsors of terrorism (Cuba, Iran, Sudan, Syria) and North Korea. In remarks to the Defense Trade Advisory Group on November 9, 2011, Assistant Secretary of State for Political-Military Affairs Andrew Shapiro said, "Our work is focused now on the removal of the majority of parts and components from the USML to the Commerce Control List (CCL) in these categories." However, as Shapiro pointed out, unlike the other items on the U.S. Munitions List, which can be reclassified by the President, satellites were placed on the list by law and congressional action would be required to remove them. Although there have been numerous discussions in committees about the issue of commercial satellites, export control legislation has generally been difficult to pass. The Aerospace Industries Association, representing the majority of U.S. aerospace firms, published a study in January 2012 that contends that the United States' space and defense industrial base is weakening as exporters large and small encounter difficulties exporting commercial communications satellites and parts and components that are incorporated in commercial satellites. Spectrum Allocation, Regulation, and Demand for Satellite Services The allocation of spectrum and orbital location have posed, and will continue to pose, large problems for an international industry that could consume an almost unlimited amount of both, were physical supply not an issue. However, both spectrum and satellite orbital position are scarce resources and governments regulate and allocate the use of radio spectrum on earth and in space. Spectrum allocation is intended to prevent signal interference, but it also imposes a limit on the amount of capacity available to satellite and terrestrial service providers. Domestic and international regulatory regimes are limited in terms of their ability to respond to capacity problems that affect satellite operators and consumers. But satellite network operators and their customers have increasingly sought technological solutions to the challenge of limited spectrum. With the increasing use of high-power Ku- and Ka-bands, larger amounts of data can be transmitted without increasing the number of transponders. U.S. regulations provide for government approval of the allocation of bandwidth and the use and positioning of satellites for communications (under the jurisdiction of the Federal Communications Commission) and for remote sensing (for which NOAA regulates commercial operators). Other countries also have varied laws and regulations for communications, navigation, and remote-sensing satellites. The United Nations, through the International Telecommunications Union (ITU), manages an international treaty, known as the Radio Regulations, to "ensure the rational, equitable, efficient and economical use of the radio-frequency spectrum by all radio communication services, including those using satellite orbits." One problem that is widely acknowledged is that some countries file an excessive number of applications for orbital locations and frequency assignments in order to reserve space, even though they are unlikely to deploy satellites that would use the frequencies or orbits. This practice deters other users from expanding their services or entering the market. Although there are rules that allow for periodic review of underutilization of spectrum and orbital placement, the process is time consuming. Conflicts over satellite spectrum and positioning also occur, and the ITU lacks enforcement mechanisms for resolving such disputes. The rapid evolution and proliferation of new bandwidth-intensive consumer, civil, and military technologies (such as broadband Internet services; satellite television and high definition television [HDTV] channels; growth in corporate enterprise networks; and military purposes such as airborne intelligence, surveillance, and reconnaissance, satellite links to ground troops, and intensified use of unmanned aerial vehicles) threatens to destabilize existing regulatory regimes that have been characterized as "command and control" models that award a specific amount of bandwidth to specific users. Once placed in its specified orbit, a satellite is limited to the bandwidth allocated to it and the option to switch transmission to a different bandwidth is not feasible. From the perspective of bandwidth-hungry consumers, this leads to a less than optimal allocation of spectrum and underutilization of existing capacity. Greater use of fiber to transmit signals could mitigate this problem slightly by reducing demand to some degree. Fiber costs are not trivial, however. In Europe, the demand for capacity has outpaced the available spectrum, and regulators are under pressure to adapt to more flexible systems that allow for greater and more efficient use of fixed satellite services, but there appear to be limits to finding a solution to the problem. European satellite operators are unwilling to cede their exclusive frequency bands, and they see the Radio Regulations as a bulwark against a move to a more liberal regime. In its most recent forecast of satellite services demand, Futron concluded that "ongoing debates regarding spectrum allocation could result in operators facing a constrained or reduced ability to maintain certain types of supply and to meet the needs of certain markets effectively in the future." But Futron also points to the adoption of operating efficiencies and fleet optimization strategies that have allowed satellite operators to better meet demand, and while the number of satellites or transponders may be limited by spectrum or orbital locations, technical solutions allow greater throughput for a given number of transponders per satellite. The shift to multiband payloads (using high-power frequency bands that are capable of carrying much higher capacities) and the use of higher power applications produce higher levels of throughput that overcome some of the limitations imposed by spectrum scarcity. Futron forecasts that the supply of fixed satellite capacity of major operator fleets will decline slightly through 2019 (with capacity measured in terms of transponder equivalents) even as demand continues to grow in terms of throughput capacity. Increased DOD Use of Commercial Satellites Unlike the previous section, which focused on the challenges posed by limited spectrum and orbital position, this section discusses the shift by the Department of Defense from a near total reliance on military-owned and -operated satellites to a reliance on leased commercial communications satellite capacity to meet its needs for additional satellite bandwidth. With increased satellite efficiency and the ability to increase the amount of throughput per transponder, the Department of Defense, which has experienced dramatic increases in demand for satellite bandwidth, has turned to commercial satellites to handle a significant portion of military communications, thus preserving capacity on military satellites for high-level intelligence data. Military satellites are much more expensive than commercial satellites. Military satellites also take much more time to build and launch than commercial satellites. Futron has estimated that global demand consumed approximately 79% of fixed satellite service (FSS) capacity in 2011. In part, the spare capacity serves as a reserve in the event of a loss of one or more satellites. But even with some surplus capacity, the U.S. Department of Defense has run up against capacity constraints in the Middle East, in part because of a shortage of satellites that meet DOD requirements. The increased use of commercial capacity by the military has provided a stimulus to private-sector investment in satellites. In part, short-term sales of satellite capacity or bandwidth, for contractual periods of up to a year, have allowed satellite operators to command premium prices. Demand has risen steadily for nearly a decade. However, the unplanned and unbudgeted demand for commercial satellite bandwidth does not provide a stable business model for satellite service providers if that demand is temporary and subject to termination years before a satellite's effective lifespan is up. Satellites are typically built to meet the specific requirements of long-term customers and few, if any, satellite operators will buy and launch a satellite unless long-term customers have contracted for most of the available capacity of the satellite. With the wars in Iraq and Afghanistan winding down, satellite operator Eutelsat has warned investors that its sales of short-term capacity to DOD will not continue to increase as rapidly as in the recent past, although the company has taken the position that DOD demand will likely remain strong as satellite capacity for troops in Iraq and Afghanistan is switched over to data-intensive streaming of videos from unmanned aerial vehicles. One of the issues of concern to the military and to commercial satellite operators has been the shift from a need for surge capacity to increased reliance on commercial satellites for core communications capabilities that meet military requirements. This shift has been the focus of a debate within DOD and among commercial satellite service providers and satellite manufacturers about a more integrated approach to the acquisition of commercial satellite services. According to one observer, "Current estimates are that more than 80 percent of DOD's satellite bandwidth is purchased from commercial [satellite communication] companies. With increased use of unmanned aerial vehicles (UAVs) and other intelligence, surveillance, and reconnaissance assets in theatre, as well as high-definition video, that bandwidth allocation is expected to very quickly grow to more than 90 percent." Under Secretary of Defense for Intelligence Michael G. Vickers noted at a November 2011 conference that the volume of intelligence, surveillance, and reconnaissance data collected in Afghanistan increased from a single terabyte (a terabyte of data equals 1,000 gigabytes) of data per day at the start of the war to 53 terabytes of data per day—an amount equivalent to 2.5 million full-length films. Because of the high level of demand for commercial satellite communications by DOD and other government agencies, the General Services Administration (GSA) and the Defense Information Systems Agency (DISA) established the Future Comsatcom Services Acquisition (FCSA) program in 2009 and extended and expanded it in 2012. The FCSA program allows commercial satellite providers to bypass a small group of middlemen and resellers who previously were the only authorized agents for commercial satellite contracts. This will allow satellite operators to expand their military customer base and better utilize capacity by allocating satellite capabilities between military and commercial users, while providing government agencies with greater efficiencies and costs that are similar to those for commercial users. GAO and DOD conducted studies that found that the cost of acquiring commercial bandwidth increased from 2003 through 2010 (GAO) and 2005 through 2009 (DOD). With the new FCSA program, the number of satellite service vendors will not be limited (previously there were only three eligible vendors), and satellite operators will also be allowed to compete to provide bandwidth. GAO and the Department of Justice Antitrust Division expect that increased competition under FCSA will result in lower bandwidth prices. However, one major impediment to competition in the satellite sector is the cost of manufacturing, launching, and insuring a fixed service, or geosynchronous, communications satellite. According to GAO, the cost of manufacturing, launching, and insuring a fixed service satellite runs $200 million to $500 million. A basic network requires three or more satellites, so the high cost of satellites is a barrier to entry for new operators. The Department of Defense is a large user of geosynchronous satellites, and it could potentially play a significant role in encouraging more competition in the commercial satellite sector—especially if it is successful in deploying hosted payloads on commercial satellites. A hosted payload provides the military with the ability to include transponders and specialized military equipment on a commercial satellite, including observation, communications, space situational awareness, and space weather forecasting payloads that can be operated by the specific DOD customer. In March 2011, seven satellite manufacturers and operators formed a coalition to promote the use of hosted payloads. Some concerns have been raised about allowing satellites with hosted payloads containing extremely sensitive U.S. military technologies to be launched anywhere but in the United States. Conclusion The outlook for the United States commercial satellite sector is generally positive, notwithstanding the regulatory challenges mentioned in the last section. In 2010, the United States commercial satellite industry launched a total of 34 satellites for commercial and government customers—more than Russia (26) or Europe (24). According to Futron, the United States also claims four of the five largest space manufacturers, in terms of revenue (see Table 4 ). Even with the rise of countries such as China, India, and Brazil, the United States continues to enjoy a significant, albeit slowly diminishing, advantage in space, at least in part because the United States has a dynamic private sector that produces most of its output. The drawn-out transition from NASA's Space Shuttle program to a successor program may delay government procurement of the commercial equipment intended to replace the shuttle. Nonetheless, as military and NASA programs become more reliant on the private sector for transportation into space, U.S. commercial space equipment manufacturers will have access to a market that is largely closed to foreign competitors. The prospects for the U.S. space equipment manufacturing industry in markets that are open to international competition are less certain. The rapid expansion of new consumer technologies and services that are space-enabled has led to the emergence of new competitors from many countries. U.S. manufacturers of launch vehicles, spacecraft, and satellites have a number of distinct advantages over many foreign competitors, including a very large aerospace industrial base capable of supporting commercial and government demand for space technologies and equipment. Additionally, the United States is pursuing policies that support and encourage competition, and numerous entrepreneurial firms are investing and developing launchers and spacecraft that may open new avenues for space exploration and travel. The United States also has a well-educated workforce and higher education system that is highly competitive internationally. In its analysis of space competitiveness, Futron ranked the relative position of the United States, compared to other countries, and found that the U.S. decline in recent years is mainly attributable to advances achieved by Russia, China, Japan, and India. As the U.S. government's role in promoting human spaceflight has transitioned from the Space Shuttle to a strategy that relies on the private sector to develop products that are competitive and serve the broad U.S. goals and activities that were identified in the National Space Policy of June 2010, the U.S. launch industry has become dependent on government payloads and has continued to face stiff competition from Russia and Europe. U.S. industry still maintains a wide lead in manufacturing for space. Although there are some vulnerabilities in the space industrial base (primarily in areas where some critical products are available from only one supplier or from limited foreign sources), the sector as a whole generates significant revenues and value-added and tends to be more entrepreneurial than in most other countries engaged in space activities. A major weakness, however, that has been identified by some Members of Congress and a number of analysts is the general lack of public support for government funding of civil and military space programs. The authors of the Futron study, for instance, have observed that the U.S. space program may be perceived as not providing sufficient value to the nation. One consequence could be a further loss of competitiveness as other countries continue to strengthen their own space manufacturing capabilities and programs.

The space industry refers to economic activities related to the manufacture and delivery of components that go into Earth's orbit or beyond. The space industry is a subset of the U.S. aerospace industry and U.S. strength in aerospace has helped to provide U.S. strength in space. The space industry was originally developed by government entities, and government policies and spending continue to exercise a strong influence on commercial space activities in the United States and elsewhere. Space-oriented manufacturing, which includes launch vehicles, spacecraft, satellites, and parts and equipment, has created a large space-industrial infrastructure that enables a much larger space services sector that includes satellite telecommunications and broadcasting services, and satellite remote sensing, among others. Together, these are an important part of the U.S. industrial and technology base. The focus of this report is the global commercial space manufacturing sector (launch vehicles, spacecraft, and satellites). Although relatively small, accounting for less than $6 billion of expenditures in 2010, it enables an estimated $276 billion in spending for ground equipment and satellite services. The United States manufactures more launch vehicles, spacecraft, and satellites than any other country, but the relative U.S. competitive position has eroded as other countries have made large investments in commercial and government space activities. The U.S. government remains the world's largest customer for space equipment and services. With the end of the Space Shuttle era, the government will increasingly depend on the U.S. commercial space industry for transport of humans and cargo, and on commercial satellites for communications and data. The extent and nature of government demand are likely to be significant factors shaping the U.S. commercial space industry. U.S. policy has gradually shifted toward encouraging more competition among firms that manufacture launch equipment, spacecraft, and satellites, encouraging the participation of smaller, entrepreneurial firms in an industry segment traditionally dominated by large aerospace firms. Several policy issues appear to have significant effects on the growth and competitiveness of the U.S. space manufacturing industry: In 1998, Congress passed legislation that reclassified all satellites and satellite parts and equipment as weapons under the International Traffic in Arms Regulations, limiting the ability of U.S. manufacturers of commercial space equipment to sell abroad and encouraging foreign rivals to increase their global market share at the expense of U.S. manufacturers. On April 18, 2012, the Department of Defense (DOD) and Department of State issued a congressionally mandated report that assessed risks associated with removing satellites and related components from the United States Munitions List (USML). Bills have been introduced in the 112th Congress to reauthorize and amend U.S. export control laws (H.R. 2122, H.R. 2004, H.R. 1727, H.R. 3288). The rapid growth in technologies that consume large amounts of bandwidth threatens to destabilize the current system that allocates spectrum and orbital position to specific users. Spectrum is a scarce resource, but increasingly, commercial satellite operators are developing technological solutions to increase capacity. DOD is now a major user of commercial satellites. From a surge related to the wars in Iraq and Afghanistan, it now places greater reliance on commercial satellites. Hosted payloads are also likely to become a more common feature of the commercial satellite industry in the future.

Introduction China announced in March 2007 that it would create a sovereign wealth fund (SWF) to invest its accumulated foreign exchange reserves more profitably. In May 2007, China Jianyin Investment Company, a government agency that was designated to manage any asset purchases until the SWF was set up, bought a nearly 10% non-voting stake in Blackstone Group, a U.S. private equity firm for $3 billion. After a few delays, China's new sovereign wealth fund—the China Investment Corporation (CIC)—officially started operations on September 29, 2007. The CIC has proven to be of interest to Congress for several reasons. First, some observers are concerned that its investment activities might have adverse effects on certain financial markets and possibly the U.S. economy. Second, its creation signals China's intention to diversify its foreign exchange holdings away from U.S. government securities into other forms of investment. Third, specific proposed investments by the CIC may raise national security concerns. Fourth, some see the possibility that China could use the CIC as a mechanism to pursue geopolitical objectives. With an initial capital fund of $200 billion, the CIC was a significant new addition to the existing pool of SWFs (see Table 1 ). The CIC augmented the $2 - $3 trillion under management by SWFs worldwide. In addition, the SWF provides China with another avenue by which it can invest its growing foreign exchange reserves, which totaled $1.9 trillion as of December 2008. Also, the conversion of the foreign exchange reserves into capital for the CIC may help "sterilize" some of the excess financial liquidity in China that is reportedly contributing to China's recent inflationary pressures. However, China's decision to create the CIC reawakened some concerns about the impact of SWFs on global financial markets and engendered new misgivings about China's involvement in international equity markets. David R. Francis, columnist for the Christian Science Monitor , started his November 26, 2007 article, "Will Sovereign Wealth Funds Rule the World?," with the words, "Sovereign wealth funds are huge, scarily big." During a November 30, 2007 interview on National Public Radio's Morning Edition , Brad Setser of the Council on Foreign Relations stated, "The rise of sovereign wealth funds represents a shift in power from the U.S. to a group of countries that aren't transparent, aren't democracies, and aren't necessarily U.S. allies." In June 2007, Clay Lowery, the U.S. Treasury Department's acting undersecretary for international affairs, indicated in an interview that the rise in government-owned investment funds could cause major changes in global markets and bring about "financial protectionism." There are also concerns about how China (and other nations) will invest the capital of their SWFs. Before the creation of the CIC, China had invested much of its foreign exchange reserves in U.S. government debt, such a U.S. Treasury bills (T-bills), that were relatively risk-free, but offered relatively low rates of return on the investment. Kenneth Rogoff, former chief economist for the International Monetary Fund (IMF), indicated in a recent interview, "Countries like China just don't need to hold any more T-bills. There's just no point." For the first half of 2008, most analysts expected the CIC to invest in overseas equities and/or acquisitions in order to obtain higher rates of return on their investments. One financial expert's analysis of China's foreign exchange reserve holdings from 2000 to 2007 shows a slight shift away from U.S. dollar denominated assets. However, as the effects of the U.S. financial crisis spread across the U.S. economy and then around the world, the CIC's interest in overseas investments seemingly waned. With its current capital stock, the CIC has the theoretical ability to purchase controlling interests in or acquire major corporations, raising potential national security concerns. According to financial journalist James Surowiecki, "Were China so inclined, it could buy Ford, G.M., Volkswagen, and Honda, and still have a little money left over for ice cream." Surowiecki's observation was echoed by well-known investor Warren Buffett, who added that the annual U.S. trade deficit of approximately $700 billion means the United States has to "give away a little part of the country" every year. Buffet continued by auguring that if these trade deficits continue the United States could wind up as a "sharecropper economy," in which U.S. citizens largely work for foreign-owned firms. In the opinion of former Securities and Exchange Commission Chairman Christopher Cox, "the fundamental question presented by state-owned public companies and sovereign wealth funds does not so much concern the advisability of foreign ownership, but rather of government ownership." However, others are less apprehensive about the potential impact of SWFs on the global economy. Rogoff thinks SWFs will do "more good than bad." Surowiecki maintains that "some of the worries about the dangers posed by sovereign wealth funds are overstated," and that the SWFs "will act much like other investors, and focus primarily on the bottom line." Preston Keat of the global risk consulting firm Eurasia Group echoes Surowiecki's assessment, pointing out, "It's a context of mutual dependence. Blowing somebody else up does you at least as much financial damage." The investment activities of several SWFs—including the CIC—following the outbreak of the subprime-mortgage crisis in August 2007 lent support the views of Rogoff, Surowiecki and Keat. Some struggling financial firms received much needed injections of capital from SWFs. On December 19, 2007, CIC invested $5 billion in Morgan Stanley not long after the financial firm announced it was writing off $9.4 billion of loss-making mortgage investments. On January 15, 2008, SWFs from Abu Dhabi, Kuwait, Singapore, and South Korea provided a $21 billion infusion of capital to Citigroup and Merrill Lynch. During a period of global market uncertainty, SWFs appeared to be providing a source of stability. However, as the ripple effects of the financial crisis spread during the summer of 2008, the CIC and other SWFs seemed reluctant to take on additional ailing financial houses, indicating a possible limit to the willingness of SWFs to play the roles of financial rescuers and suppliers of market stability. While news accounts in June 2008 reported that China's sovereign wealth fund was preparing to go on a "global spending spree," by December 2008, CIC was stating it was in "no hurry to invest overseas." At the end of 2008, a senior CIC official offered his view of China's role in solving the global financial crisis, "China can't save the world. It can only save itself." Administrative Structure of the China Investment Corporation The China Investment Corporation, Ltd. (CIC) is a semi-independent, quasi-governmental investment firm established by the Chinese government to invest a portion of the nation's foreign exchange reserves. The CIC reports directly to China's State Council, conferring it with the equivalent standing of a ministry, and the State Council's leader, Premier Wen Jiabao. According to one source, the CIC will have three major departments for its investment functions—1. Central Huijin Investment Company (CHIC), which will provide capital to domestic financial firms; 2. China Jianyin Investments, which will manage domestic assets and the disposal of nonperforming loans; and 3. A new department to manage overseas investments. CIC's Management The investment activities of the CIC are nominally directed by an 11-member board of directors, which reports directly to China's State Council. A separate seven-person Executive Committee, however, is generally considered to be in charge of the day-to-day operation of the SWF (see Figure 1 ). The CIC also reports to a semi-independent Board of Supervisors, which monitors the ethical conduct of the members of the Board of Directors and senior executives, as well as oversees its accounting and financial activities. The chairman of the CIC's board is Lou Jiwei, China's former deputy finance minister and former State Council deputy secretary general. Chairman Lou also serves as CIC's Chief Executive Officer (CEO) and chairman of the CHIC. The CIC's Chief Investment Officer (CIO) and president is Gao Xiqing, previously vice chairman of China's national pension fund, the National Council for the Social Security Fund. Other people serving on the CIC's board of directors include: Zhang Hongli, the CIC's Chief Operating Officer (COO) and past vice minister of finance; Fu Ziying, vice minister at the Ministry of Commerce (MOFCOM); Hu Xiaolian, deputy governor of the People's Bank of China (PBOC) and Administrator of SAFE; Li Yong, vice minister of finance; Liu Shiyu, vice governor of the People's Bank of China; Wang Chunzheng, ex-vice chairman of the National Development and Reform Commission (NDRC); Liu Zhongli, currently chair of the Chinese Institute of Certified Public Accountants; Zhang Xiaoqiang, vice chairman of NDRC; and Yu Erniu, the CIC's human resource director. Three of the members of the board of directors also serve on CIC's Executive Committee – Gao Xiqing, Lou Jiwei, and Zhang Hongli. The other four members are: Jin Liqun, chairman of the Board of Supervisors and past vice president of the Asian Development Bank; Wang Jianxi (Jesse), the CIC's chief risk officer; previous positions include chairman of China Jianyin Investments, chairman of China International Capital Corporation (CICC), and vice chairman of the CHIC; Xie Ping, president of the CHIC; and Yang Qingwei, previously a department director at the NDRC. Initial reports indicated the CIC was to have a staff of about 1,000 employees, including 100 to 200 investment specialists. To date, the CIC has not released information on the actual size of its staff. Many of the CIC's workers came from the absorption of CHIC and China Jianyin Investments, but it has periodically advertised for new staff. In the first few months following the formation of the CIC, its chief spokespeople were Lou Jiwei and Li Yong, a vice minister of finance. More recently, Gao Xiqing has been CIC's top spokesperson, including an extensive interview on CBS's "60 Minutes" on April 6, 2008. CIC's Working Capital The working capital for the CIC came indirectly from China's approximately $1.5 trillion in foreign exchange reserves at the time of CIC's creation. Under a plan approved by the Standing Committee of China's National People's Congress in June 2007, the Ministry of Finance was to issue up to 1.55 trillion yuan ($200 billion) in special treasury bonds to provide the CIC with capital to purchase foreign exchange from China's central bank, the People's Bank of China (PBOC). The CIC was to be responsible for servicing the newly created debt—at an estimated cost of $40 million per day. The first tranche of the special treasury bonds—worth 600 billion yuan ($77 billion)—was sold on August 28, 2007, to the PBOC, using the Agricultural Bank of China (ABC) as an intermediary. The 10-year bonds had a coupon value of 4.3%. A second tranche of bonds worth 103 billion yuan ($13 billion) was sold to the Chinese public in mid-September 2007. The September bonds were a mixture of 10- and 15-year bonds with coupon rates ranging from 4.46% to 4.68%. A third tranche worth 96 billion yuan ($12 billion) was sold to the public during November and December 2007, again with varying maturation periods of 10 and 15 years, with coupon rates of 4.5%. The remaining 750 billion yuan ($97 billion) was sold to PBOC on December 10, again using the ABC as an intermediary, with 15-year maturations and a coupon rate of 4.45%. No additional bonds were sold in 2008. In converting China's foreign exchange reserves into $200 billion in capital for the newly created CIC, China limited the amount of new debt issued to the public to 199 billion yuan ($26 billion). Most of the newly issued bonds ended up in the hands of the PBOC, effectively sterilizing some of the perceived excess liquidity in China's money markets. Investment Activities of China's Sovereign Wealth Fund The investment objectives of the CIC have been gradually revealed by the CIC's leadership. Just prior to the creation of China's sovereign wealth fund, Jesse Wang Jianxi, a member of the CIC's preparatory group, stated, "The mission for this company [CIC] is purely investment-return driven." However, the actual meaning of "purely investment-return driven" is open to interpretation. In April 2008, Wang, in his new role as the CIC's executive vice president and chief risk officer, provided a more specific statement of the CIC's investment goals, indicating that the company was "quite conservative at this time," seeking a rate of return on its investments of "about mid-one-digit or slightly above one digit." Since the onset of the global financial crisis, there are indications that the CIC's expectations for the rate of return on its current and future investments may have been lowered. CIC's Existing Investments A fair amount of information is available about the existing investments of the CIC. However, because of the manner by which China typically publicizes CIC-related activities, it is often difficult to obtain specific information about investment transactions. In particular, China frequently announces planned investments shortly before the financial transaction is to take place and subsequently mentions in passing that the planned investment has occurred, but rarely reports on the investment the day the actual transaction happens. In other cases, Chinese and CIC officials refuse to comment on investments reported by generally reputable media sources. While this pattern demonstrates some relative transparency about CIC activities, it also indicates an apparent reluctance to be completely forthcoming about the details of the CIC's investments. Figure 2 provides an overview of CIC's current direct and indirect investments as of December 2008, based on available news reports. Tracing CIC's investment activities is also complicated by its pattern of using subsidiaries or fund managers to make investments. In little over a year, CIC has either purchased or created several subsidiaries and investment companies, including the Central Huijin Investment Corporation (CHIC); China Jianyin Investment Company (CJIC); and Beijing Wonderful Investments, Ltd (BWIL). CIC has also reportedly invested some of its capital with private equity funds and fund managers. To date, CIC has generally not announced or publicized its investment activities with equity funds and fund managers. Direct CIC Investments The investment options of the CIC are constrained in part by commitments made before the formal start of its operations. On May 20, 2007, CJIC, a wholly-owned subsidiary of the CHIC, signed an agreement to purchase a nearly 10% stake in Blackstone Group in nonvoting shares worth $3 billion. The decision to purchase less than 10% of Blackstone's shares, and to purchase nonvoting shares, was apparently not an arbitrary one. According to Blackstone's CEO and Chairman Stephen A. Schwarzman, "The deal is 'purely commercial' and do [sic] not need the U.S. government approval as the stake is less than 10 percent." According to executive vice president Wang, CIC would hold onto its Blackstone stock for five to seven years, or longer. In October 2008, the CIC reportedly increased its holdings of Blackstone to an unknown level reportedly near a 12.5% limit established between the CIC and Blackstone. According to a Form 8-K filed with the U.S. Securities and Exchange Commission (SEC) on October 16, 2008, Blackstone and the CIC entered into a "new letter agreement" which raised the limit of BWIL and its affiliates' holdings to 12.5% of Blackstone's non-voting common units. In November 2007, the newly formed CIC assumed responsibility for the assets and liabilities of the CHIC, which was previously owned by the PBOC. It was reported that the PBOC obtained about 500 billion yuan ($67 billion) in compensation for the CHIC. This transaction utilized approximately one third of the CIC's working capital. As a result, the CIC became the parent company for the CHIC and China Jianyin Investment Company, plus owner of $3 billion in Blackstone Group stock. In addition, the CIC indirectly became a major stock holder in China Construction Bank (CCB) and the Industrial and Commercial Bank of China (ICBC) by way of the investments of the CHIC and China Jianyin Investment Company in those two banks. The precise nature of the CIC's relationship to China's various state-owned banks continues to be difficult to determine due to contradictory announcements from various sources containing ambiguous statements of China's intentions. In November 2007, China's State Council reportedly decided that the CIC was to provide capital totaling $67 billion to two of China's state-owned banks, the Agricultural Bank of China (ABC) and the China Development Bank (CDB). After its investment in the ABC, the CIC would supposedly own one-third of the bank with another third owned by China's Ministry of Finance. Other sources reported that a financial restructuring plan for the ABC – a plan to convert the ABC into a publicly-owned commercial bank – was submitted to the State Council for approval, and the plan included $40 billion from the CIC, possibly through the newly acquired CHIC. However, on December 5, 2007, a representative of the ABC stated that "overseas media reports concerning the bank's shareholding reforms were false," but did not indicate which aspects of those reports were incorrect. A news article in March 2008 cited an ABC spokesman as saying that reports of the CIC's investment in ABC were "not true." For several months, there was little news about the CIC's relationship to China's state-owned banks, creating uncertainty if any investments had been made or if any investments would ever be made. Then, in August 2008, it was reported that CIC's capital injection into ABC was to be reduced to $20 billion, to free up more funds for overseas investments. Two months later, the ABC reportedly signed an agreement with the CHIC in which it was to receive a capital injection of 130 billion yuan ($19 billion) in preparation for an eventual stock listing. According to the ABC's vice president, the CHIC's investment in the bank would result in it holding half of the bank's equity, with the other half owned by the Ministry of Finance. The vice president also stated that the ABC's initial public offering "would be finished in the second half of 2009." The nature of the CIC's relationship with the CDB is somewhat clearer. According to the Chinese press, the CHIC signed an agreement on December 31, 2007 to invest $20 billion into the CDB. A separate source reported on January 2, 2008, that the investment had already occurred and confirmed both the amount of the investment and the use of the CHIC to make the investment. The CIC has made several other major direct investments since its establishment. On November 21, 2007, the CIC announced plans for its first investment following its formal launch—the purchase of $100 million in shares of Hong Kong's initial public offering for the new China Railway Group (CRG). China Railway Group is a railway construction company in China, and reportedly one of the largest construction companies in the world. The Government of Singapore Investment Corporation, another SWF, reportedly also bought shares in CRG. The second major investment took place on December 19, 2007, when the CIC purchased "around 9.9%" of Morgan Stanley, one of the largest U.S. investment banks. According to the Form 8-K filed with the SEC, the CIC investment in Morgan Stanley – made via another CIC subsidiary, Company and Best Investment Corporation – amounted to $5.579 billion. At the time of the investment, Morgan Stanley stressed that the CIC would have "no special" rights of ownership and no role in corporate management. The third major CIC investment occurred on March 24, 2008, when it invested "more than $100 million" in Visa's initial public offering (IPO). There were unconfirmed reports that the CIC was a party to the negotiations to rescue Lehman Brothers from bankruptcy in mid-September 2008. A group headed by Bank of America and including J.C. Flowers and CIC reportedly expressed an interest in buying Lehman Brothers, but the possible takeover talks proved unsuccessful. Similarly, the CIC reportedly headed a consortium of companies that considered acquiring portions of the U.S. insurance company American International Group (AIG) in November 2008, but in the end, no agreement was reached. In early February 2009, there were reports that the CIC was talking with CITIC Pacific, a Hong Kong-based conglomerate, about purchasing up to 50% of CITIC Capital Holdings Limited, a China-focused investment management and advisory firm. There have also been reports that the CIC is considering investing "several billion dollars" in Australia's Fortescue Metals. The CIC has also reportedly invested some of its capital in money market funds. On October 13, 2008, it was reported that CIC – through another of its wholly-owned subsidiaries, Stable Investment Corporation – had invested $10.3 billion in U.S. money market funds, including $5.4 billion in Reserve Primary Fund. In September 2008, Reserve Primary Fund suspended withdrawals after it posted $785 million in losses on worthless Lehman Brothers debt securities. The CIC announced on October 15, 2008, that it had notified Reserve Primary Fund to withdraw its investment before the fund suspended withdrawals. Reserve Primary Fund, however, issued a press release on the same day indicating the CIC would receive its share of the Fund's liquidated assets at the same time as the Fund's other investors and there was no guarantee that the CIC would receive 100% of its investment. The following day, the CIC stated it had "written documents" from Reserve Primary Fund "that it will pay back both principal and interest of our investment." The settlement of Reserve Primary Fund's assets has not yet occurred. There are also reports that the CIC was considering hiring several independent financial consultants to manage its investments. On April 3, 2008, Reuters reported that the CIC had signed a deal with J.C. Flowers & Company, a U.S.-based investment firm, launching a $4 billion private equity investment fund that would focus on investments in U.S. financial assets. Neither the CIC nor J.C. Flowers has confirmed the deal. Since April 2008, there have been no additional reports of the CIC hiring independent financial consultants. Investments by the CHIC The CHIC also has been adding investments to its existing portfolio (see Table 2 ). Although it is a wholly-owned subsidiary of the CIC, according to the CHIC's website, "the investment business of CIC and the share management function conducted on behalf of the State Council by Central Huijin are completely separated." The CIC's website reinforces the apparent administrative separation between the CIC and the CHIC: Central Huijin Investment Ltd. (Central Huijin) is a wholly-owned subsidiary of CIC with its own Board of Directors and Board of Supervisors. It was established to invest in key state-owned financial institutions in China; it does not conduct any other commercial activities and is not involved in day-to-day issues within the institutions in which it invests. In addition to its investments in the state-owned banks ABC and CDB, the CHIC has been investing in China's commercial banks. On November 8, 2007, the CHIC announced it intended to purchase a 70.92% stake in China Everbright Bank, a Beijing-based joint-equity commercial bank founded in August 1992. On November 28, 2007, the shareholders of China Everbright Bank agreed to accept a 20 billion yuan ($2.7 billion) capital injection from the CHIC. The CHIC's financial support to China Everbright Bank reportedly was supposed to be sufficient for China Everbright Bank to go ahead with its planned initial public offering (IPO) on the Hong Kong Stock Exchange (HKSE) and China's A-share stock market. On December 5, 2007, China Everbright Bank announced that it is planning on holding its IPO in June or July of 2008. As of January 2009, China Everbright Bank's IPO had not occurred. In September 2008, the CHIC reportedly purchased 2 million shares in three of China's largest commercial banks – Bank of China (BOC), China Construction Bank (CCB), and the Industrial and Commercial Bank of China (ICBC) – to help stabilize China's sliding stock market. As a result of the purchases, the CHIC owns over two-thirds of BOC, nearly two-thirds of CCB, and just over a third of ICBC. The CHIC's holdings in China's commercial banks has raised concerns about the autonomy of the banks. CIC's 2008 Performance and Future Investments An anonymous source close to the CIC told the press on February 24, 2009, that the CIC's total profits for 2008 amounted to about $10 billion – an approximately 5% rate of return on its total working capital. Since the CIC or its subsidiaries purchased equity positions in Blackstone and Morgan Stanley, the share prices of those companies have fallen 82% and 48% respectively, amounting to an estimated loss of nearly $4 billion. This would imply that the CIC has earned approximately $14 billion in profits on its various existing domestic investments in 2008. Overall, the reported existing direct and indirect investments of the CIC total leave about $80 billion available for future investments. So far, most of the CIC's investments have apparently been made based on non-commercial criteria. For example, there are indications that the State Council, the PBOC and the NDRC insisted that the CIC provide help in the restructuring of these two state-owned banks as a condition of the CIC's establishment. Similarly, the payment to the PBOC for the CIC's acquisition of the CHIC and its subsidiary, China Jianyin Investment Company, may have been driven more by political considerations than economic ones. The non-commercial character of the CIC's existing investments may lead to increased interest and surveillance on its future investments. Another factor that may subject the CIC to greater scrutiny is the poor performance record of its major overseas investments (see above). In addition, the CIC may lose part of its principal invested in the Reserve Primary Fund. Some government officials, as well as members of the public, have been critical of the CIC's investment performance. In December 2008, assistant minister of finance Zhu Guangyao stated that he had not heard of any plans to increase the CIC's capital above its initial $200 billion. Since the day China announced the formation of the CIC, senior representatives of the new corporation and various government agencies have been actively publicizing that China's SWF would operate with a high degree of transparency utilizing an investment strategy based on commercial principles. China has also shown some sensitivity to existing apprehensions about the possible overseas investments the CIC might make, and CIC representatives have publicly announced that the new SWF will not invest in certain sensitive sectors and markets. However, the Chinese government has also made it known that it is concerned about undue criticism or scrutiny of the CIC, and in particular, is worried that other nations (including the United States) may try to use the creation of China's SWF as an opportunity to implement protectionist measures targeted at the Chinese economy. In sum, China has handled the creation of the CIC in a fairly common Chinese fashion of combining reassuring statements with veiled warnings. Investment Strategy Prior to the creation of the CIC, Chinese officials were already making statements indicating that its investment strategy would be to maximize the rate of return on its investments. Jesse Wang, a member of the CIC's preparatory group, stated on September 10, 2007, "The mission for this company is purely investment-return driven." On the day the CIC was created, CIC deputy general manager Yang Qingwei stated, "The company's principal purpose is to make profits." More recently, during his first overseas trip as the CIC's chairman, Lou provided a more nuanced explanation of the company's investment strategy, "We will adopt a long-term and prudent investment principle and a safe, professional portfolio strategy that adapts to market changes, which will put emphasis on a rational match of returns and risks." The CIC's need for relatively high rates of return on their investments is partially being driven by the manner in which the company has received access to China's foreign exchange reserves. According to one of the CIC's top managers, the company is responsible for servicing the interest on the 1.55 trillion-yuan of bonds issued by the PBOC (see above). According to CIC Chairman Lou, the interest cost on the outstanding bonds amounts to 300 million yuan ($40 million) per day. With a minimum return of $40 million per day, the CIC will need to earn at least $14.6 billion per year in profits—or at least 7.3% on its total capital of $200 billion. There was a report that CIC was late in making its first interest payment to the PBOC, despite the receipt of a dividend payment from Blackstone. However, for its second interest payment, the CIC was able to draw on its dividends from its investments in domestic banks to cover the installment. Also, as Lou points out, the CIC's ability to obtain access to more of China's foreign exchange reserves will depend on its profitability. There has been some domestic criticism of the CIC's investment in Blackstone, which as of February 6, 2009, was down 82% from its purchase price. Similarly, the CIC's other major U.S. purchase—Morgan Stanley—was trading about 48% below the lower range of the agreed transaction price. "If I am making losses every day, how can I face asking the government for more money?" asked Lou. There have also been some indications on the actual types of investments the CIC will be making and where it will be making investments. A CIC representative reportedly stated in 2007 that it will focus its international investments on a "portfolio of financial products." Also in 2007, CIC Chairman Lou told a group of financial experts in Beijing that most of the CIC's investments would be in publicly traded securities, but that it would also make some direct investments. In the first few months following the CIC's establishment, officials with the CIC indicated that it is considering making investments in Hong Kong and Taiwan, and it held talks with stock exchange officials in London. The CIC was also expected to set up branches overseas, with the locations of its overseas branches to be determined. Since the onset of the global economic crisis, the CIC has not actively pursued either avenue of overseas expansion. At the same time, China made reassuring statements about the types of investments the CIC would not be making. Chinese officials reportedly told German Chancellor Angela Merkel during her visit to China in August 2007 that the future CIC "had no intention of buying strategic stakes in big western companies." CIC Chairman Lou has indicated that the CIC will not invest in infrastructure. China's Vice Minister of Finance Li Yong also dismissed "rumors that China would try to buy out European and American companies in large numbers." Vice Minister Li has stated that the CIC would not buy into overseas airlines, telecommunications or oil companies. An unnamed contact at CIC indicated that the SWF also would not make investments in foreign technology companies as a means of obtaining advanced technology, pointing out, "That's political, and we don't do that." Despite the reassurances provided by the CIC, some observers are unconvinced that China's SWF has a clear investment strategy that is free from political influences. Setser gave a negative answer to his own rhetorical question, "Does the China Investment Corporation (CIC) have a coherent investment strategy?" According to Setser, "There clearly isn't a consensus inside China on what the CIC should be doing." A reporter for the Financial Times mirrored Setser's appraisal, writing, "Such a concentration of the country's wealth in one entity has inevitably drawn intense interest ... from powerful forces within the state bureaucracy. Each of these groups has its own ideas on how the money can best be spent." There are some indications that these past assurances may be under review, in light of the current global economic crisis. Wang Shuilin, one of CIC's managing directors, told reporters on February 24, 2009, that the CIC would increase its investments in "alternative assets, such as infrastructure, real estate, and renewable energy in 2009." Also, as previously mentioned, there continue to be reports that the CIC is considering investments in overseas mining companies. Transparency CIC officials and other leading economic figures in China have also made reassuring statements about the transparency of the CIC's operations and management, but often with caveats. For example, on the day the CIC was launched, Chairman Lou said, "We will adopt a prudent accounting system ... adhere to commercial lines and improve the transparent [sic] on the condition that company interest will not be jeopardized." In April 2008, CIC's Wang contrasted CIC's operations to the Government of Singapore Investment Corporation (GIC) indicating that while CIC discloses its investments in the United States, the GIC does not. According to Wang, "CIC is one of the most transparent sovereign funds in the world." However, the degree and pace at which China will make the CIC transparent remains uncertain. While the CHIC provides a listing of its major investments in its website, the CIC's has been less forthcoming with the details of its investment portfolio. During a dinner at the mayor of London (England)'s mansion, Lou offered an explanation for the CIC's hesitation to reveal its investment holdings by expanding on his previous statement, "We will increase transparency without harming the commercial interests of CIC. That is to say, it will be a gradual process... If we are transparent on everything, the wolves will eat us up." Reciprocity The creation of the CIC was not done in isolation from China's overall policy on inward and outward capital movements. At the time the CIC was created, much of the rest of the world would have preferred that China had focused on liberalizing various aspects of its inward capital flow policies, much of its efforts were centered on laws and regulations governing its outward capital flows. At present, more foreign direct investments (FDIs) are flowing into China than are flowing out of China. The combination of China's net FDI inflows and overall trade surplus is financing the growth of its foreign exchange reserves. The Bush administration repeatedly pressured China to make its stock and bond markets more open to foreign investors, matching the comparative openness of its inward FDI policies. However, at the time, China was more concerned about increasing the avenues by which it can redirect more of its domestic foreign exchange holdings towards investments outside of China. Some advocated that China push the United States to make the U.S. financial industry more open to foreign investment. It remains to be seen how the Obama Administration will approach the issue of capital market reciprocity with China. Over the last few years, the Chinese government has gradually introduced reforms to its outward FDI laws and regulations. For example, China rolled out a program in April 2006 creating "qualified domestic institutional investors" (QDIIs) that would allow Chinese nationals to invest in global investment funds offered by the QDIIs. On February 23, 2009, China's State Administration of Taxation announced that dividends of QDIIs would be subject to a 10% capital gains tax. The goals of the QDII program are to offer Chinese investors new options, and to soak up some of China's excess liquidity by moving funds overseas. China has approved a number of QDIIs (including Bank of Communications Schroder, China AMC, China International, China Southern Fund, Fortis Haitong, Fortune SGAM, Harvest Fund, Yinhua) and reportedly plans on approving more QDIIs in the future. As part of China's controls on foreign exchange, each fund is provided a quota limiting the size of its fund by the State Administration of Foreign Exchange (SAFE). China has also placed restrictions on the overseas markets in which the funds may invest. It has already approved Hong Kong and London, and is considering the United States. At the end of September 2007, just under $11 billion had been invested in the existing QDIIs. In December 2007, JP Morgan estimated that about $90 billion would be invested in QDIIs by the end of 2008. However, declines in international stock markets have hurt China's QDIIs. A group of Chinese investors recently filed suit against one QDII in England, alleging insufficient disclosure of investment risk led to major losses. As of January 2009, the total amount invested in QDIIs was $7.58 billion. China's efforts to improve the reciprocity of its investment policies have often been accompanied by warnings to other nations about using the creation of the CIC and the possible rise in Chinese overseas investments as an excuse to raise inward investment barriers, especially on the ground of "national security." On December 10, 2007, CIC Chairman Lou cautioned during a dinner at the Mayor of London's mansion, "If an economy will use national security as a criteria for entry of sovereign wealth funds, we will be reluctant to tap the market because you are not sure what will happen." Lou continued by stating that "any protectionist backlash" against SWFs could "change the stability and security of global financial markets." During the December 2007 Strategic Economic Dialogue (SED) in Beijing, Zhang Xiaoqiang, Vice Minister of the National Development and Reform Commission, made an apparent indirect comment on the recently passed Foreign Investment and National Security Act of 2007 ( P.L. 110-49 ), "We hope U.S. policies and regulations do not become a barrier for Chinese investors." According to Zhang, "Investors both from the U.S. and China have shown a strong desire to invest in each other, and it's necessary for both countries to create a sound investment environment for them." Zhang specifically cited China's concerns about U.S. use of national security as a barrier to Chinese investors, and greater scrutiny and possible discrimination against China's state-owned enterprises (SOEs) that wish to invest in the United States. Market Stability In the first few months following the creation of the CIC, China indicated that they see sovereign wealth funds being a "stabilizing force in the international market," in contrast to hedge funds, which are "a source of market instability." For example, at a 2007 conference in Beijing, CIC Chairman Lou noted that SWFs have been injecting capital into financial institutions "that suffer from the subprime crisis; they are stabilizing the market. CIC will also do the same thing." However, China has been cautious about its assertions about the stabilizing power of SWFs. According to CIC Chairman Lou, "Judging from our (CIC's) investment strategy and scale, we are unlikely to present a major impact on the international market." China's Vice Minister of Finance, Li Yong, has indicated that the CIC's investments will be made "gradually" and "cautiously." Rethinking CIC's Role? Starting in the summer of 2008, there emerged indications that China was rethinking CIC's role. CIC's poor overseas investment performance, plus internal and external administrative tensions, gave rise to discussions about reforming CIC. Internally, there were problems reconciling CIC's overall investment mission with the CHIC's domestic investment focus. Externally, the State Administration of Foreign Exchange (SAFE), which reports directly to the PBOC, made an apparent bid to challenge CIC's role as the Chinese government's leading overseas investment fund. While there have been no major changes to CIC so far, there are clear indications that China's leaders are keeping an eye on CIC's progress. In July 2008, sources in China reported that Chinese officials were discussing the possible separation of CIC and the CHIC. The officials perceived a tension between CIC's commercial orientation and the CHIC's role as investor in China's larger financial institutions. In addition, the connection between CIC and the CHIC apparently led the U.S. Federal Reserve to postpone granting licenses for CCB and ICBC branches in New York City. On October 22, 2008, China's State Council announced that it was assigning new roles to the CHIC and China Jianyin Investment Company, but keeping both firms under CIC. The CHIC was to serve as a investment institution holding majority stakes in China's larger state-owned banks. As a result, China Jianyin Investment Company will transfer some of its holdings over to the CHIC, so it can focus on its new function as an "investment platform for companies." In January 2009, it was reported that the CHIC had taken control of five securities firms (including CIC Securities and UBS Securities) from China Jianyin Investment Company, but not China Investment Capital Corporation (CICC). Stories about possible competition between CIC and SAFE also surfaced during the summer of 2008. As described below, SAFE made a number of overseas investments in 2008 in a variety of firms, including banks and oil companies. In April 2008, Caijing Magazine reported that the State Council had authorized SAFE to invest up to 5% of China's foreign exchange reserves – the equivalent of nearly $90 billion – in non-fixed income investments. Financial analyst Logan Wright wrote in June 2008 that SAFE's "encroaching on the CIC's turf is likely more reflective of these bureaucratic conflicts than a coordinated government strategy for investing China's foreign exchange reserves." China's Quasi-Sovereign Wealth Funds In addition to the CIC, China has other government entities that act as quasi-sovereign wealth funds. The key entities are SAFE, the State Development and Investment Corporation (SDIC), and the National Social Security Fund (NSSF). Each of these entities has recently taken actions indicating a greater willingness to invest overseas. State Administration of Foreign Exchange The State Administration of Foreign Exchange, or SAFE, reports directly to China's State Council and the PBOC. Its main function is to manage China's foreign exchange, including the maintenance of balance of payments statistics, regulating and monitoring foreign exchange transactions, and managing China's foreign exchange reserves. It is in this last capacity that SAFE has the ability to operate like a SWF. SAFE generally invests China's foreign exchange reserves in traditional items, such as U.S. Treasury bonds. According to one source, 70% of SAFE's assets are in U.S.-dollar denominated bonds. However, there are signs that SAFE is diversifying its investment portfolio. Late in 2007, SAFE purchased minority stakes of less than 1% in three of Australia's larger banks—ANZ Bank, Commonwealth Bank of Australia, and National Australia Bank—for $176 million per bank. A spokesman for ANZ Bank indicated that SAFE had stated that SAFE's share purchase was a "portfolio investment" and "a better way of managing their exposure to the Australian dollar." In April 2008, SAFE made two major investments in the petroleum industry. On April 4, 2008, the Financial Times reported that SAFE had accumulated 1.6% of the French oil company, Total, for $2.8 billion in a series of smaller purchases spread over several months. Eleven days later, Reuters reported that SAFE had also accumulated "just less than 1%" of the British oil company, BP, through a similar process involving a total investment of approximately $2 billion. SAFE's move to diversify its portfolio into equities continued through the summer of 2008. By the end of August 2008, SAFE held less that 1% of shares of over 50 British listed companies, according to one financial reporting service. Among the companies in which SAFE holds an equity position are: Barclays, British Gas, Cadbury, Drax Group, Royal Bank of Scotland, Tesco, and Wire & Plastic Products Group. SAFE's recent forays into overseas equity investments have raised two major issues among market analysts. First, some people wonder if SAFE's overseas investments are a sign of dissatisfaction among China's leadership with the performance of CIC, or alternatively, an indication of institutional competition between the PBOC and CIC. There is a report that the leadership of CIC is "furious" about SAFE's purchases of overseas equities. According to one analyst, SAFE's recent investments have blurred the distinction of responsibility between itself and CIC. Second, there is uncertainty on how to interpret SAFE's willingness to invest in petroleum companies, given CIC's previous assurances that it would not invest in this potentially politically sensitive industry. Rumors that SAFE may be considering an investment in the Anglo-Australian BHP Billiton have given a modicum of credence to claims that SAFE is willing to make more politically-charged investments that CIC has forsworn. In November 2007, CIC denied market rumors that it was considering making a bid to buy Rio Tinto to block BHP Billiton's takeover bid. State Development and Investment Corporation The State Development and Investment Corporation (SDIC) was established by the State Council in May 1995 to function as a government-owned holding company to invest in basic economic infrastructure. According to SDIC's annual report for 2006, SDIC had 62 wholly-owned subsidiaries and holding companies with over 50,000 employees, and 113.8 billion yuan ($16.3 billion) of total assets, making SDIC's the largest state-owned investment company in China. Until recently, much of SDIC's investment was in power projects, especially electricity-generation facilities. SDIC also has investments in port facilities, fertilizer production and financial services. On March 5, 2008, SDIC announced that it intended to "focus on overseas investment and the financial sector in the next five years." According to SDIC's general manager, Wang Huisheng, the company's planned overseas investment in 2008 was 7 billion yuan ($1 billion), mostly in infrastructure construction and resources-fueled industries. More recently, however, it seems the SDIC has been refocused on providing capital to China's domestic energy companies and to help in the process of selling off selected state enterprises. National Social Security Fund In August 2000, China's State Council and the Central Committee of the Chinese Communist Party (CCP) created the National Social Security Fund (NSSF) "as a strategic reserve fund accumulated by the central government to support future social security expenditures." The National Council for the Social Security Fund (NCSSF) was also created to manage the NSSF's assets. Capital for the NSSF is derived from the proceeds from reduction of state-owned shares, fiscal outlays, allocations made by the State Council, and returns on NSSF investments. Outlays for social security purposes are jointly determined with the Ministry of Finance and Ministry of Labor and Social Security. The NCSSF currently uses a number of external fund managers to manage the NSSF's investment decisions. The NSSF had assets worth 516 billion yuan ($73.7 billion) as of the end of 2007, including $1.66 billion in overseas investments. From 2003 to 2007, the NSSF realized an average rate of return on its investments of 10.7%. In 2008, however, the NSSF suffered its first ever annual loss – a reported $5.7 billion – since its establishment in 2000. In February 2008, Zheng Bingwen, a scholar at the Chinese Academy of Social Sciences (CASS), one of China's premier thinktanks, suggested that China create a fund similar to Norway's Government Pension Fund. According to Zheng, "CIC has sparked a new round of the China investment threat theory and a new wave of financial protectionism. We may hear fewer of those kinds of voices if we set up a sovereign pension fund to make investments in developed countries." While Zheng's comments were unclear about the relationship between his proposed sovereign pension fund and the existing NSSF, he did suggest that the NSSF should increase its overseas investments, with a focus on neighboring nations. Implications for China Besides offering a new vehicle for managing its foreign exchange reserves, the CIC was supposed to help China sterilize some of its excess liquidity. In 2007 and 2008, China experienced a major inflow of foreign exchange due to its merchandise trade surplus and the continuing stream of foreign direct investment. If the net inflow of foreign exchange was not "sterilized," the excess liquidity in China's money supply would have contributed to domestic inflation or a speculative bubble in China's domestic asset markets (principally the real estate and stock markets). Prior to the creation of the CIC, China had been absorbing some of the excess foreign exchange by issuing government bonds, and then purchasing foreign government debt—much of it U.S. Treasury bills—with the accumulated foreign exchange. However, this was generating two economic forces considered undesirable by the Chinese government. First, to attract the foreign exchange away from its citizens, China was offering a relatively high rate of return on the government bonds, raising the cost of "sterilization." Second, because the rate of return was relatively high, overseas investors were attracted to the Chinese bonds, fostering an additional influx of foreign exchange. This influx of so-called "hot money" placed more pressure on China to appreciate its currency when there were already widespread claims that China's renminbi was undervalued. Ironically, the expectation that the renminbi would appreciate would tend to foster the inflow of even more "hot money," creating a potentially unstable speculative spiral. In addition, China's accumulation of U.S. debt has not been very profitable given the appreciation of the renminbi (RMB) against the U.S. dollar. For example, the yield on 10-year U.S. treasury bills fluctuated between 4.5% and 5.0% throughout 2007. However, the renminbi appreciated 6.0% relative to the U.S. dollar. As a result, the effective rate of return on U.S. treasury bills valued in Chinese currency was negative in 2007. When evaluated in its domestic currency, China lost money on its investments in U.S. government debt in 2007. In theory, the CIC offered a new avenue for the government to utilize the accumulated foreign exchange and possibly earn a positive rate of return on its investments. The sale of the "special treasury bonds" placed the foreign exchange in the hands of the CIC's investors, who could then invest the capital in domestic assets other than real estate or stocks, as well as foreign assets. In theory, this would reduce upward pressures on China's real estate and stock prices, lower China's investments in U.S. government debt, and generate positive yields on its investments in foreign assets. The thinking behind the creation of the CIC failed to anticipate the U.S. financial crisis and the ensuing global economic recession. China's rising rate of inflation in early 2008 evaporated, to be replaced with a growing concern about the slowdown in overall economic growth. As a result, the need to "sterilize" the inflow of foreign exchange disappeared. At the same time, the inflow of "hot money" abated, partly because of the stabilization in the renminbi-U.S. dollar exchange rate, and partly due to a shift in international investor's attitudes towards risk. The rise in risk adversity also struck Chinese investors – including the CIC – in 2008. CIC Chairman Lou reported told a Hong Kong audience in late 2008 that the CIC was "not brave enough" to invest in foreign firms. Instead, the CIC shifted its focus to domestic investments, injecting capital into several of China's state banks (see above), to stimulate economic growth. Premier Wen Jiabao reportedly pledged to "do whatever was necessary" to maintain economic growth at 8% in 2009, including using China's foreign exchange reserves. Implications for Global Financial Markets and the U.S. Economy From a macroeconomic perspective, it is unclear how the arrival of the CIC will affect global financial markets. From a microeconomic perspective, the critical issue will be the types of investments the CIC makes. Furthermore, the entrance of CIC has invigorated discussion of how sovereign wealth funds are regulated, and what standards, or codes of procedure guide their operations. Implicit in the creation of the CIC is a shift in China's overseas portfolio away from U.S. Treasuries and other sovereign debt into other assets. There has been some speculation that China may be considering shifting most of its $1.5 trillion in reserves to the CIC—if it manages its investments well. According to some analysts, a shift in China's portfolio away from U.S. debt could put upward pressure on U.S. interest rates at a time when the Federal Reserve is trying to lower interest rates to prevent a possible economic recession. With a reported daily trade volume of existing U.S. Treasuries of $600 billion, a large divestment of U.S. Treasury holdings by China might also cause more severe market disruptions. However, there would be little impact on the exchange rate between the renminbi and the U.S. dollar because of China's policy of keeping the exchange rate within a narrow band. The arrival of a new investor with over $90 billion to invest initially attracted the interest of many major financial markets around the world. On October 26, 2007, Mayor of London (England) John Stuttard met with CIC Chairman Lou in China to lobby for the new SWF to set up a branch office in the City of London. On November 22, 2007, Hong Kong's Chief Executive Donald Tsang met with representatives of the CIC in Beijing for similar discussions. In early December 2007, Lou traveled to London, Paris, and Singapore for additional talks about possible CIC activity in those financial centers. Since the initial flurry of interest and talks, the CIC has neither opened overseas branches nor ventured significantly into any of these overseas equity markets. However, CIC's Blackstone Group investment made some observers wary about the specific types of investments the new SWF will make. The observers were concerned that China might use the CIC to secure energy resources or purchase strategic assets for geopolitical purposes. There were also market apprehensions that the CIC could seek to increase its market share in important industries via targeted acquisitions or takeovers. Others were concerned that CIC might make investments in particular companies in order to obtain access to sensitive technology or information. These various forms of possible strategic investments fueled calls for international guidelines for SWFs, including China's CIC. In September 2008, following four months of negotiations and several international meetings, members of the newly-formed International Working Group of Sovereign Wealth Funds (which included CIC and the United States) agreed to a voluntary code of conduct at meetings in Santiago, Chile. Initially, there were indications that the global financial markets were ill-prepared for the introduction of its $70 billion into the marketplace. Shares in the Hong Kong stock market rose in October 2007 in response to rumors that the CIC had secretly invested in Hong Kong stocks. There was a similar jump in the Tokyo stock market following rumors that the CIC was considering investing in undisclosed Japanese companies. Plus, rumors in November 2007 that the CIC was a party to a consortium of Chinese companies planning to bid on Australia's mining company, Rio Tinto, led to a one-day 7.5% rise in the share price of Rio Tinto and a 4.5% rise in the share price of its other alleged suitor, BHP Billiton, despite repeated denials by CIC representatives. CIC continued to be mentioned as a possible party in rumored investments throughout the summer and fall of 2008, including stories linking CIC with possible investments in Australia's Fortesque Metals Group, Germany's Dresdner Bank, Sweden's Nordea, a major financial services group, and unknown Japanese equities. However, since the onset of the global economic recession, there have been signs that attitudes have shifted, and market analysts and equity markets would now welcome a major investment by the CIC. There are also apprehensions about the potential for abuse or corruption created by the greater proximity SWFs create between governments and the private sector. As the existing investments of the CIC reveal, there is a growing network of interlinked investments between banks and other financial firms within China and overseas. Some U.S. financial analysts have expressed concern that CIC's investment in Morgan Stanley will provide the U.S. financial firm unfair preferential access to China's domestic financial markets. Others are worried that China will place pressure on overseas financial firms in which it has invested to provide more positive and optimistic assessments of China's economic prospects and the financial status of major Chinese companies courting international investors. Multilateral Responses to SWFs Misgivings about the potential impact of the CIC and other SWFs on financial markets and local economies are fostering calls for multilateral organizations to develop greater monitoring procedures and regulations of SWF investments. In June 2007, then-U.S. Treasury's Assistant Secretary for International Affairs, Clay Lowery, called on the IMF and the World Bank to develop guidelines for sovereign wealth funds. Following a meeting of their finance ministers in October 2007, the G-7 nations asked the IMF, the World Bank, and the Organization for Economic Cooperation and Development (OECD) to develop a set of "best practices" for SWFs to follow. The IMF formed the International Working Group of Sovereign Wealth Funds (IWG) to develop guidelines for SWFs. In addition, the OECD is working on a parallel project to provide recipient countries with suggested guidelines for handling SWF investments as part of their ongoing "Freedom of Investment" project. Also, individual nations are considering implementing laws and regulations governing SWFs. For example, the Indian government is examining the need for a special investment framework for SWFs because "even a trickle from these funds could have huge ramifications for the Indian stock markets and the economy on the whole." Role of the IMF The IMF has responded to the calls of Lowery and others, initiating "a dialogue among and with SWFs, with the goal of identifying best practices." In November 2007, the IMF held a roundtable discussion on SWFs involving representatives of key IMF members (including the United States) and several major SWFs (including CIC). On February 29, 2008, the IMF released a "Work Agenda" on SWFs that "set out ways to improve the Fund's surveillance over the operations of SWFs" and examined "the issues surrounding the development of a set of best practices which would provide guidance on how to improve institutional arrangements, organizational structures and risk management, and information dissemination practices." The report concludes with recommended "next steps" for the IMF including the establishment of an international working group of SWFs to meet in April 2008 to began drafting a set of best practices, with the goal of completing the first draft by August 2008. On May 1, 2008, the IMF announced the formation of the International Working Group of Sovereign Wealth Funds (IWG), comprised of representatives of 25 IMF member countries, including China and the United States. The OECD and the World Bank participate as permanent observers to the Working Group. Initially, Chinese officials and CIC representatives were somewhat critical of the IMF project. In January 2008, deputy administrator for China's State Administration of Foreign Exchange (SAFE) Wei Benhua contrasted the financial arrangements of SWFs to those of hedge funds, stating, "SWFs rarely make investment with leverage, and thus will not cause the imbalance of the international financial system." Wei went on to say, "The newly-formed CIC, since its birth, has attracted lots of attention from the international community. A few nations, on purpose, disseminate the argument of China's investment threat. The international community should clearly oppose different forms of investment protectionism and financial protectionism." In March 2008, CIC executive vice president Wang referred to the G-7 proposal as "unfair." Wang went on to say, "The claim that sovereign wealth funds are causing threats to state security and economic security is groundless. We don't need outsiders to come tell us how we should act." During an interview on CBS's "60 Minutes," CIC president Gao said that the proposed IMF guidelines were "stupid" and would lead to "hurt feelings." Despite their apparent misgivings about the IMF project, China and the CIC decided to participate in the IMF's IWG. In addition to attending the November 2007 roundtable, China also made public statements supportive of the development of international standards for SWFs. Minister of Foreign Affairs Yang Jiechi stated that "the good use of SWF according to all international regulations should benefit all parties involved," but also noted that "all stakeholders should work together to make the rules." On September 2, 2008, following two days of meetings in Santiago, Chile, the IWG announced it had reached a preliminary agreement on a draft set of 24 voluntary principles and practices for sovereign wealth funds. Although the IWG did not at that time release copies of the "Generally Accepted Principle and Practices for Sovereign Wealth Funds (GAPP)," it did state its hope that the document "will promote a clearer understanding of the institutional framework, governance, and investment operations of SWFs, thereby fostering trust and confidence in the international financial system." The IWG presented the GAPP to the IMF's International Monetary and Financial Committee (IMFC) meeting held on October 11, 2008, in Washington, DC, and released the entire GAPP – also known as the Santiago Principles – to the public. Following the IWG's announcement in September 2008, the CIC stated that it intended to abide by the GAPP's provisions. This will probably require some changes in CIC's relationship with CHIC, as CHIC engages in some policy activities (such as injected capital into state-owned banks) that violate the GAPP. However, there had already been earlier in the summer of 2008 some indications of a possible change in the CIC-CHIC relationship, including a possible separation. Two of the key issues motivating the possible separation are the desire to avoid potential regulatory problems and a clarification of the roles of CHIC and CIC. The licenses for CCB and ICBC branches in New York City were reportedly delayed in part because of the combined shareholdings of CIC and CHIC in the two banks. In August 2008, the U.S. Federal Reserve informed the CIC that it could not subsidize loans for its companies via an ICBC branch in New York City. Also, if the two investment agencies are separated, it is expected that CIC will remain primarily an investor in overseas assets, while CHIC will become an administrator of state-owned financial assets—such as ABC, BOC, CCB, CDB, and ICBC. OECD Guidelines for Recipient Countries In April 2008, the OECD's Investment Committee released its report, "Sovereign Wealth Funds (SWFs) and Recipient Country Policies," spelling out principles and policy guidelines for "fair treatment of SWFs." On June 5, 2008, the Ministers of the OECD countries adopted a declaration on SWFs that "welcomed" the report of the Investment Committee and endorsed several policy principles, including: (1) opposition to the erection of "protectionist barriers to foreign investment;" (2) non-discriminatory treatment for foreign and domestic investors; and (3) investment safeguards for national security concerns should be transparent, proportional, and subject to accountability. On October 8, 2008, OECD members – including the United States – adopted what was termed the "first tranche" of guidance on recipient country policies towards SWFs, which included the OECD Ministers' June 5 declaration and the Investment Committee's report, as well as additional guidelines on recipient country policies related to national security. The OECD intends to release a final report on guidelines for investment policies for recipient countries by mid-2009. The final report is to include a list of "best practices," and "if appropriate, suggestions for clarifications to existing OECD instruments." The Investment Committee report recommended that recipient countries abide by five investment policy principles: (1) Non-discrimination; (2) Transparency; (3) Progressive liberalization; (4) "Standstill;" and (5) Unilateral liberalization. The report also contained a list of investment policy guidelines for recipient countries, including: Similar treatment for similarly situated investors; Codification and publication of investment laws and regulations; Prior notification to changes in investment policies; Consultation on possible investment policy changes; Procedural fairness and predictability; and Disclosure of investment policy actions. On the issue of "national security" concerns, the OECD Investment Committee recognized that "each country has a right to determine what is necessary to protect its national security," but recommended that in making this determination, countries should keep a "narrow focus" in their investment restrictions, use appropriate expertise to make national security determinations, tailor their responses to the specific risks posed by a proposed investment, and block investments only as a "last resort" when national security-related concerns cannot be eliminated. In addition to developing investment policy principles and guidelines, the OECD is holding regular meetings among its members to conduct peer reviews of their investment policies. While the group does not have the authority to alter or amend member investment policies, the presentations are subject to what Ervin referred to as the "red face" test. In response to a question on the OECD's understanding of the meaning of "national security," Ervin indicated that there is a clear consensus that it included military risks, government procurement and "critical infrastructure," but also recognized that each OECD member had to make the determination of what constituted a risk to national security. Ervin also stated that the OECD thinks that members should strive to keep their definitions of national security as narrow as possible. Congressional Initiatives The 110 th Congress took action regarding the monitoring and regulation of foreign investment in the United States. The "Foreign Investment and National Security Act of 2007" ( P.L. 110-49 ) requires that the Committee on Foreign Investment in the United States (CFIUS) investigate any foreign investment transaction (including mergers, acquisitions, or takeovers) which results in "foreign control of any person engaged in interstate commerce in the United States" or if the transaction would result in foreign control of "critical infrastructure that could impair the national security." The new law also adds new criteria for CFIUS to use when determining if an investigation is warranted, including whether the transaction is a "foreign government-controlled transaction." In addition, P.L. 110-49 increases congressional oversight of CFIUS by requiring more detailed reports on its operations and the results of its investigations. However, the authority to suspend or prohibit foreign investments in the United States remains with the President. Even with the passage of P.L. 110-49 , some Members of the 110 th Congress were concerned that the new law may not sufficiently protect the United States from the risks posed by the emerging SWFs. In a February 2008 letter to their fellow Senate Banking Committee members, Chairman Christopher Dodd and Ranking Member Richard Shelby indicated their willingness to consider appropriate legislation. In an editorial opinion published in the Wall Street Journal , Senator Evan Bayh wrote, "... China's drive for economic advantage—including rampant intellectual property theft, currency manipulation, and subsidies for manufacture and export—raise serious concerns about how sovereign wealth funds might be used." Senator Bayh also suggests that the CFIUS 10% review threshold may not be a sufficient standard, and calls for the United States to implement a "passive investment" requirement on SWF investments. Some commentators maintain that while P.L. 110-49 effectively dealt with the national security risks posed by foreign investments, it did not adequately mitigate against the economic security risks . In his November 14, 2007 testimony before Senate Committee on Banking, Housing, and Urban Affairs, Edwin M. Truman mentioned that "some observers" are concerned about the stability implications for the U.S. economy and financial systems of SWF investments in "private equity firms, hedge funds, and regulated financial institutions." There have been suggestions that the United States should prohibit a SWF from investing in the United States unless its home nation meets certain criteria, such as those proposed by Truman and Garten. On September 5, 2007, the House of Representatives passed H.Res. 552 (110 th Congress) by a vote of 401 to 4, which included a reciprocity requirement that "United States financial service regulators, in assessing whether applications from Chinese financial institutions meet comprehensive consolidated supervision standards, should consider whether the applications are for operations and activities in the United States that are currently prohibited for United States financial institutions in China ..." However, others warn that such restrictions could lead to a wave of financial protectionism that would cause undue damage to the U.S. economy. Since the creation of the CIC, Congressional committees have held several hearings the SWFs in general. These have included: Senate Committee on Banking, Housing, and Urban Affairs hearing, "Sovereign Wealth Fund Acquisitions and Other Foreign Government Investments in the U.S.: Assessing the Economic and National Security Implications," November 14, 2007; Joint Economic Committee hearing, "Do Sovereign Wealth Funds Make the U.S. Economy Stronger or Pose National Security Risks?," February 13, 2008; House Financial Services Subcommittee on Domestic and International Monetary Policy, Trade and Technology, and the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises hearing, "Foreign Government Investment in the U.S. Economy and Financial Sector," March 5, 2008; and House Financial Services Subcommittee on Domestic and International Monetary Policy, Trade, and Technology hearing, Sovereign Wealth Funds: New Challenges from a Changing Landscape," September 10, 2008. In addition, the U.S.-China Economic and Security Review Commission held a hearing, "The Implications of Sovereign Wealth Fund Investments for National Security," on February 7, 2008. On February 27, 2008, Representatives Jim Moran and Tom Davis announced the formation of a "new bipartisan task force to explore sovereign wealth funds (SWF)." According to a press release from Representative Moran's office, the SWF task force "will study issues surrounding SWFs including their potential to affect geopolitics, and the U.S. and international economy." The SWF task force includes designated members from the House Ways and Means Committee and the House Financial Services Committee. Congressional Considerations The initial reaction of the Bush administration to the CIC's creation was generally favorable. President Bush reportedly said that he was "fine" with foreign investors buying shareholdings in U.S. banks and financial firms. U.S. Treasury Undersecretary for International Affairs David McCormick commented the investments of SWFs have "largely been long-term, very commercially focused, and very stable," but also indicated that more transparency and governance was needed. To that end, the Bush administration pushed the IMF to develop a system of best practices for SWFs. There have been no direct policy statements from the Obama administration on sovereign wealth funds or the CIC. As a presidential candidate, President Obama stated, "I am concerned if these … sovereign wealth funds are motivated by more than just market considerations, and that's obviously a possibility." As previously mentioned, P.L. 110-49 broadened the investigatory authority of CFIUS in cases of national security risk, and increased the committee's reporting requirements to Congress. However, there have been suggestions that the recent changes do not adequately protect the United States from economic risks posed by SWFs. These potential economic risks are seen as including financial market instability, undesirable foreign control or influence over key industries or companies, access to sensitive technology, and other forms of unfair competitive advantages. Among the regulatory changes being suggested are: Requirements that any SWF interested in investing in the United States publicly release audited financial statements that follow international accounting standards on a regular basis; Restrictions on the percentage of a U.S. company an SWF may own—other nations have such limits; for example, Hong Kong authorities have said they may withdraw the authority of Standard Chartered Bank to issue Hong Kong currency if the share of its stock owned by a Singaporean SWF exceeds 20%; Restrictions on the type of investment SWFs may make in U.S. companies—alternatives include restricting SWFs to the purchase of nonvoting shares, banning SWFs from negotiating a seat on the company's board of directors or representation in the company's senior management; and Changes in U.S. tax code—under current U.S. law, the profits of SWFs are generally tax-exempt; it has been suggested that the tax-exemption for SWFs be eliminated or restricted. In addition, there have been suggestions that access to U.S. financial markets should be contingent on the successful conclusion of a reciprocity agreement that would allow U.S. banks and financial institutions comparable access to the other nation's investment and financial markets. However, some commentators are concerned that increasing the regulatory constraints on SWFs will precipitate a period of global financial protectionism. In addition, China might respond to additional restrictions on Chinese investments in the United States by restricting U.S. companies' access to China's financial markets. The issue is whether the value of protection obtained outweighs the forgone benefits of investments prevented in more restrictive global and/or Chinese financial markets.

China established its major sovereign wealth fund, the China Investment Corporation (CIC) on September 29, 2007—six months after it first announced its intention to create such a fund. Financed with $200 billion in initial capital, the CIC is one of the largest sovereign wealth funds (SWFs) in the world. The creation of CIC was somewhat controversial in China. Both the People's Bank of China (PBOC) and the Ministry of Finance (MOF) reportedly wanted the CIC under their authority. In the end, the CIC reports directly to China's ruling State Council. However, as part of the interagency struggle, it was decided that the CIC would have to make significant purchases in several state-owned banks, as well as purchase the Central Huijin Investment Corporation (CHIC) from the PBOC. Although some of the CIC's initial investments were apparently political in nature, the CIC's top management have repeatedly asserted that future investments will be commercially based. The CIC and its subsidiaries have made several investments, including the purchase of 9.9% of the U.S. financial firm, Morgan Stanley, on December 19, 2007. Meanwhile other government-owned entities in China—including the State Administration of Foreign Exchange (SAFE)—have started to act like sovereign wealth funds and have been making sizable overseas investments. According to top Chinese officials, the CIC was created to improve the rate of return on China's foreign exchange reserves and to prevent the nation's excess financial liquidity from contributing to domestic inflation. Depending on its performance, the CIC may be allocated more of China's growing stock of foreign exchange reserves in the future. However, its first-year results have raised questions about its investment strategy and calls for administrative reforms for CIC. A number of experts in international finance have expressed some concern about the recent growth in SWFs and China's creation of the CIC. Analysts have cautioned that major shifts in SWF investments could potentially disrupt global financial markets and harm the U.S. economy. Other experts are less concerned about SWFs and the CIC, and welcome their participation in international investment markets. China has responded by maintaining that the CIC will prove to be a source of market stability. China has also stated that it has no intention of using its SWF to disrupt the U.S. economy or global financial markets. There have been calls for greater oversight and regulation of the activities of SWFs. The International Monetary Fund (IMF), in consultation with many of the leading SWFs, has developed a set of voluntary "Generally Accepted Principles and Practices" (GAPP) for the operation of SWFs. The Organization of Economic Cooperation and Development (OECD) has drafted policy guidelines for countries that are recipients of SWF investments. Some international financial experts have suggested elements to be included in such guidelines, including standards for transparency, governance, and reciprocity. Other experts have suggested that the United States should review its current laws and regulations governing foreign investments in the United States, and possibly implement special procedures or restrictions on proposed investments by SWFs. These include financial reporting requirements, limits on SWF ownership of U.S. companies, restrictions on the types of equity investments SWFs can make in U.S. companies, and special tax provisions for SWFs. This report will be updated as circumstances warrant.

Introduction Antitrust doctrine holds that robust competition will best protect consumers; it is concerned with the viability of individual competitors only insofar as their fates affect marketplace competitiveness. There is neither an arbitrary antitrust directive concerning the requisite amount of competition deemed acceptable in any given market, nor any predetermination of the point beyond which a market participant may grow; nor is there any absolute number of competitors a market participant must face. Although there are general prohibitions against monopolization and attempted monopolization in the Sherman and Clayton Acts, and a prohibition against "unfair acts" in commerce in section 5 of the Federal Trade Commission Act, "monopoly" and "monopolist" are merely descriptive terms, used to illustrate a situation in which a single entity possesses effective control of the market in which it operates. Neither term implies anything about the lawfulness of the monopoly possessed: there is no concept of "no fault" monopolization in United States antitrust law. Absent a finding by a court of "guilty behavior" by a monopolist, therefore, there can be no finding of "monopolization." Further, the antitrust Rule of Reason has modified the concept of competition by recognizing that in certain situations the anticompetitiveness of some actions must be balanced against any procompetitive effects that might be produced by those actions. Accordingly, any assessment of whether any of the prohibitions against monopolization have been violated requires two inquiries. First, it must be determined whether an entity is in fact a monopolist; and second, whether that monopolist has unlawfully monopolized the market(s) within which it operates (the applicable, "relevant market," which may be either product- or geographically based, or both). Assuming that a market participant has been legally determined to be a monopolist (as opposed to being so determined by reference to the popular definition—i.e., one who possesses at least a 51% market share), the question arises, "Does that monopoly entity have a legal obligation to deal with any or all of its actual or potential competitors?" The courts have generally answered, "No," but the situation long thought to create such an obligation—monopolist ownership or control of an "essential facility" —is, currently, not as settled as was once thought. In 2004, the Supreme Court opined that "We have never recognized such a doctrine ... and we find no need either to recognize it or to repudiate it here." The recent prosecutions by the Antitrust Division of the Department of Justice ( Microsoft ) and the Federal Trade Commission ( Intel ) (both discussed below) are particularly illustrative of the monopoly/monopolization dichotomy. Monopoly and Monopolization Although monopoly and monopolization are fundamental, and related, concepts in antitrust law, they are not synonymous. A shorthand definition of "monopoly" is "the power to control prices or exclude competition." The significance of the ability to exclude competition or control prices, however, lies in the supposed deleterious effect of the lack of competition on, consumers , who are presumed to benefit from the existence of largely competitive markets. The impact on excluded competitors is relevant only insofar as it affects the fate of competition : '[t]he antitrust injury requirement obligates [complainants] to demonstrate, as a threshold matter, "that the challenged conduct has had an actual adverse effect on competition as a whole in the relevant market; to prove it has been harmed as an individual competitor will not suffice."' "... it is axiomatic that the antitrust laws were passed for 'the protection of competition, not competitors .'" There is no concept of "no fault" monopolization in United States antitrust law, and courts have differed over the years since the passage of the Sherman Act in 1890, as to the size of the market share that must be attributable to a given market participant in order to accurately label the participant a "monopolist." Absent a finding by a court of "guilty behavior,"therefore, there can be no automatic finding of "monopolization" based merely on a finding of monopoly power: a finding of " monopoly power " does not , by itself, necessarily equate to a finding of the monopolization prohibited by either section 7 of the Clayton Act or section 2 of the Sherman Act, or the "unfair practices" prohibited by section 5 of the FTC Act. The point that "monopoly" (or size) does not equate to unlawful "monopolization" was made in 1998 by the Assistant Attorney General, Antitrust Division: Sometimes people complain about a merger solely based on its size. ... I want to make clear[, however,] that antitrust analysis focuses on the specific competitive harms that may be associated with a particular merger, not on its size in the abstract. Thus, for example, a big merger may not be challenged because the merging parties are not competitors or potential competitors of one another and the merger does not raise any vertical antitrust issues. At the same time, we may challenge a smaller merger that involves the only two firms that make a particular product. The key for our review is whether the merger will harm consumers, not the sheer size of the corporate entities involved . What the Antitrust Laws Prohibit As noted above, both the Sherman and Clayton Acts contain absolute prohibitions only against monopolization and attempted monopolization: Section 2 of the Sherman Act makes it a felony for any person to "monopolize, or attempt to monopolize, or combine or conspire with any other person to monopolize [interstate] ... commerce"; section 7 of the Clayton Act, the so-called antimerger provision, prohibits mergers or acquisitions by persons engaged in interstate commerce "the effect ... may be substantially to lessen competition, or to tend to create a monopoly." On the other hand, the judicially created Rule of Reason doctrine, first used in 1911 by the Supreme Court in Standard Oil Co. of New Jersey v. United States modifies the apparent inflexibility of the prohibitions in those provisions. The doctrine recognizes that in certain circumstances, adhering to the letter of the law concerning monopolization would be unreasonable; and that the anticompetitiveness of some actions must be balanced against any procompetitive effects that might be produced by those actions. The Concept and Importance of "Relevant Market" Whether a market entity is considered a monopolist, or whether it can be successfully charged with either having attempted to monopolize a market or actively monopolizing a market depends on the definition of the market in which it operates. A defendant facing a charge of (attempted) monopolization would prefer to have the relevant product market and/or the relevant geographic market defined broadly. If he can include several interchangeable substitutes for his product, its (and therefore, his) proportion of that product market will be calculated differently than if the product market is confined to only his product, or his product and merely a few alternatives. Similarly, the more expansive the definition of the geographic market within which the alleged monopolist is operating, the less likely it is that he will be seen to control a sufficiently large portion of it to justify a determination of "monopolist" or a finding of "(attempted) monopolization." And, as was noted earlier, "there can be no automatic finding of 'monopolization' based merely on a finding of monopoly power." Moreover, the fact that a trademarked or patented product gives the owner a lawful monopoly over that product may not suffice to justify a determination that he is a monopolist in a given market. Judicial and Administrative Definition/Treatment of Monopoly Status The courts have generally used a subjective "test" rather than an inflexible number for the amount of market share that would be a prerequisite to a determination that a market participant has a monopoly. The Supreme Court noted in 1956, for example, that " [t]he relative effect of percentage command of a market varies with the setting in which that factor is placed." Eleven years earlier, the United States Court of Appeals for the Second Circuit, in a case decided upon transfer from a Supreme Court, on the way to noting that the way in which a market share was calculated mattered, observed that although a 90 per cent share of a relevant market would be "enough to constitute a monopoly[,] it is doubtful whether sixty or sixty-four per cent would be enough; and certainly thirty-three percent is not." Monopolization In order to be found guilty of either "monopolization" or "attempted monopolization" one has first to be determined to be a "monopolist." As was observed earlier at footnote 8 , the existence of "monopoly power" is generally conceded if a market participant possesses the power "to control prices or exclude competition." A finding of monopoly power, by itself, however, will not support a "monopolization" charge. In addition, a monopolist must generally also be guilty of "the willful acquisition or maintenance of [monopoly] power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." That having been said, however, courts have had to evaluate actual business conduct in order to distinguish between lawful (e.g. , that having a "legitimate business purpose," or that which is merely indicative of aggressive competition) and unlawful (that which is predatory—i.e., seemingly economically irrational except for its adverse effect on competition, or exclusionary) conduct by a monopolist. Throughout its analysis a court must be mindful of the consumer protection purpose of the antitrust laws, which protect competition, not competitors ; as we noted at the beginning of this report, the viability of individual competitors is relevant only to the extent their fates affect marketplace competitiveness. Attempted Monopolization An allegation of "attempted monopolization," as does a charge of "monopolization," requires proof of predatory or anticompetitive conduct (i.e. , "guilty behavior") on the part of the would-be monopolist; but because "a full blown monopoly [will not yet] ha[ve] been accomplished," there must also be proof that the defendant entity (a) specifically intended to achieve monopoly status and (b) that there is/was a "dangerous probability" that monopoly status could be achieved. Moreover, emphasizing the importance of determining the relevant market, the Spectrum Sports Court continued, "[i]n order to determine whether there is a dangerous probability of monopolization, courts have found it necessary to consider the relevant market and the defendant's ability to lessen or destroy competition in that market." Duty of Monopolist to Deal In general The basic antitrust truth, expressed in 1919 by the Supreme Court in United States v. Colgate & Co. , notwithstanding certain exceptions and attempts to circumscribe it, remains that an entity—even a monopolist—is free to deal or not deal with any other entity unless its actions constitute either "guilty behavior" or an attempt to expand its monopoly into a market adjacent to the one in which it may hold a lawful monopoly: In the absence of any purpose to create or maintain a monopoly, the [Sherman] act does not restrict the long recognized right of trader or manufacturer engaged in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal; and, of course, he may announce in advance the circumstances under which he will refuse to sell. Moreover, according to the United States Court of Appeals for the Federal Circuit, the fundamental, Colgate precept of seller choice is not altered by the applicability of either the patent or copyright law to the item(s) in question, unless it is judicially determined that the patent or copyright in question was fraudulently procured. Vis-a-vis markets adjacent to the one in which the monopolist usually operates The antitrust legality of a situation in which even a genuine monopolist, albeit a lawful one, takes (or refuses to take) action which adversely affects competition in an adjacent market depends, for one thing, upon the monopolist's position vis-a-vis those who compete in that market. Whether the monopolist may be required to deal advantageously with entities in an adjacent market also depends on whether the monopolist's actions are taken in pursuance of an attempt to extend his lawful monopoly (which, of course, may be the result of patent or copyright grants) in one market into another by means other than those which resulted in his original, sanctioned market position. Two courts reached opposite conclusions after analyzing somewhat similar circumstances involving monopolists' decisions concerning dealings with entities in adjacent markets that were their competitors in those markets. In both Eastman Kodak Co. v. Image Technical Services, Inc. (referred to alternatively as Kodak) and In re Independent Service Organizations Antitrust Litigation the requisite competition was presumed. In the first case, however, the ISOs (independent service organizations) did not directly allege a refusal to deal, but, rather, that Kodak had unlawfully tied the sale of both the repair parts it manufactured, as well of certain others manufactured under license, to the purchase of its service, violating the antitrust laws by extending its lawful monopoly in the parts market into the service/repair market and, thus, eliminating much of the competition to itself from ISOs; in the second, plaintiff ISOs alleged specifically that the Xerox Corporation's refusal to sell them either patented repair parts or copyrighted service manuals violated the antitrust laws. The Supreme Court held, in Image Technical Services, that the lower courts must determine whether Kodak, in fact, possessed sufficient market power in the market for parts used to service photocopier equipment to be able to unlawfully tie the purchase of service for its copiers to the purchase from it of repair parts for those copiers (in other words, to require purchasers of its copier equipment to agree either to use only its repair parts/service or not to use the repair parts/services of an ISO); on remand, a jury found the existence of the Supreme Court's required monopoly power and the misuse of that power in the service market, and the appeals court affirmed that finding and the injunction it precipitated. In the Independent Service Organizations Antitrust Litigation , the United States Court of Appeals for the Federal Circuit upheld the United States District Court for Kansas' grant of summary judgment to Xerox, noting, first, that although a patent holder (or other intellectual property owner) does not, by virtue of his patent, have a right to violate the antitrust laws, "it is also correct that the antitrust laws do not negate the patentee's right to exclude others from patent property." The court, emphasizing that the differing allegations in this case and Image Technical Services necessitated a different approach to analyzing the antitrust legality of the challenged actions, stated: ... Kodak does nothing to limit the right of the patentee to refuse to sell or license within the scope of the statutory patent grant. In fact, we have expressly held that, absent exceptional circumstances, a patent may confer the right to exclude competition altogether in more than one antitrust market.... ... In the absence of any indication of illegal tying, fraud in the Patent and Trademark Office, or sham litigation, the patent holder may enforce the statutory right to exclude others from making, using, or selling the claimed invention free from liability under the antitrust laws. An earlier, related "adjacent market" case presented the Federal Trade Commission (FTC) with a situation in which the publisher of The Official Airline Guides chose to list the schedules and connecting flights of smaller, commuter airlines less advantageously than those of the major airlines, undeniably putting the "commuters" in an unfavorable position; the Commission was rebuked by the United States Court of Appeals for the Second Circuit for having ruled that the publisher acted in violation of Section 5 of the FTC Act, which prohibits "unfair acts of practices in commerce": The Commission did not find in the present case 'any purpose to create or maintain a monopoly,' but went on to say that 'the philosophy of Colgate must give way to a limited extent where the business judgment is exercised by a monopolist in an arbitrary way.' The Commission conceded that its result 'may be inconsistent to some extent with the theory of the Colgate doctrine.' * * * ... we think enforcement of the FTC's order here would give the FTC too much power to substitute its own business judgment for that of the monopolist in any decision that arguably affects competition in another industry. Such a decision would permit the FTC to delve into, as the Commission itself put the extreme case, 'social, political, or personal reasons' for a monopolist's refusal to deal. ... Thus, if the only supermarket in town decides to stock Birdseye vegetables but not Green Giant vegetables, the FTC would be able to require it to stock Green Giant vegetables if it were to find Green Giant competitively disadvantaged. The court concluded: "We do not think that the Colgate doctrine is as dead as the Commission would have it." The Official Airline Guides case remains the touchstone for assessing a monopolist's duty to deal advantageously with non-competitor entities in an adjacent market. "Essential facilities" doctrine From almost the beginning of statutory antitrust law (the enactment of the Sherman Act in 1890), the concept of the so-called "essential facilities" doctrine has been developing; courts have rather consistently held that a monopolist who controls an instrumentality that is crucial to the ability of a potential competitor to compete and which cannot be reasonably duplicated by the potential competitor must make that facility available to him. Perhaps the most well known "essential facilities" case is United States v. Terminal Railroad Association , in which access to the only terminal in St. Louis that could reasonably accommodate rail traffic to the west was required to be made available to potential competitors of the railroads who jointly owned the terminal. The concept of an "essential facility" was determinative when, in 1985, the Court required the owner of three of four skiing mountains to continue allowing the owner of the fourth mountain to jointly market access to all four mountains. As the United States Court of Appeals for the Seventh Circuit explained, in MCI Communications Corp. v. AT&T , a case that required AT&T to grant connection to its telephone lines in order to allow MCI to compete in the long-distance telephone business, A monopolist's refusal to deal under these circumstances [the requested access was both technically and economically feasible] is governed by the so-called essential facilities doctrine. Such a refusal may be unlawful because a monopolist's control of an essential facility (sometimes [especially in telecommunications law] called a 'bottleneck' [a point through which everything destined for a specific point must pass]) can extend monopoly power from one stage of production to another, and from one market into another. Thus, the antitrust laws have imposed on firms controlling an essential facility the obligation to make the facility available on nondiscriminatory terms. Verizon v. Trinko Curtis Trinko challenged, as a violation of the antitrust laws, Verizon's failure to adequately share its network facilities with his provider of telecommunications service, as required by the Telecommunications Act of 1996. His suit was filed as a class action immediately following a series of state and federal regulatory actions that penalized Verizon for failing to comply with the act's mandate to provide any requesting telecommunications carrier with interconnection service "at least equal to that provided by the local exchange carrier to itself ...." The complaint alleged that Verizon "continues to resist competitive entry by carriers seeking to compete entirely with their own facilities," and consequently, that customers of Verizon's competitors have been injured in their business or property by reason of "Verizon's "exclusionary and anticompetitive behavior." The Court rejected both Trinko's reasoning and his arguments. The opinion first discussed and described the regulatory scheme set out in the Telecommunications Act, the regulatory actions carried out pursuant thereto, and the effect of the act's antitrust "savings clause." After observing that the savings clause foreclosed the possibility of either unquestioningly substituting the regulatory scheme for traditional antitrust analysis or granting the regulated entity the benefit of implied antitrust immunity, the Court noted nevertheless that the savings clause "preserves [ only ] those 'claims that satisfy established antitrust standards.'" It then analyzed those "established standards"—monopoly status, and the offenses of "monopolization" and "attempted monopolization"—and quoted from the " Colgate doctrine" concerning the "long recognized right" of a private businessman "to exercise is own independent discretion as to parties with whom he will deal." Prior cases that had utilized the "essential facilities" doctrine were distinguished by the Court, which found the differences between them and its present case significant: Aspen was not available to Trinko because access to the "essential facility" in that case (the defendant's three mountains), previously granted, had been withdrawn. Terminal Railroad and another case relied on by Trinko, Associated Press v. United States , were also distinguished, the Court noting that both "cases involved concerted action, which presents greater anticompetitive concerns ...." The majority stressed its belief that although Verizon had violated a duty imposed by the act, it had not violated any obligation—positive or negative—imposed by the antitrust laws. Some Examples of Antitrust Enforcement Agency Posture The 1992 jointly issued Horizontal Merger Guidelines make clear that the "monopoly"/"monopolization" dichotomy is a key enforcement concept. The Guidelines were promulgated in order to inform the business community of the agencies' (DOJ, FTC) governing philosophy and "analytical framework" when they are reviewing the permissibility of proposed mergers, but they afford a good view of the agencies' overall thinking about antitrust culpability. The "Purpose and Underlying Policy Assumptions" section of the Introduction states unequivocally that "mergers should not be permitted to create or enhance market power or to facilitate its exercise; it goes on to note, however, that while "competitively harmful" mergers will be challenged, there is a "larger universe of mergers that [is] either competitively beneficial or neutral." We earlier quoted an Assistant Attorney General to the effect that competitive harm rather than size is the determinative element in a decision on a reviewed merger. Two relatively recent cases clearly illustrate the antitrust enforcement agencies' differentiation between the existence of monopoly power and active monopolization: the Department of Justice suit against Microsoft and the FTC's complaint against Intel. In Microsoft, the Antitrust Division stated that "Microsoft possesses (and for several years has possessed) monopoly power in the market for personal computer operating systems." The DOJ action, however, was filed not to challenge Microsoft's monopoly status, but rather, the company's actions: To protect its valuable [and presumably, lawful] Windows monopoly against ... potential competitive threats, and to extend its operating system monopoly into other software markets, Microsoft has engaged in a series of anticompetitive activities . Microsoft's conduct includes agreements tying other Microsoft software products to Microsoft's Windows operating system; exclusionary agreements precluding companies or potential competitors from distributing, promoting, buying, or using products of Microsoft's software competitors or potential competitors; and exclusionary agreements restricting the right of companies to provide services or resources to Microsoft's software competitors or potential competitors. In the charges against Intel Corporation by the FTC, the Commission acted to restrain the "pattern of conduct ... that violates Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45," and not because of Intel's acknowledged monopoly status. As a monopolist , Intel can compete by producing better, cheaper and more attractive products. It cannot act to cement its monopoly power by preventing other firms from challenging its dominance. Intel has acted illegally. It has used its monopoly power to impede innovation and stifle competition [by denying necessary technical information to certain customers in retaliation for their suits against Intel to enforce their (the customers') patents, allegedly infringed by Intel]. Conclusion Judicial determination of "monopoly" status for a market participant says nothing concerning the lawfulness of the monopoly enjoyed. At most, monopoly status indicates that the monopolist possesses sufficient market power to "control prices or exclude competition." But such a determination does not automatically create an obligation on the part of the monopolist to deal—at all, or "fairly"—with other entities in the market, or with consumers. That obligation may be created only by a further finding either that the monopolist has achieved his monopoly position in violation of the prohibitions against monopolization or attempted monopolization in the Sherman or Clayton Antitrust Acts or the prohibition against unfair practices in the Federal Trade Commission Act (i.e., possesses an unlawful monopoly); or that he has unlawfully exploited even a lawfully obtained monopoly position; or both. In other words, a monopolist's "guilty behavior" is what creates a monopolization violation of the antitrust laws, not his status as a monopolist. The duty to deal with actual or potential competitors of a lawful monopolist who has not been found to have engaged in some "guilty behavior" is generally governed by the Colgate doctrine, which gives market participants the right to choose their commercial relationships. That "right," however, has been thought to have been circumscribed by what has become known as the "essential facilities" doctrine; it stands for the proposition that a monopolist who possesses or controls a necessary component of an actual or potential competitor's business must make it available to his competitor(s) if it cannot reasonable be obtained—at all, or only at prohibitive expense. In Verizon Communications, Inc. v. Trinko , however, the Supreme Court questioned the validity of the "essential facilities" doctrine in antitrust law—at least in the context of regulated entities. When a regulated entity violates a regulatory statute that compels the sharing of specifically named facilities, the Court said, there is not also an automatic antitrust violation without a finding that that behavior would have violated something in the antitrust laws—with or without the existence of the statutory requirement.

Antitrust law does not mandate either that markets be competitive, or that they contain some predetermined number of participants/competitors; it is concerned, rather, with the operation of markets, on the assumption that a properly functioning market (i.e., one in which there is an opportunity for viable competition, and is not skewed by the predatory actions of participants), will best protect consumers. "Monopoly" and "monopolist" are, therefore, merely descriptive terms, used to illustrate situations in which a single entity (or group of entities) possesses effective control of the market in which it operates; neither term implies anything about the lawfulness of the monopoly possessed. "Monopolization," on the other hand, is the term used in antitrust law to characterize as unlawful a situation in which a monopolist—irrespective of whether his monopoly has been lawfully achieved—couples his monopoly status with behavior designed to unfairly exploit, maintain, or enhance his market position. Similarly, "attempted monopolization"connotes a situation in which an entity unlawfully or unfairly attempts to secure a market monopoly. The long-standing, judicially created Rule of Reason, which involves balancing an anticompetitive action with any procompetitive results, underscores those facts. Whether a market participant who is a monopolist must deal with anyone who desires to deal with it continues to be largely governed by the so-called Colgate doctrine. In 1919, in United States v. Colgate & Co. (250 U.S. 300), the Supreme Court recognized the unfettered "right" of a private vendor "to exercise his own independent discretion as to parties with whom he will deal ...." Colgate notwithstanding, the existence of an "essential facility" (i.e., a necessary component of a potential competitor's business and which is both unavailable from any source other than the alleged monopolist and cannot be reasonably duplicated), once established, has generally been thought to impose a duty to deal with the actual or potential competitors of even a lawful monopolist. The continuing viability of the so-called "essential facilities" doctrine, however, was called into question by the Supreme Court's 2004 ruling in Verizon v. Trinko (540 U.S. 398). The Antitrust Division of the Department of Justice (DoJ) and the Federal Trade Commission (FTC) each operate on the assumption that the monopoly status of competitors is antitrust-relevant only insofar as their actions may impact the operation or competitiveness of markets. This report—which explores the difference between monopoly and monopolization as those terms are used in antitrust law, and the differing enforcement consequences of each—will be updated if case law or legislation alters the concepts it discusses. It is based on several existing documents by the same author, including CRS Report RS20241, Monopoly and Monopolization - Fundamental But Separate Concepts in U.S. Antitrust Law; CRS Report RS21723, Verizon Communications, Inc. v. Trinko: Telecommunications Consumers Cannot Use Antitrust Laws to Remedy Access Violations of Telecommunications Act; and Duty of a Monopolist to Deal, a general distribution memorandum.

Introduction Native Americans living on reservations or other tribal lands are more likely to experience poor housing conditions, such as living in housing that is physically substandard or overcrowded, than the population as a whole. One reason for this is that a disproportionate number of Native Americans are low-income, making it difficult to afford suitable housing. Additionally, Native Americans who live on reservations or in other tribal areas face housing issues that do not generally apply to the rest of the country, such as the legal status of trust land and the implications that has for mortgage lending. Recognizing the singular challenges in providing affordable housing for Native Americans in tribal areas, and the need for such housing, in the 1960s the federal government began to implement specific housing programs for Native Americans that were separate from other affordable housing programs. Questions about whether these programs were meeting their goals, and whether they were running efficiently, persisted for several decades. In 1996, Congress passed the Native American Housing Assistance and Self-Determination Act (NAHASDA). The law reorganized several existing federal housing assistance programs for Native Americans into a single block grant program. In addition to providing funding for affordable housing for Native Americans, the law focused on self-determination for tribes, giving tribes broad authority to choose how to use the affordable housing funds they receive under NAHASDA. The block grant program authorized under NAHASDA provides funding to tribes and Alaska Native villages for affordable housing activities that benefit low-income Native Americans living in tribal areas. A separate block grant program, established later by an amendment to NAHASDA, makes funding available for housing for low-income Native Hawaiians who are eligible to live on the Hawaiian Home Lands. NAHASDA also authorizes a loan guarantee program to help tribes and Alaska Native villages access financing for affordable housing activities and authorizes funding for training and technical assistance. This report provides some brief background on Native American housing issues and the system of federal housing assistance for Native Americans prior to NAHASDA. It then describes the programs authorized by NAHASDA: the Native American Housing Block Grant, the Title VI Loan Guarantee Program, and the Native Hawaiian Housing Block Grant, as well as funding for training and technical assistance. It concludes with a discussion of historical funding levels for NAHASDA programs and tribes' uses of NAHASDA funds. Background on Native American Housing Issues The federal government currently recognizes over 550 Native American tribes and Alaska Native villages across the United States. These tribes and Alaska Native villages vary widely in terms of size, population, geography, history, and culture. The size and surroundings of tribes' reservations and other tribal lands are also very different. For example, some reservations are very large while others are quite small—the largest is over 16 million acres, while the smallest reservations encompass fewer than 1,000 acres—and some tribes do not have reservations at all. Many reservations are located in remote rural areas, while some are located closer to urban areas. According to the U.S. Census, more than 5 million individuals identified as American Indian or Alaska Natives (AIAN) in 2010. Of this number, nearly 3 million individuals identified themselves solely as American Indians or Alaska Natives, while an additional 2 million identified as AIAN in combination with another race. Not everyone who identifies as AIAN is a member of a federally recognized tribe or Alaska Native village. Some individuals who identify as AIAN may not be formally enrolled members of any tribe, and some may be enrolled members of state recognized tribes or other tribes not formally recognized by the federal government. Furthermore, many people who identify as AIAN do not live on or near reservations or in other tribal areas. Of those who identified as AIAN alone, about one-third lived in tribal areas (such as on reservations or on off-reservation trust lands) in 2010, according to the Census. This report describes the main federal housing program for members of federally recognized tribes and Alaska Native villages who are living on tribal lands or in nearby areas. Native Americans who do not live in tribal areas are potentially eligible for the same federal housing programs as the rest of the population. Certain issues impact housing and housing programs in tribal areas differently than the rest of the country. The special nature of the relationship between the federal government and federally recognized tribes has implications for Native American housing and housing programs. Furthermore, the restricted legal status of tribal lands has implications for financing housing in these areas. Finally, while economic conditions and the quality of the housing stock vary by tribe, housing conditions in tribal areas generally tend to be worse than in other areas. The Federal Government's Relationship with Tribes The federal government's relationship with federally recognized tribes is unique in several ways. For one thing, federally recognized tribes are sovereign nations, and the relationship between the federal government and tribes is a government-to-government relationship. Tribes are entitled to govern their own affairs, including deciding tribal membership and leadership, and tribal areas are governed by tribal law. Furthermore, the federal government has a long-standing trust responsibility to members of federally recognized Native American tribes, meaning that it has a responsibility to provide for certain needs of tribes and tribal members. This trust responsibility was first established through treaties between the federal government and individual tribes; under these treaties, tribes generally ceded land to the federal government in exchange for protection and certain annuities, personnel, goods, and services. Over time, the federal government's trust responsibility to tribes has been affirmed through laws, court decisions, and executive orders, and has been the basis for a number of federal programs that provide funds or services specifically to Native American tribal members. At times, the federal government's responsibility to provide certain services to tribes and the tribes' right to govern their own affairs can appear to be in conflict. Tribal leaders have expressed concerns that having federal agencies administer funding that is provided to tribes, and making most of the decisions about how such funding is used, undermines tribal sovereignty and impedes the ability of tribes to develop the capacity and resources needed to administer their own affairs. In light of these concerns, federal policy towards Native Americans began to shift towards the concept of self-determination beginning in the 1970s. Self-determination recognizes the sovereignty of tribes and aims to give tribes authority over their own affairs. In 1975, Congress enacted the Indian Self-Determination and Education Assistance Act ( P.L. 93-638 ), providing tribes with the authority to contract to provide services otherwise provided by the federal government and to administer their own education programs. It represented the first major shift towards self-determination in federal programs for Native Americans. Self-determination has continued to be a cornerstone of federal Indian policy since that time, with the government providing funds for many social programs to tribes while allowing tribes greater discretion in how they implement those programs. Legal Status of Tribal Land The legal status of tribal land poses some distinctive challenges for housing for Native Americans. Most tribal land is held in trust or otherwise restricted in some way. When land is held in trust, it means that the federal government holds the title to the land for the benefit of an individual ("individual trust land") or a tribe ("tribal trust land"). Both tribal and individual trust lands are subject to restrictions on alienation and encumbrance—that is, trust land generally cannot be transferred, leased, or have a lien or claim placed against it without the approval of the Bureau of Indian Affairs (BIA). When land is held in restricted fee status, rather than in trust, an individual or tribe holds the title to the land, but the land still cannot be alienated or encumbered without the BIA's approval. These restrictions on trust and restricted lands raise issues for mortgage lending because the land generally cannot be used as collateral for a mortgage. Banks are usually unwilling to offer mortgage loans (either for households to purchase a home or for developers to build housing) where they will not be able to take title to the land if the borrower does not repay the mortgage as promised. Because of the restrictions on mortgaging trust land, many loans on trust lands involve long-term leases of the land, with the leasehold interest acting as the collateral for the loan since the ownership interest in the land cannot be transferred. For example, an individual might obtain a 50-year leasehold interest in the land, and obtain a mortgage using that leasehold interest and the home as collateral. This has provided a model for lending on lands that have legal restrictions to being mortgaged. However, leases on tribal lands also generally require the BIA's approval. The process of obtaining the BIA's approval to obtain a long-term lease of trust land can make it more complicated and time-consuming to take out a mortgage. Another factor that can pose obstacles to mortgage lending is that tribal lands are subject to tribal laws, rather than state or federal laws. This includes laws governing foreclosure and eviction procedures if someone who took out a loan fails to pay it back as promised. This can contribute to banks being unwilling to offer loans on tribal lands, because banks might be uncertain about tribal laws or have concerns that some tribes do not have sufficient foreclosure or eviction laws in place. Together, these factors can limit the availability of private financing in tribal areas, either for individuals to purchase homes or for developers to access capital to increase the supply of housing. Housing Conditions in Tribal Areas Housing conditions on tribal lands vary widely. However, in general, the housing problems of Native Americans living on tribal lands tend to be particularly severe compared to the rest of the country. Historically, Native Americans on tribal lands have been more likely than the general population to live in housing that is overcrowded and/or physically substandard, and this continues to be the case today. Many issues contribute to poor housing conditions in tribal areas. Lack of economic development and economic opportunity contributes to substandard housing. Native Americans living on tribal lands are nearly twice as likely to live in poverty as the general population, making it difficult for many families to afford safe, affordable housing or leading to overcrowding. The issues raised by the legal status of trust land can make it difficult for tribes or individuals to obtain capital to finance affordable housing in tribal areas. Furthermore, the remoteness of some reservations can make it difficult or expensive to obtain building materials or find qualified labor, raising the cost of housing construction. In the years prior to the enactment of NAHASDA, several studies detailed the generally poor condition of housing on tribal lands. In 1989, Congress established the National Commission on American Indian, Alaska Native and Native Hawaiian housing, which released its final report in 1992. It described a persistent need for decent housing on tribal lands and identified barriers to the provision of such housing. In 1996, just before NAHASDA was enacted, the Urban Institute completed a study for HUD on Native American housing needs and the progress of existing housing programs in meeting those needs. It found that 28% of Native Americans on reservations or in other tribal areas were living in housing that lacked plumbing or kitchen facilities or was overcrowded, and that overall about 40% of Native Americans living in tribal areas were experiencing inadequate housing conditions. Since NAHASDA took effect in FY1998, tribes indicate that the law has had a positive impact on their ability to address housing needs in tribal areas. However, poor housing conditions remain much more prevalent in tribal areas than in the country as a whole, and some tribes experience particularly severe conditions. According to an analysis of 2010 Census data by the Housing Assistance Council, a nonprofit organization focused on rural housing issues, 5% of housing units on tribal lands lack complete plumbing facilities, and 5% lack complete kitchen facilities, compared to less than 1% of housing units nationally that lack each of these features. Eight percent of housing units on tribal lands are overcrowded, compared to 3% nationally. Tribal officials, policy makers, and others routinely describe extremely poor housing conditions that many tribes experience. In light of the special trust relationship between the federal government and tribes, the specific issues that affect housing on tribal lands, and the poor housing conditions in these areas, the federal government has established several programs that directly target housing on Native American lands over the last several decades. The next section of this report provides a brief overview of the evolution of federal housing programs for Native Americans, leading up to the reorganization of Native American housing programs into the system that is in place today. Brief History of Native American Housing Programs The federal government has had a long-standing policy of promoting access to decent and affordable housing for all Americans. The Housing Act of 1949 included a goal of "a decent home and a suitable living environment for every American family." However, Native Americans living on reservations or other tribal lands generally had little access to the affordable housing programs established by the federal government until the early 1960s. At that time, the government began to recognize that Native Americans largely lacked access to existing affordable housing programs and took steps to provide affordable housing funding explicitly for Native Americans. In 1961, tribal governments were first recognized as eligible to receive funding under the public housing program, which had been established by the Housing Act of 1937 and was administered at the time by the Public Housing Administration. This recognition allowed tribes to establish Indian housing authorities (IHAs), similar to local public housing authorities (PHAs), to administer federal housing assistance programs authorized under the 1937 law. In 1962, the Public Housing Administration established the Mutual Help Homeownership Opportunity Program to provide funds to IHAs to help Native Americans achieve home ownership through a lease-purchase program. Both the public housing program and the Mutual Help program were administered by the Department of Housing and Urban Development (HUD) after that department was established in 1965, and these two programs provided the bulk of housing assistance to Native Americans until NAHASDA reorganized the federal government's Native American housing programs into today's block grant system. Also in 1965, the Bureau of Indian Affairs (BIA) within the Department of the Interior established the Housing Improvement Program (HIP). Through HIP, the BIA provides grants to assist the least well-off Native Americans with repairing severely inadequate housing. The BIA was authorized to establish various assistance programs for Native Americans by the Snyder Act of 1921. However, while it used this authority to establish other types of programs for Native Americans, it did not create a specific housing program for Native Americans until it created HIP. In the mid-1970s, the government began to recognize that simply extending existing programs to tribal areas was not always effective, given some of the unique circumstances related to housing on tribal lands. Despite the availability of a number of affordable housing programs in tribal areas, poor housing conditions in tribal areas persisted. In 1978, a report from the General Accounting Office (GAO) noted that, despite the fact that HUD, BIA, and the Farmers Home Administration administered several programs that could help provide affordable housing for Native Americans, these programs had "not been effective in providing the number of units necessary to keep pace with the increasing need for decent, safe, and sanitary Indian housing." The report noted that HUD's programs were generally designed for more urban areas, and tended to be less effective on reservations located in more rural areas. Federal agencies began to make efforts to make housing programs more targeted to the specific circumstances of Native Americans living in tribal areas. Around this time, HUD created a separate Office of Indian Housing to administer the agency's Native American housing programs, which were previously operated as part of the public housing program. In 1976, regulations governing Native American housing assistance were published separately from the public housing regulations. Federal efforts to improve housing conditions in tribal areas continued during the 1980s and early 1990s. In 1983, Congress authorized a program to allow the Federal Housing Administration (FHA) to insure home mortgages made on tribal lands. This program was intended to address issues related to the lack of availability of mortgage credit on tribal lands and to encourage lenders to offer mortgages in these areas. In 1988, Congress passed the Indian Housing Act of 1988 ( P.L. 100-358 ), which separated Native American housing assistance from the existing public housing program in law and specified that future amendments to the public housing program would not apply to the Native American program (although existing requirements of the public housing program did continue to apply). The law also codified the Mutual Help Homeownership Opportunity Program. In 1992, Congress authorized another loan guarantee program, the Section 184 program, to encourage mortgage lending on tribal lands by allowing HUD to guarantee certain home mortgages in tribal areas. By the early 1990s, tribes were eligible to receive funding through at least 14 HUD programs, each of which had its own eligibility criteria and program requirements. These included programs specifically for tribes, such as Mutual Help, the Indian public housing program, and programs to provide loan guarantees on tribal lands such as the Section 184 program. It also included other, broader HUD programs for which tribes were eligible to receive funds, often through a set-aside of funding from the larger program. However, taken together, these programs were generally seen as inadequate to address the persistent housing needs and unique circumstances of Native Americans living on tribal lands. Furthermore, these programs generally did not recognize the principle of tribal self-determination. The Native American Housing Assistance and Self-Determination Act of 1996 In 1996, Congress enacted the Native American Housing Assistance and Self-Determination Act ( P.L. 104-330 ). The law represented a major reorganization of federal Native American housing assistance, consolidating most of the federal housing funding that previously had been provided to tribes under HUD programs into a single block grant that provides funds to eligible tribes based on a formula. Purpose President Clinton signed NAHASDA into law on October 26, 1996, and it took effect on October 1, 1997 (the beginning of FY1998). The congressional findings recognized the federal government's unique relationship with tribes and its responsibility to ensure access to affordable, decent homes for Native Americans, while at the same time recognizing the rights of tribal self-governance and self-determination. The centerpiece of NAHASDA was a reorganization of most of the existing federal housing assistance for Native Americans into a single block grant program, the Native American Housing Block Grant (NAHBG). (This block grant is sometimes also referred to as the Indian Housing Block Grant, or IHBG.) NAHASDA removed the ability of IHAs to directly receive funds through most other HUD programs, and instead authorized tribes to receive block grant funds that could be used for a broad range of affordable housing activities. Specifically, NAHASDA eliminated tribes' ability to receive funds under programs authorized by the Housing Act of 1937, as amended, such as the public housing program, Section 8, and Mutual Help. It also eliminated tribes' ability to directly receive funds through the HOME Investment Partnerships Program block grant, homelessness assistance programs, and the Youthbuild program (which has since been transferred from HUD to the Department of Labor). Tribes were given the flexibility to choose how to use the funds provided under the new block grant program to meet their housing needs within the parameters set by the law. NAHASDA also established a loan guarantee program to help tribes obtain private financing for affordable housing activities and authorized funding for technical assistance. In 2000, the law was amended to add a block grant providing housing assistance for Native Hawaiians. NAHASDA has been amended several times since it was enacted, and has been reauthorized twice, in 2002 ( P.L. 107-292 ) and 2008 ( P.L. 110-411 ). The most recent authorization for most NAHASDA programs expired at the end of FY2013. (The Native Hawaiian Housing Block Grant has not been reauthorized since its original authorization expired in FY2005.) The 113 th Congress considered NAHASDA reauthorization legislation, but none was enacted prior to the end of the 113 th Congress. In the 114 th Congress, the House and Senate have each been considering NAHASDA reauthorization bills ( H.R. 360 and S. 710 , respectively). For more information on NAHASDA reauthorization efforts in the 114 th Congress, see CRS Report R44261, The Native American Housing Assistance and Self-Determination Act (NAHASDA): Issues and Reauthorization Legislation in the 114th Congress , by [author name scrubbed]. Negotiated Rulemaking NAHASDA requires that regulations implementing the statute must be issued through a negotiated rulemaking process. Negotiated rulemaking means that the process of developing regulations to implement the statute includes groups and individuals with a stake in the outcome of the regulations, as well as the federal agency tasked with implementing the law. In the case of NAHASDA, negotiated rulemaking means that regulations are developed through a process that includes tribal representatives as well as representatives of HUD. Amendments to NAHASDA have clarified that negotiated rulemaking must also be used to develop any regulations required by amendments to the statute. HUD is required to establish a negotiated rulemaking committee within 180 days of the enactment of any laws reauthorizing NAHASDA to develop any proposed regulations that may be required. Native American Housing Block Grants The Native American Housing Block Grant program is the centerpiece of NAHASDA and the largest source of federal funding specifically targeted to Native American housing. Through the NAHBG, HUD provides funding to federally recognized Indian tribes and Alaska Native villages. In addition, five state recognized tribes that had contracts with HUD to receive funding under the pre-NAHASDA housing programs authorized by the Housing Act of 1937 are also eligible recipients of NAHBG funds. (Native Hawaiians are not eligible for NAHBG funds. Rather, Native Hawaiians are eligible for a separate housing program authorized by an amendment to NAHASDA, discussed in the " Housing Assistance for Native Hawaiians " section of this report.) Each year, Congress appropriates funding for the NAHBG to HUD, which then distributes formula grants to eligible tribes and Alaska Native villages, or to organizations that tribes or Alaska Native villages have identified to administer their grants (known as tribally designated housing entities, or TDHEs). TDHEs can be IHAs that administered previous housing programs for tribes, or they can be tribal departments or nonprofit entities. A single TDHE can be designated to administer the NAHBG for one or more tribes. Tribes and TDHEs that receive NAHBG funds are referred to as recipients. Indian Housing Plans In order to receive NAHBG funds, a tribe or its TDHE must submit an annual Indian Housing Plan (IHP) and have it approved by HUD. The IHP describes the tribe's affordable housing needs and its planned affordable housing activities for the next one-year period. These plans include descriptions of the activities that the tribe plans to fund with the NAHBG, estimates of the number of housing units or households that will be assisted and the amount of funding that will be spent on each activity, and requests for HUD approval of any necessary waivers of NAHBG requirements, among other things. The IHP must be submitted to HUD at least 75 days before the beginning of the tribal program year. While the IHP is required to be submitted and approved by HUD before a tribe can receive NAHBG funding, tribes are also required to submit an Annual Performance Report (APR) to HUD after the program year detailing the actual activities that the tribe funded with NAHBG funds. Recently, HUD combined the IHP with the APR. Now, tribes or TDHEs submit the IHP portion of the form prior to the beginning of the program year, and then submit the APR portion after the program year ends. Funding Formula The NAHASDA statute directed the Secretary of HUD to establish a formula for the distribution of NAHBG funds based on several factors. These factors include the number of housing units developed under certain pre-NAHASDA housing programs that continue to be operated by a tribe; poverty measures; and the number of members of federally recognized tribes (or the five state recognized tribes that are eligible for NAHASDA) that are living in the tribe's formula area. The actual formula is set out in regulations, which were developed through negotiated rulemaking between the tribes and HUD. It is based on two broad parameters: formula current assisted stock (FCAS), which measures the pre-NAHASDA housing stock developed under the 1937 Housing Act programs that the tribe continues to operate, and housing need. The two main components of the formula are also adjusted by additional factors intended to reflect costs in the local area. For example, the formula is adjusted to reflect either fair market rents in the area or the amount of operating subsidy a tribe received to operate its public housing units developed under the Housing Act of 1937. It also takes into account "total development cost," which is the cost of building a "moderately designed" house in the area based on the average of at least two nationally recognized residential construction cost indices. The formula is also adjusted to ensure that each tribe receives a certain minimum amount of funding. A tribe receives NAHBG funds based on the FCAS and need within its formula area, which is defined as reservations, trust land, and other tribal areas. A tribe can request that additional areas be added to its formula area. To do this, the tribe must show that it has an agreement with the governing entity of the area to provide housing services in the area, and that it either (1) could exercise court jurisdiction or (2) is providing substantial housing services in the area and will continue to do so. A tribe's formula area for the purposes of the NAHBG might differ from the area that is included as part of a tribe's service area for the purposes of other programs. Formula Current Assisted Stock As described earlier in this report, prior to the enactment of NAHASDA, tribes received federal housing assistance through HUD programs that had been authorized under the Housing Act of 1937. These included the Mutual Help program and the public housing assistance provided to IHAs. Although tribes no longer receive funding or develop new units under these programs, they continue to operate and maintain units that were built under the Housing Act of 1937. Therefore, in order to provide tribes with funds to continue to maintain and operate these units, part of the formula for distributing NAHBG funding is based on the number of housing units that were developed by the tribe under these 1937 Housing Act programs and continue to be owned or operated by the tribe today. Section 8 units are also included in this part of the formula if the tribe continues to provide rental assistance similar to the Section 8 program. Altogether, the number of housing units assisted under these programs that continue to be operated by a tribe is referred to as formula current assisted stock. The tribe is responsible for continuing to operate and maintain units developed under the 1937 Housing Act programs for as long as they remain in existence or until a homeowner unit is conveyed to the occupant. Therefore, the purpose of the FCAS component of the formula is to provide funds for both an operating subsidy and a modernization allocation for tribes to operate and maintain these units. Tribes report changes to their FCAS to HUD each year. Tribes might stop operating units funded under these old programs when a homeowner takes possession of a lease-purchase unit or when an older unit is demolished, for example. According to HUD, about half of tribes eligible for formula allocations under NAHASDA have FCAS. Need After the FCAS component of the formula is calculated, the remaining NAHBG funds are distributed based on need within a tribe's formula area. The need portion of the formula takes into account the Native American population, the income characteristics of the population, and the state of the housing stock in a tribe's formula area. More specifically, the need component of the formula is made up of the following seven factors, with the weight each factor is given in parentheses: The number of American Indian or Alaska Native households that are overcrowded or lack either kitchen or plumbing facilities (25%); The number of American Indian or Alaska Native households that have a housing cost burden greater than 50% of annual income (22%); Housing shortage, defined as the number of American Indian or Alaska Native households with an annual income less than or equal to 80% of median income, minus current assisted stock and housing units developed under NAHASDA (15%); The number of American Indian or Alaska Native households with annual incomes less than or equal to 30% of median income (13%); The number of American Indian or Alaska Native households (11%); The number of American Indian or Alaska Native households with annual incomes between 30% and 50% of median income (7%); and The number of American Indian or Alaska Native households with annual incomes between 50% and 80% of median income (7%). Each participating tribe receives an allocation of funding based on the formula current assisted housing stock and need in its formula area. Tribes can challenge most of the data used by HUD in determining formula allocations, including the population estimate (the number of Native Americans living in the formula area) and what HUD refers to as the household variables (the number of households in different situations). A tribe can challenge the data by submitting other data that it feels more accurately represent the tribe's housing needs. The data must be collected in a way that is consistent across tribes and must be acceptable to HUD. Examples that HUD gives of the types of data that might be used to challenge Census data are administrative data, such as tribal enrollment figures or data from the Indian Health Service (IHS), or a survey that is conducted by the tribe. The NAHASDA regulations, developed pursuant to negotiated rulemaking with representatives from both HUD and the tribes, specify that the data used to calculate the need portion of the formula should be data that are "collected in a uniform manner that can be confirmed and verified for all AIAN [American Indian and Alaska Native] households and persons living in an identified area." The regulations also specified that, initially, U.S. Census data would be used. HUD has continued to use Census data to calculate the need portion of the formula. Some tribes have argued that Census data are not the most accurate source to use for calculating the NAHBG formula because they include anyone who identifies as American Indian or Alaska Native, not just members of federally recognized tribes (the population that is eligible for NAHASDA). Other tribes have maintained that Census data are the most reliable source of data that are collected uniformly across tribes and should continue to be used. Furthermore, since the Census began to allow respondents to identify as belonging to more than one race in 2000, there has been disagreement over whether the "single-race" or "multi-race" Census data should be used to count the number of Native Americans living in an area for the purposes of the formula. Since FY2006, annual appropriations acts have directed HUD to calculate the formula both ways for each tribe—that is, once using only the number of people who identify as American Indian or Alaska Native alone, and once including the total number who identify as Native American or Alaska Native whether alone or in combination with another race—and to award each tribe the larger of the two grant amounts. For more details on the use of Census data in the NAHBG formula, and the debate over the use of single-race or multi-race data, see Appendix . Eligible Activities Tribes can use NAHBG funds for a wide range of affordable housing activities. In most cases, the housing assisted with NAHBG funds must benefit low-income members of federally recognized tribes (or members of the small number of state recognized tribes that are eligible for NAHASDA). Tribes can give preference to their own tribal members, as opposed to members of other federally recognized tribes living in their formula areas, if they indicate such a preference in their IHP. NAHBG funds can be used to develop, operate, maintain, or support affordable housing, including both rental housing and homeownership housing, as well as to provide associated infrastructure and services. The NAHASDA statute identifies six broad categories of activities for which NAHBG funds can be used: Indian Housing Assistance : Funds can be used to provide maintenance or operating assistance for housing that was developed under the programs authorized by the Housing Act of 1937 prior to NAHASDA. Development : Funds can be used to acquire, construct, reconstruct, or rehabilitate affordable housing. Among other things, this category allows funds to be used for infrastructure and utilities. Housing Services : Funds can be used for services for residents, including housing counseling, support for resident organizations, and services that promote residents' self-sufficiency. Housing Management Services : Funds can be used for services related to the management of affordable housing, such as processing loans, performing inspections, selecting tenants, and providing maintenance or operating assistance for housing that was developed using NAHBG funds. Crime Prevention and Safety : Funds can be used for safety, security, and law enforcement activities related to protecting residents of affordable housing. Model Activities : Funds can be used for model programs that are consistent with the purposes of NAHASDA and are approved by the Secretary of HUD. The regulations limit the amount of funds that can be used for administrative expenses to 20% of the annual grant amount. If a tribe intends to use more than 20% of a grant amount on administrative expenses, it must get approval from HUD. Eligible administrative expenses include costs such as program administration, data collection, and, if the tribe chooses, staff and overhead costs. Tribes can also put up to a certain amount of funds into reserve accounts to accumulate funds for planning and administrative activities. Figure 1 shows the percentage of total NAHBG expenditures between FY2008 and FY2013 that were used for each eligible activity under NAHASDA. The largest percentages of expenditures were for Indian housing assistance, defined as the operation and maintenance of pre-NAHASDA housing units (37%), and for housing development (31%), followed by administrative expenses (15%). The other categories of eligible activities each represented less than 10% of expenditures. Since this represents expenditures, rather than number of units assisted, the smaller percentages of funds expended on many eligible activities may partly reflect the lower cost of these activities as compared to developing or operating affordable housing. Income and Affordability Requirements NAHBG funds are intended to provide affordable housing to low-income tribal members. Therefore, the statute and regulations include several provisions related to ensuring that housing assisted with NAHBG funds is and remains affordable to this population. Low-Income Benefit In general, housing funded through the NAHBG must benefit low-income Native American households that are living on reservations or in other tribal areas. Low-income is defined as having an income that is no higher than 80% of the area median income. Although housing funded through the NAHBG is generally intended for low-income Native American families, there are some exceptions. Subject to specific conditions, tribes can use NAHBG funds to assist Native American households that are not low-income if there is a need for housing for such households that cannot otherwise be met. Tribes can also use NAHBG funds to provide housing for law enforcement officers under certain circumstances. Finally, tribes can use NAHBG funds to provide housing assistance to a household whose presence is considered "essential" to the well-being of the area (an example might be a medical professional in a remote area) if the household's housing needs cannot reasonably be met without the assistance. Maximum Rent Monthly rents or homebuyer payments (that is, payments under a lease-purchase program) in NAHBG-assisted housing may not exceed 30% of a household's monthly adjusted income. Tribes or TDHEs are responsible for having written policies related to rents and homebuyer payments and methods for determining such payments. The statute does not specify a minimum rent, but tribes are free to set a minimum rent if they choose to do so (as long as the rent does not exceed 30% of a household's adjusted income). Affordability Period Housing assisted with NAHBG funds must remain affordable for "the remaining useful life of the property," as determined by the Secretary of HUD, or for another period of time set by the Secretary. The recipient must require "binding commitments," such as deed restrictions or other mechanisms, to ensure that the affordability period will be met. An affordability period applies regardless of the amount of NAHBG funds expended on a unit, although tribes can choose to set a relatively short affordability period for units that have small investments of NAHBG funds. The 2008 law that reauthorized NAHASDA specified that the long-term affordability and binding commitment requirement does not apply to households that subsequently take ownership of homeownership units assisted under NAHASDA. Oversight The NAHASDA statute and regulations include a number of provisions related to the oversight of NAHBG funds. These provisions include both HUD's oversight of the recipients of NAHBG funds and recipients' oversight of the activities that they fund with NAHBG grants. HUD Oversight of Recipients NAHASDA requires recipients to submit performance reports to HUD each fiscal year describing the specific activities for which NAHBG funds were used and how they related to the housing needs set forth in the IHP. These reports are known as annual performance reports (APRs), and, as noted earlier in this report, HUD has recently redesigned the report to combine it with the IHP. NAHASDA also provides several steps that HUD can take if a recipient of NAHBG funds is not complying with the requirements of the program. If HUD finds that a tribe has substantially not complied with NAHASDA requirements, then HUD is to take one of several actions, including terminating assistance to the tribe, reducing payments by the amount of funds that were not spent properly, limiting funds to the tribe, or, in certain cases, replacing the TDHE. Certain notice and hearing requirements apply. The Secretary also has the authority to refer a case to the Attorney General for a civil action. For less serious instances of noncompliance, HUD can provide technical assistance to the tribe to ensure that funds are expended in compliance with the requirements of the law. Any funds that HUD recaptures as a result of a recipient not complying with NAHASDA requirements are added to the NAHBG funds to be distributed to tribes the following fiscal year. Recipient Oversight of Grantees Recipients of NAHASDA funds (i.e., tribes and TDHEs) are required to ensure that funds are used in ways that comply with the program requirements. NAHASDA requires recipients to have enforceable agreements with owners of housing assisted with NAHASDA funds to ensure long-term compliance and establish remedies for noncompliance. Recipients are also required to review housing activities under NAHASDA at least annually, including through onsite inspections, to ensure that activities are complying with the requirements of NAHASDA. Title VI Loan Guarantee Program As was described earlier in this report, the legal status of trust lands can make it difficult to obtain traditional financing for building or purchasing housing in tribal areas. This can impact not only individuals seeking mortgages to purchase homes, but also tribes seeking loan funds to build housing or other types of buildings. Title VI of NAHASDA authorizes a loan guarantee program to help tribes obtain financing for affordable housing activities. The program is referred to as the Title VI Loan Guarantee Program. Under the Title VI program, HUD can guarantee loans made by private lenders to NAHBG recipients to help them fund affordable housing activities. Individual tribal members are not eligible for Title VI loan guarantees. The same affordable housing activities that are eligible uses of NAHBG funds are eligible under Title VI. The tribe pledges future NAHBG amounts as collateral for the loan. (A tribe can borrow up to five times the need portion of its annual NAHBG formula allocation.) If the tribe defaults on the loan, HUD will repay the lender 95% of the remaining principal and interest amount it is owed, and HUD can be repaid from the tribe's NAHBG formula allocations. HUD receives an appropriation each year to cover the costs of the program. In recent years, Congress has appropriated about $2 million per year to cover the costs of these loan guarantees. Annual appropriations acts also include a limit on the dollar amount of loans that HUD can insure under the program in a given year. In FY2015, HUD was authorized to guarantee up to $16.5 million in loans under this program. As of the end of FY2014, HUD had guaranteed a total of 80 loans totaling over $200 million over the life of the program. In FY2014 alone, HUD guaranteed five loans totaling $14.4 million. Technical Assistance NAHASDA also authorizes funding for training and technical assistance. Under Section 703 of NAHASDA, Congress authorizes funding for "a national organization representing Native American housing interests" to provide training and technical assistance to IHAs and TDHEs. Congress has provided funding for training and technical assistance for an organization representing Native American housing interests in annual appropriations acts, and this funding was traditionally provided to the National American Indian Housing Council (NAIHC). Since FY2012, appropriations acts have provided funding for "national or regional organizations representing Native American housing interests." Therefore, in recent years, HUD awarded this funding to additional organizations as well as the NAIHC. In FY2015, Congress provided $3.5 million for training or technical assistance for national or regional organizations that represent Native American housing interests, but directed that at least $2 million of that amount be provided to a national organization as described in the NAHASDA statute. Congress has also traditionally set aside additional funding within the NAHBG account for HUD to provide training and technical assistance related to the inspection of NAHASDA-assisted housing, various contract expenses, and housing oversight and management. In FY2015, Congress provided $2 million for this purpose. Housing Assistance for Native Hawaiians In 2000, Congress amended NAHASDA to add Title VIII, which provides for housing assistance for Native Hawaiians. Title VIII establishes the Native Hawaiian Housing Block Grant (NHHBG) program, which is similar to the Native American Housing Block Grant program. However, unlike the NAHBG, the only eligible recipient of funds under the NHHBG is the Department of Hawaiian Home Lands (DHHL), an agency of the state government of Hawaii. The DHHL, in turn, can provide funds to local organizations to carry out housing activities. Like tribes and TDHEs under the NAHBG program, the DHHL must submit a housing plan for HUD's approval prior to receiving funds. NHHBG funds must be used for affordable housing activities that benefit low-income Native Hawaiians who are eligible to live on the Hawaiian home lands. Native Hawaiians are defined as citizens of the United States who are descended from the aboriginal Hawaiian people. The Hawaiian home lands are lands that were set aside under the Hawaiian Homes Commission Act of 1920 to be used to provide homesteads for Native Hawaiians. The lands are administered by the DHHL, which provides 99-year homestead leases to eligible Native Hawaiian applicants. Those who obtain leases can then build or purchase a home on the land. Native Hawaiians have some of the most severe housing needs, with 15% of Native Hawaiians in Hawaii living in poverty and 25% living in overcrowded conditions. Furthermore, Hawaii has some of the highest housing costs in the nation, and the Hawaiian home lands tend to be located in rural areas and often include land that presents challenges for building. All of these factors contribute to a shortage of affordable housing that is available to Native Hawaiians, particularly on the Hawaiian home lands. According to HUD, DHHL estimates that there are about 9,000 Native Hawaiian households that currently hold homestead leases on the Hawaiian home lands, over 26,000 households on the waiting list for leases to reside on the Hawaiian home lands, and over 32,000 households that could apply to reside on the Hawaiian home lands. DHHL estimates that there are over 34,000 households in total that may be eligible for assistance under the NHHBG—that is, Native Hawaiians eligible to reside on the Hawaiian home lands who are also low-income. Eligible activities under the NHHBG are similar to the eligible activities under the NAHBG, and include the development of affordable housing, including new construction, rehabilitation, or acquisition; providing infrastructure; offering support services and housing management services; crime prevention activities; developing community facilities that serve low-income Native Hawaiian residents of affordable housing; and model activities approved by HUD. In recent years, HUD has allowed the DHHL to use up to 20% of its grant amount for administrative expenses. Like the NAHBG, housing funded through the NHHBG must remain affordable for the remaining useful life of the property, and the monthly rents or homebuyer payments cannot be more than 30% of a household's monthly adjusted income. The NHHBG can be used for both rental and owner-occupied housing. However, the DHHL has historically used most of its NHHBG funding for owner-occupied housing or related activities (such as providing infrastructure or offering housing counseling). This appears to be due to the fact that the Hawaiian home lands were originally set aside for homesteading purposes, and that there are currently a large number of families on the wait list to receive a homestead lease on the Hawaiian home lands, some of whom have been on the list for years or even decades. The DHHL has traditionally used NHHBG funding to assist with constructing or rehabilitating single-family homes on the Hawaiian home lands, or to provide assistance with financing the purchase or repair of such homes. Over the life of the program through FY2014, NHHBG funds have been used to build, acquire, or substantially rehabilitate homes for 570 households and to provide counseling or other services to over 1,500 households. The DHHL aims to use NHHBG funds to assist about 65 families per year with building, acquiring, or substantially rehabilitating a home. NAHASDA Funding Appropriations Each year, Congress appropriates funding to HUD for NAHASDA programs during the annual appropriations process. Funding for NAHASDA programs is appropriated to two accounts: the Native American Housing Block Grant account and the Native Hawaiian Housing Block Grant account. Native American Housing Block Grant Account Funding for all NAHASDA programs, except for the Native Hawaiian Housing Block Grant, is appropriated to the Native American Housing Block Grant account. NAHBGs themselves make up the bulk of the funding each year, but the account also includes funding to cover the costs of the Title VI Loan Guarantee Program and funding for training and technical assistance. In addition, appropriations laws include a limit on the dollar amount of loans that HUD can insure under the Title VI program during the fiscal year. Since the account was first funded, in nominal (non-inflation-adjusted) terms, total funding has ranged from a low of $600 million (in FY1998, the first year of funding) to a high of $700 million (in FY2010), with appropriations in most years falling somewhere in between. Table 1 shows the funding level for each program funded within the NAHBG account, as well as overall account-level funding, for each year from FY2003 to FY2015. Native Hawaiian Housing Block Grant Account Table 2 shows the annual funding levels for the Native Hawaiian Housing Block Grant program in each year since it was first funded in FY2002. Prior to FY2006, NHHBG funding was appropriated within the Community Development Fund account within HUD. Since FY2006, NHHBG funding has been appropriated in its own account. The NHHBG account generally includes a set-aside of funds to be used for training and technical assistance, and this amount has been relatively steady over the years. In FY2015, $9 million was appropriated to the account, including $300,000 for training and technical assistance. Tribes' Uses of NAHBG Funds As described, tribes can use NAHBG funds for a wide variety of affordable housing activities that benefit low-income tribal members. In general, tribes rehabilitate more units with NAHBG funds than they build or acquire, and tribes are more likely to use funds for owner-occupied housing than for rental housing. Units Assisted Between FY2008 and FY2014, HUD reports that a total of over 44,000 units of housing were built, acquired, or rehabilitated using NAHBG funds. On average, tribes used NAHBG funds to build, acquire, or rehabilitate between 5,000 and 8,000 units per year. As Figure 2 shows, rehabilitation of housing units is more common than building or acquiring units. In FY2014, about 4,000 units were rehabilitated using NAHBG funds, compared to nearly 1,000 units built or acquired. HUD estimates that over 100,000 housing units have been built, acquired, or rehabilitated with NAHBG funds since the program began. Of this total, over 35,000 units have been built or acquired, and over 70,000 have been substantially rehabilitated. Until recently, HUD did not systematically collect information on the number of units that benefited from NAHBG funds in ways other than construction, acquisition, or rehabilitation, such as through the use of rental assistance or down payment assistance programs. HUD has begun collecting more data on other eligible activities with the revised IHP/APR form that it began using in FY2012, suggesting that more data on these uses of NAHBG funds might be available in the future. A 2009 evaluation of the NAHBG program conducted for HUD provided some estimates on the number of households or units that were assisted through other types of activities over the course of a single year. The evaluation estimated, on the basis of interviews with selected tribes, that tribes had used NAHBG funds to assist a total of about 1,000 households with down payment assistance, about 8,500 households through various rental assistance programs, and about 5,000 households with emergency assistance with making rent, mortgage, or utility payments during the most recent program year. Tribes had also provided ongoing maintenance or operating assistance during the year to about 5,000 rental units that had been developed using NAHBG funds. In addition to developing and maintaining new units and providing other types of housing assistance, tribes also currently continue to maintain about 31,000 existing low-rent public housing units and close to 12,000 Mutual Help units that were developed prior to NAHASDA. Homeownership vs. Rental Units In general, many tribes choose to use NAHASDA funds to develop more new owner-occupied units rather than rental units. For example, GAO found that, between FY2003 and FY2008, tribes used NAHBG funds to build, acquire, or rehabilitate nearly four times as many homeownership units as rental units. Specifically, as Figure 3 shows, tribes assisted 40,000 homeownership units using NAHBG funds during this time period, compared to just over 10,000 rental units. One reason that tribes give for assisting more homeownership units than rental units is the ongoing cost to tribes of maintaining and operating rental units built with NAHASDA funds. Ongoing maintenance of rental units is expensive for tribes and TDHEs, while the maintenance and other costs of owner-occupied housing become the responsibility of the homeowner rather than remaining the responsibility of the tribe. FY2015 Formula Allocations Every federally recognized tribe and the five state recognized tribes that were grandfathered in under NAHASDA are eligible to receive a formula allocation of NAHBG funds. Each year, HUD runs the NAHBG formula to determine how much each tribe is eligible to receive under the formula (a tribe's formula allocation). However, the number and size of grants actually made can differ from the number and size of these formula allocations for several reasons. One reason that the number and size of formula allocations may differ from the number and size of grants made is that several tribes might select the same TDHE to administer their funds, resulting in those tribes' formula allocations being combined into a single grant to that TDHE. This means that there are fewer grants made than formula allocations, and the average grant amount is generally higher than the average formula allocation. Another reason that the number of grants might differ from the number of formula allocations is that some tribes that are eligible for formula allocations may not receive a grant in a given year. This could occur because a tribe has elected not to take its formula allocation, because it did not submit an Indian Housing Plan or that plan was not approved by HUD, or for other reasons. This section describes the formula allocation amounts, rather than grant amounts, for FY2015. In FY2015, HUD announced formula allocations totaling over $650 million in NAHBG funds for 586 tribes and Alaska Native villages. The amounts of the individual formula allocations ranged from just over $50,000 (many tribes and Alaska Native villages) to nearly $84 million (the Navajo Housing Authority). The $84 million awarded to the Navajo Housing Authority was nearly three times larger than the next highest formula allocation amount (nearly $29 million to the Cherokee Nation). The mean formula allocation was about $1.1 million, while the median formula allocation was nearly $270,000. Over 370 tribes or Alaska Native villages had allocations of less than $500,000; of these, over 150 had allocations of less than $100,000. About 140 recipients had allocations of more than $1 million; of these, 20 had allocations of at least $5 million, and eight had allocations of $10 million or more. Figure 4 summarizes how many of the 586 formula allocations to tribes and Alaska Native villages in FY2015 fell within certain dollar ranges. Tribes can leverage their NAHBG funds—that is, use the funds they receive through the program to attract additional funds from other sources—or otherwise combine NAHBG funds with other funding streams to develop affordable housing. The Title VI program is an example of leveraging, because it allows tribes to use their NAHBG funds to help them obtain additional financing from private sources. Leveraging of HUD funding was allowed prior to NAHASDA, but was not common, and some tribes have identified the ability to leverage funds as a major benefit of NAHASDA. However, HUD has suggested that the ability of some tribes to leverage NAHBG funds using Title VI is limited because tribes can only borrow up to five times the need portion of their NAHBG formula allocations. Leveraging or otherwise combining funds from multiple sources might be particularly important for tribes who receive relatively small grants under the NAHBG, since those grants alone might not be enough to undertake some larger-scale housing projects. For example, a tribe that receives an allocation of $50,000 is unlikely to be able to construct or acquire new housing units with its NAHBG funding alone, and may have to focus on other, lower-cost affordable housing activities unless it is able to combine its NAHBG funding with funding from other sources. However, smaller tribes might be less likely than larger tribes to have the capacity to seek out or administer funding from additional sources. Other sources of funds available to tribes can include other federal programs, as well as state, local, tribal, or private funds. Some examples of other federal sources of funding for housing might include other HUD programs, the low-income housing tax credit (LIHTC) administered by the Department of the Treasury, or housing programs administered by the U.S. Department of Agriculture (USDA). Tribes might also be able to access funding for related projects, such as infrastructure needed to support housing development, from agencies including the BIA, USDA, or the Indian Health Service (IHS) within the Department of Health and Human Services (HHS). While combining funds from multiple sources can make it easier for tribes to address a wider range of housing needs, it also means that tribes have to comply with multiple programs' requirements. This can lead to challenges for tribes in leveraging NAHBG funding, including additional expense or time devoted to complying with multiple programs' requirements. Census Data in the NAHBG Formula Data from the decennial Census are used for many aspects of the NAHBG formula. Some issues have arisen related to the use of these data to calculate formula allocations. First, some tribes have argued that other sources, such as tribal enrollment or survey data, would more accurately identify the population that NAHASDA is intended to serve than the Census data. Second, since 2000, the Census has allowed respondents to identify themselves as belonging to more than one race, leading to questions about whether the NAHBG formula should take into account only those who identify solely as American Indians or Alaska Natives, or those who also identify as American Indian or Alaska Native in combination with another race. This appendix provides a brief overview of these two issues. In general, tribes have indicated that they wish to come to a consensus about formula issues among themselves through the negotiated rulemaking process, rather than having HUD or Congress make decisions on how to handle these issues. Tribes have previously discussed these issues in negotiated rulemaking, but have not come to a consensus regarding any changes to date. Using Census Data to Calculate the Need Portion of the Formula The NAHASDA regulations, as agreed upon in negotiated rulemaking, specify that the data source used to calculate the need portion of the formula must be data that are "collected in a uniform manner and that can be confirmed and verified for all AIAN [American Indian and Alaska Native] households and persons living in an identified area." The regulations also specify that, initially, the data source used would be decennial Census data. HUD has continued to use Census data to calculate the need portion of the formula grant amounts for the NAHBG, including data on the number of American Indian or Alaska Native (AIAN) households. There has been disagreement among tribes on whether Census data are the best data for HUD to use to allocate NAHBG funding. Some tribes believe that it is the most uniform, verifiable source of data available, and therefore is the fairest way to allocate funding among tribes. Other tribes, however, argue that Census data may not be representative of the population that NAHASDA is meant to serve. NAHASDA provides funds to tribes to provide affordable housing to people who are members of federally recognized (or a small number of state recognized) tribes and are living in a tribe's formula area. However, the Census counts include anyone who identifies as American Indian or Alaska Native, whether or not they are enrolled members of such a tribe. Some of the people who identify as AIAN in the Census might not be enrolled tribal members at all, or they might be members of tribes that are not eligible under NAHASDA (such as state recognized tribes, or Canadian or South American tribes). Therefore, some tribes have argued that Census data do not provide an accurate count of the tribal population, as opposed to the overall AIAN population, and have suggested that tribes should have the option of using alternative data sources that better reflect the population that NAHASDA is intended to serve. They also argue that using the reported AIAN numbers in the Census rather than data that count enrolled tribal members effectively distributes NAHBG funds based on the number of people who identify with a specific racial group rather than based on their political status as tribal members. Some possible alternative data sources that could be used include tribal enrollment data, tribal censuses, or data collected by other federal agencies. Many tribes have argued that one or more of these sources might more accurately reflect the tribal population. Furthermore, tribes have pointed out that, as sovereign nations, they choose the conditions of tribal membership; therefore, they argue that they should be allowed to choose the best data to measure their own tribal populations. Other tribes have opposed using data sources other than the Census, arguing that the Census data are the only available data that are collected in a "uniform" and "verifiable" manner across tribes, as required by the regulations. These tribes note that existing alternative data sources each have drawbacks. For example, some data might not be collected by all tribes, or the data that are produced might not be standardized or verified across tribes. These tribes argue that it would be expensive and burdensome to require all tribes to adopt a single new data source, particularly if it required tribes to begin collecting data that they do not collect currently. They also express concerns that allowing tribes to each use different data sources could be cumbersome, and that this approach could lead to delays in funds being awarded while HUD verified the accuracy of many different data sources. The 2008 reauthorization of NAHASDA included a provision directing the Secretary of HUD to contract with an organization to carry out a study of data sources, including sources other than the Census, that could be used to evaluate Native American housing needs for the purposes of the formula. The law authorized appropriations to carry out the study, but no funds have been appropriated, and the study has not been carried out. "Single-Race" and "Multi-Race" Census Data Beginning in 2000, Census respondents have had the option of identifying themselves as belonging to more than one race. The NAHASDA statute and regulations do not specify whether HUD should use data related only to the number of individuals who identify solely as American Indian or Alaska Native ("single-race data"), or if it should also include the number who identify as American Indian or Alaska Native in combination with another race ("multi-race data"). For the FY2004 formula allocations, HUD chose to use the total number of individuals who identified as American Indian or Alaska Native, regardless of whether they also identified with another race. HUD said that it made this decision because it believed it to be the most inclusive of all Native Americans living in a tribe's formula area. However, many tribes disagreed with both this decision itself and with HUD's decision to use the multi-race data without consulting tribes through negotiated rulemaking or a notice and comment period. Since FY2006, annual appropriations acts have directed HUD to calculate the formula both ways for each tribe—that is, using the single-race data and the multi-race data—and to award each tribe the larger of the two grant amounts. Tribes have not reached a consensus about the single-race and multi-race data through negotiated rulemaking. In 2006, at Congress's direction, HUD solicited comments on its use of multi-race data in the NAHBG formula. Many tribes argued against using the multi-race data, maintaining that the single-race data are a better approximation of the tribal population that NAHASDA is intended to serve. These tribes raised concerns that those who identify as AIAN under the multi-race data might be less likely to be enrolled tribal members or less likely to live on reservations, and that using the multi-race data could therefore shift NAHASDA funding away from tribal members living on traditional reservations towards tribes that have more urban areas included in their formula areas. Although many tribes are in favor of using the single-race data, there are some tribes that favor using the multi-race data. These tribes argue that there are tribal members who identify as belonging to multiple races, and that using only the single-race data would therefore exclude these tribal members. These tribes argue that using the multi-race data is a better reflection of the total population that they serve.

Native Americans living in tribal areas experience some of the poorest housing conditions in the United States. Native Americans in tribal areas are several times more likely to live in housing that is physically substandard or overcrowded than the U.S. population as a whole. They are also more likely to live in poverty than the general population, further contributing to housing problems. In addition, a number of issues, such as the legal status of tribal land, pose unique barriers to housing for many people living in tribal areas. In light of these conditions, and the federal government's trust responsibility to Native American tribes, Congress has provided funding for Native American housing programs for several decades. The Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA) reorganized the previous system of housing assistance for Native Americans and replaced it with a single block grant program, the Native American Housing Block Grant (NAHBG). In addition, the law focused on self-determination for tribes, giving tribes broad authority to choose how to use the affordable housing funds they receive under NAHASDA. Through the NAHBG, the Department of Housing and Urban Development (HUD) distributes formula funding to Native American tribes and Alaska Native villages, or to organizations the tribes have designated to administer the funding (known as tribally designated housing entities (TDHEs)). Tribes and TDHEs, in turn, use the funding for a range of affordable housing activities to benefit low-income tribal households. These activities include developing new housing for rental or homeownership, maintaining or operating existing housing units, providing infrastructure, and offering housing-related services. In addition to the NAHBG, NAHASDA also authorizes a loan guarantee program to help tribes obtain private financing for housing activities (the Title VI Loan Guarantee program) and authorizes funding for training and technical assistance. An amendment to NAHASDA in 2000 established the Native Hawaiian Housing Block Grant (NHHBG) program to provide housing assistance for Native Hawaiians similar to the assistance provided under the NAHBG. HUD estimates that about 100,000 housing units have been built, acquired, or rehabilitated since the NAHBG began. The majority of these units have been substantially rehabilitated rather than built or acquired. In general, many tribes choose to use their NAHBG funds to develop more homeownership units than rental units, in part because homeownership units have fewer ongoing costs for tribes. The NHHBG has been used to build, acquire, or rehabilitate nearly 600 homes since the program began, and to provide services or training to another 1,500 households. The authorization for NAHASDA programs, other than the Native Hawaiian Housing Block Grant, expired at the end of FY2013. (The Native Hawaiian Housing Block Grant program has not been reauthorized since its initial authorization expired at the end of FY2005.) Congress has been considering bills to reauthorize NAHASDA.

Introduction The Indian Health Service (IHS), part of the Public Health Service (PHS) of the Department of Health and Human Services (HHS), funds health services to about 1.8 million Indians, members of the nation's 562 federally recognized American Indian and Alaska Native (AI/AN) tribes in IHS service delivery areas. Health services are available to eligible residents of reservations, of non-reservation areas of those counties that overlap or abut reservations, and of some urban areas with a significant AI/AN population. Eligible Indians receive free IHS health services regardless of their ability to pay (except in certain urban programs, or when a tribe chooses to charge for services). The federal government considers its provision of these health services to be based on its trust responsibility for Indian tribes, a responsibility derived from federal statutes, treaties, court decisions, executive actions, and the Constitution (which assigns authority over Indian relations to Congress). Congress, however, has only a moral obligation, not a legal one, to provide Indian health care. The Supreme Court has rejected the idea (absent congressional statement to the contrary) that IHS is under an obligation to provide any specific health program to Indians. This report provides an overview of the Indian Health Service and how it provides for the health care problems and needs of AI/AN. It also shows IHS appropriations for recent years and discusses its current statutory authorities and legislative issues, including the reauthorization of appropriations in the Indian Health Care Improvement Act (IHCIA) and several other policy issues. Health Care Delivery The federal government's delivery of health services to Indians, and funding of tribal and urban Indian health programs, has developed over more than a century. ( Appendix provides a brief history of the Indian Health Service.) Organization of the IHS Health Delivery System Currently, the IHS health care delivery system, a largely rural system, is organized into regional area offices and, within each region, local service units. As of 2006, there were 12 regional area offices and 161 local service units. The IHS system serves federal reservations, Indian communities in Oklahoma and California, and Indian, Eskimo (Inuit and Yupik), and Aleut communities in Alaska. Service units, as geographic entities, may be made up of both whole counties and parts of counties. All counties in the national IHS service area are covered by one or more service units. The map in Figure 1 shows the counties served by IHS-funded programs (as of 2001), including both IHS service areas and IHS-funded urban projects. As a whole, the IHS national service area roughly matches the distribution of federal Indian reservations and communities, although in five states (Alaska, Arizona, Nevada, Oklahoma, and South Carolina) every county is served by the IHS. Range of Health Care Services The IHS provides an array of medical services, including inpatient, ambulatory, emergency, dental, public health nursing, and preventive health care. The IHS does not have a defined medical benefit package that excludes or includes specific conditions or types of health care. Besides providing general clinical health services, the IHS also focuses on such special Indian health problems as maternal and child health, fetal alcohol syndrome, diabetes, hepatitis B, alcoholism, and mental health. The IHS provides these services directly, and through tribes, tribal organizations, and urban Indian organizations. In addition, both the IHS and tribes may contract for health services from private providers. Health Administration As noted, IHS-funded health care is provided in facilities administered through regional offices and service units. Service units and specific health facilities (but not IHS regional offices) may be managed either by the IHS directly, or by Indian tribes and tribal organizations and consortia through self-determination contracts and self-governance compacts negotiated with the IHS under the authority of the Indian Self-Determination and Education Assistance Act (ISDEAA). Tribes and tribal organizations have taken over from IHS the responsibility for operating many service units and health facilities. (The ISDEAA is discussed at greater length below, under "Statutory Authority.") Currently, 100 of the 161 service units (62%) are operated by tribes under ISDEAA, as are 522 of the 646 IHS-funded health facilities (81%) (see Table 1 ). Contract Health Services (CHS) In addition to care received from IHS and tribal providers, health services are purchased by IHS and the tribes through contracts with more than 2,000 private providers, if the local facility is unable to provide the needed care. Not all areas of the country are covered by this service. Areas where this IHS-funded contract health care is available are known as "contract health service delivery areas" (CHSDAs), and are the same as the IHS service areas shown in Figure 1 . CHS providers may not bill Indians for CHS services authorized by the IHS. Urban Indian Health Projects Although most IHS facilities are located on or near reservations, IHS also funds, with approximately 1% of its budget, 34 urban Indian health projects (UIHPs), with operations at 41 locations. UIHPs are funded by IHS with grants and contracts. In 2000 UIHPs served an estimated 669,970 urban Indians living in IHS's urban service areas. UIHPs also receive funding from other sources, including state, private, and non-IHS federal programs, and from patient fees. Figure 1 displays the areas served by urban Indian health projects. Some urban projects are inside CHSDAs and some are not. Other Health-Related Activities The IHS funds the construction, equipping, and maintenance of hospitals, health centers, clinics, and other health care delivery facilities, both those operated by the IHS and those operated by tribes. Tribes may handle these activities under self-determination contracts or self-governance compacts. Since 1960, under the authority of the Indian Sanitation Facilities Act, the IHS has also funded the construction of water supply and sewage facilities and solid waste disposal systems, and has provided technical assistance for the operation and maintenance of such facilities. According to the IHS in 2005, about 12% of AI/AN homes lack safe drinking water supplies and adequate waste disposal facilities, compared to about 1% of all U.S. homes. Because of improved access to sanitation facilities, there has been about an 80% reduction in gastrointestinal disease among AI/AN since 1973, according to the IHS. Limitations in Health Services The IHS does not provide the same health care services in each area it serves. Services vary from place to place and from time to time. In general, the services provided to any particular Indian community will depend on financial resources (i.e., appropriations and third party reimbursements) and available personnel and facilities. IHS has stated that its funding does not allow it to provide all the needed care for eligible Indians. As a result, according to Indian health organizations, some services are "rationed," with the most critical care given first. IHS regulations require that, when resources or funds are insufficient, the agency must set priorities for both direct and contract health care based on "relative medical need." In addition, the drugs and medicines available from IHS pharmacies may not include all drugs and medicines needed, although IHS says its pharmacies will stock most drugs that have proven to be cost-effective and beneficial. IHS shortfalls in medical personnel contribute to this unevenness in health care delivery. Where a health professional position is vacant, either the health care may not be available or the facility will have to use CHS funds, which according to IHS raises the costs of the care. In January 2008, the IHS had job vacancy rates of 31% for dentists, 18% for nurses, 17% for physicians, 13% for optometrists, and 11% for pharmacists. Eligible Population In general, persons eligible for IHS services are members of federally recognized tribes. They must also live on or near federal Indian reservations or in traditional Indian communities, or within a county where IHS contract health services are available. Eligible Indians include those of Indian descent belonging to the Indian community who are regarded as Indian by the community in which they live. Eligibility also is indicated by: (1) location within an IHS health service delivery area; (2) residence on tax-exempt land or ownership of property on land for which the federal government has a trust responsibility; (3) active participation in tribal affairs; or (4) meeting other relevant factors in keeping with general Bureau of Indian Affairs (BIA) practices in the jurisdiction for determining eligibility. Urban Indian health programs funded by IHS may serve a wider range of eligible persons, including members of terminated or state-recognized tribes and their children and grandchildren. In addition, eligible persons may also include a non-Indian woman pregnant with an eligible Indian's child. She would be eligible for care during the pregnancy and six weeks following birth, as long as paternity is acknowledged. The IHS also serves non-Indians in specific circumstances particularly when an acute infectious disease is involved. Most IHS services are intended for members of federally recognized tribes. Since federal law does not restrict state recognition of tribes, some states grant recognition to Indian groups that are not recognized by the federal government. Members of such state-recognized tribes are ineligible for most IHS health services, but are eligible for services at IHS-funded urban Indian health projects. For the most part, tribal membership is determined by the tribe. Many tribes require recognized descent from a particular tribal roll for membership. In tracing descent, tribes follow paternal or maternal. bloodlines, or both. Some tribes require minimum percentages of genealogical descent, and others require only proof of descent. For a few tribes, Congress has set membership criteria in statute. The IHS service population (as calculated by IHS) is not evenly distributed throughout Indian country. In 2003, approximately 35% of the population served by IHS resided in two IHS regions: 14.4% lived in the Navajo region (northwestern New Mexico, southeastern Utah, and northeastern Arizona, excluding the Hopi Reservation), and 20.7% lived in the Oklahoma region (Kansas, Oklahoma, and part of Texas). Population Data Determining the actual number of people eligible for IHS services is problematic. There is no U.S. census of members of federally recognized tribes (or, for that matter, of members of terminated and state-recognized tribes who might be eligible for UIHP services). IHS makes annual estimates of its eligible "service population" based on decennial census data, adjusted for birth and death rates and for the areas IHS serves (see Figure 1 ). The census, however, asks respondents only to identify themselves by race, not by confirmed membership in a federally recognized tribe. Hence IHS service population data are based on self-identification as AI/AN by race, not on tribal membership. Not all persons self-identifying as AI/AN are members of federally recognized tribes, so not all AI/AN counted by the census are eligible for IHS services. The IHS also estimates its "user population," based on registered AI/AN patients who used IHS-funded services at least once in the most recent three years, but this figure does not include all eligible AI/AN. The BIA publishes biennial estimates of its own service population, based on estimates received from BIA agencies and federally recognized tribes, but these estimates are not based on actual censuses and cover only persons on or near reservations. The BIA also lists tribes' reports of their enrollment totals, but the BIA conducts no census to confirm these figures, and its publication does not show whether the enrollees enumerated live on or near reservations or inside or outside IHS service areas. Table 2 compares recent IHS, BIA, and census population figures. Determining the urban Indian population eligible for UIHP services is equally inexact. As noted above, UIHPs serve a wider range of eligible persons, including members of terminated or state-recognized tribes and their children and grandchildren. They are not, however, authorized to serve anyone who merely identifies themselves as racially Indian. BIA figures for service population and tribal enrollment do not help determine the urban UIHP population, because, in addition to the problems already mentioned, the BIA data are not broken down by urban or metropolitan residence, nor do they cover terminated or state-recognized tribes. Nor is an answer provided by Census Bureau data on Indians, since, although the data are broken down by urban, metropolitan, city, and other types of residence, they are still, as noted above, based on self-identification by race, not on tribal membership, whether in federal, state, or terminated tribes. IHS figures for urban Indian populations are based on these Census data. While IHS, Census, and BIA figures for Indians, whether resident in urban areas or not, may not be definitive for the IHS-eligible population, they provide useful approximations of the population that IHS serves. Census data suggest that most AI/AN live outside reservations and other census-identified Indian areas, that the movement out of these areas is many decades old, and that a majority of census-identified Indians live in census-identified urban areas. Many urban areas are within CHSDAs, however, so further analysis may be needed to determine what proportion of census-identified urban Indians are eligible for general IHS services. Health Status IHS comparisons of mortality measures indicate that the IHS service population has historically had a greater incidence of illness and higher mortality rates than the general U.S. population. The disparities in mortality rates have diminished in recent years in such areas as infant and maternal mortality, and mortality associated with homicide, suicide, injuries, firearms, tuberculosis, pneumonia, and other conditions. In comparison with the general population, however, Indians are 6.5 times more likely to die from alcoholism, 6 times more likely to die from tuberculosis, almost three times more likely to die from diabetes, and 2.5 times more likely to die in accidents (see Table 3 ). Indians are less likely to die from some other major causes of death, such as heart disease (0.97 chance) and cancers (0.94 chance). In terms of life expectancy, IHS has found that "American Indians and Alaska Natives born today have a life expectancy that is 2.4 years less than the U.S. all races population (74.5 years to 76.9 years, respectively; 1999-2001 rates)." Studies suggest the higher mortality rates for a number of leading causes of death among AI/AN are related to alcohol abuse, including not only alcohol-related deaths but also accidents, suicide, and homicide. Diabetes42 Indians suffer from a disproportionately high and growing rate of Type 2 diabetes, with its prevalence increasing 41% between 1997 and 2003 in all service areas, particularly among young adults (persons aged 25-34). Between 1990 and 2003, for instance, the incidence of diabetes among these young AI/AN adults grew 135%. Diabetes mortality is 3.1 times higher in the AI/AN than in the general U.S. population. Diabetes is a major cause of AI/AN morbidity, leading to blindness, kidney failure, lower-extremity amputation, and cardiovascular disease. With the 1997 Balanced Budget Act, Congress began a Special Diabetes Program for Indians (SDPI) as part of IHS's ongoing National Diabetes Program. With SDPI grant monies, the IHS, tribal health programs, and UIHPs have set up diabetes programs to create an extensive support network that gives training, "best practices," and the latest scientific findings with area diabetes consultants, model diabetes programs and other grant programs in 318 AI/AN communities in 35 states. The funding has enhanced patient care and education and created a needed infrastructure for diabetes programs. With SDPI funding, IHS, Urban Indian Organizations (UIOs), and tribes are able to support prevention programs which have been shown to delay the onset of the disease through lifestyle changes or use of medication. The program's disease performance measures have tracked the success of the SDPI efforts to fight diabetes. So far the program's efforts have seen an increase in the percentage of Indian diabetics maintaining blood sugar control from 25% in FY1997 to 34% in FY2004. In addition, there are other decreases in the number of health incidents related to diabetes including kidney disease and retinopathy. Other programs are tying diabetes screening with other diseases. For example, on May 16, 2005, the National Institutes of Health announced the beginning of an educational campaign to promote the message that AI/AN can reduce the risk of a heart attack or stroke if they keep under control their blood glucose, blood pressure, and cholesterol. Appropriations and Funding IHS funding is separated into four budget categories: health services, facilities, collections (reimbursements from Medicare and Medicaid, as well as private insurance), and SDPI. Health services and facilities appropriations constitute IHS's budget authority ; its budget authority plus collections and SDPI constitute IHS's program-level funding . Table 4 below shows detailed funding for IHS programs for FY2000-FY2008, with the administration's request for FY2009. Funding for FY2009 to March 6, 2009, under the continuing resolution is 43.01% of the FY2008 amount for each budget item. Trends in IHS budget authority and program-level funding for FY1994-FY2008 are shown in Figure 2 , in current dollars and constant 1994 dollars. Collections Indians are U.S. citizens, and hence many are eligible for Medicare and Medicaid. Congress has authorized IHS and tribes operating IHS-funded health facilities to collect reimbursements from Medicare and Medicaid, as well as from non-federal sources (see " Statutory Authority ", below). Collections funding has grown from 9% of the IHS program-level budget in FY1995 to 18% in FY2007. Because many Indians on or near reservations lack employment-related health insurance benefits, IHS collections come mostly from the Medicaid and Medicare programs, of which Medicaid provides the majority. Medicaid payments grew from 55% of collections in FY1995 to 71% in FY2003 (falling slightly to 69% in FY2007). "Overall," said IHS in 2005, "Medicaid and Medicare collections represent up to 50% of the hospital and clinic operating budgets." (The Medicaid program as a whole is funded by both state and federal governments, but states receive 100% federal reimbursement for Medicaid services provided to eligible Indians through facilities owned or operated by IHS or by tribes. ) Diabetes Funding In the Balanced Budget Act of 1997 ( P.L. 105-33 ), Congress amended the Public Health Service Act to create the IHS's Special Diabetes Program for Indians (SDPI). To fund SDPI, the act reduced the State Children's Health Insurance Program (SCHIP) appropriation for FY1998 through FY2002 by $30 million each year and transferred the funds to SDPI. In 2000, the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act (part of P.L. 106-554 ) increased annual SDPI funding to $100 million for FY2001-FY2003. Under the 2000 act, for FY2001-FY2002, $30 million of the $100 million for SDPI came from the SCHIP appropriation and $70 million came from the general Treasury, while for FY2003 the whole $100 million was drawn from the general Treasury. This funding from the general Treasury is separate from regular IHS appropriations (as noted in Table 4 ). In 2002, Congress increased the annual funding for SDPI to $150 million and extended the appropriation to FY2004-FY2008. Last year Congress extended the appropriation to FY2009. Legislation in the 110 th Congress ( H.R. 2762 and S. 1494 ) would increase the annual SDPI appropriation to $200 million and extend the appropriation to FY2013. Funding Disparities Groups supporting Indian health care have argued that IHS per capita expenditures on health services are often less than per capita expenditures in other federal health-related programs. The private nonprofit National Indian Health Board, for example, pointed out that, in FY1997, IHS's per capita expenditures were $1,430 as compared with $3,489 per capita under the federal Bureau of Prisons (BOP) and $5,458 under the Department of Veterans Affairs (VA). Three years later, however, in FY2000, IHS per capita spending had risen 9% to $1,577, while BOP's had fallen 19% to $2,840 and VA's had fallen 7% to $5,063. By FY2006, IHS per capita expenditures had risen 5% to $1,664 while VA's had risen 13% to $5,799. Comparisons of per capita spending under different federal health programs are problematic, however, because—as with BOP and VA—the programs may serve different populations, with differing demographic characteristics and health needs, and may provide different sets of health care services. A multi-part study initiated in 1998 showed the disparities that exist in personal medical services between IHS and mainstream health care systems. Initially called the "Level of Need Funded" (LNF) study, and retitled the "FEHP Disparity Index" (FDI) study, the study was produced by a tribal-IHS workgroup of 16 people (15 tribal representatives and one IHS official) charged with the responsibility by IHS, and assisted by experts and consultants. The workgroup chose the Federal Employees Health Benefits Plan (FEHBP) as the benchmark mainstream personal medical services plan against which to compare IHS health services. The latest FDI study available on the IHS website found that in FY2004, the total cost to give each AI/AN in the IHS user population coverage comparable with that received by federal employees under the FEHBP would be $3,753 per AI/AN. Of this amount, $2,815 would be from IHS appropriations and the rest from reimbursement programs such as Medicare, Medicaid, private insurance, and other payments. FEHBP-level coverage for the 1.44 million IHS user population, according to the FDI study, would call for IHS appropriations of about $3.97 billion in FY2004 for personal medical services. The study found that actual FY2004 IHS appropriations for personal medical services would provide 56.8% of the appropriations needed to give IHS users personal medical services equivalent to the FEHBP, and that an additional $1.7 billion would be needed to raise the level of IHS personal medical services to 100% of the FEHBP's. IHS Funding Allocations and Disparities Most IHS funding for health services is not allocated based on formulas but rather on historical patterns of recurring base funding as adjusted by annual built-in increases to maintain programs at current levels of service. Each year IHS area and service units receive their previous year's base funding, with built-in adjustments (if appropriated) allocated by a fixed percentage increase that is the same across IHS. If Congress makes appropriations above the adjusted base to increase particular services or meet unmet needs, IHS allocates such increases using formulas, which have been developed in consultation with tribes. Some IHS programs or parts of programs are allocated solely by formulas, such as routine maintenance of facilities, some SDPI grants, some sanitation facilities funds, the Indian Health Care Improvement Fund (discussed below), and others. If Congress appropriates funds for specific facilities, the funds are usually added into, and become part of, the base funding for the relevant service unit and area. Basing IHS allocations on historical patterns of base funding means the allocations do not fully take into account changes in population, health needs, and health services. One result has been that different IHS areas and service units receive widely varying levels of funding, as measured by per-capita funding. FDI studies found significant funding variations within the IHS—estimating, for instance, that in FY2004 161 (61%) of the 266 operating units were funded at or below 60% of FEHBP-equivalent services, while 49 (18%) operating units were funded at over 80% of need. IHS's internal funding disparities have long been known. They were the subject of a 1980 court case involving inequitably low funding allocations to the California area, which were studied by GAO in 1982 and 1991 and were studied by the Office of Technology Assessment (OTA) in its 1986 report on Indian health care. The IHS and Congress have made several attempts to deal with the problem, usually by appropriating additional "equity" funds for allocation according to needs-based formulas, with the additional funds becoming part of the recipients' recurring base funding. The appropriations for such equity funds, however, were too low—2% of total IHS funding between 1980 and 1990, GAO found—to make a significant change in area-by-area allocation disparities. Major methodology problems also became apparent, including how to measure health status and health care needs, determine the services provided, and define the IHS-eligible population whose needs must be met. Congress established a permanent equity fund in 1988, the Indian Health Care Improvement Fund (IHCIF), to provide additional funding to operating units that are most in need. (The FDI is the most recent methodology developed to allocate these funds.) But when IHS had attempted in 1987 to apply needs-based allocation formulas to part of areas' base funding, some tribes and IHS areas had lost funding and objected strongly. So Congress in 1988 also added a partial "hold harmless" provision, prohibiting any allocation of IHS funding that reduced any service unit's recurring programs by 5% or more from the previous fiscal year, unless HHS had reported to the President and Congress on the proposed change and its likely effects. Although urban Indian health programs are not usually included in discussions of IHS area funding disparities, FDI methodology has been applied to urban Indian health needs. According to the IHS, FDI calculations for FY2000 suggested that the urban Indian health program provided 4% of the FEHBP-equivalent funding needed. The IHS has previously identified funding shortfalls in other service areas. For instance, facilities maintenance was funded at 27.5% of need for FY2004; replacement of biomedical equipment was funded at about 20% of need in FY2004; sanitation facilities for new homes is funded at 70%, and for existing homes at 5%, of need in FY2005; and health professions scholarships are projected to be funded at 10% of new applications in FY2005. Statutory Authority and Committee Jurisdiction Over the last eight decades, Congress has enacted a number of statutes providing general or specific authorizations for health services to AI/ANs. Before that, Congress directed the BIA to provide Indian health care and construct Indian health facilities through annual Indian appropriations acts. Statutory Authority Currently, the IHS administers funds and policies under several statutes. Snyder Act of 1921 81 This act provides a broad and permanent authorization for federal Indian programs, including for "conservation of health." In 1921 all such programs were under the management of the BIA. The act was passed because Congress had never enacted any specific statutory authorizations for most of the many BIA activities that had developed after the Civil War as more and more tribes were placed on reservations. Instead, Congress had made detailed annual appropriations for these BIA activities. Authority for Indian appropriations in the House had been assigned to the Indian Affairs Committee after 1885 (and in the Senate to its Indian Affairs Committee after 1899). Rules changes in the House in 1920, however, moved Indian appropriations authority to the Appropriations Committee, making Indian appropriations vulnerable to procedural objections because they lacked authorizing acts. The Snyder Act was passed in order to authorize all the activities the BIA was then carrying out. The act's broad language, however, may be read as authorizing—though not requiring—nearly any Indian program, including health care, for which Congress enacts appropriations. Transfer Act of 1954 82 The act transferred the responsibility for Indian health care from the BIA to the PHS in the newly established Department of Health, Education and Welfare (now HHS). Among other reasons, Congress felt the PHS could do a better job of providing health care services to Indians. Indian Sanitation Facilities Act of 1959 83 This act, amending the Transfer Act, authorizes the PHS to construct sanitation facilities for Indian communities and homes. Indian Self-Determination and Education Assistance Act (ISDEAA) of 1975 84 ISDEAA, as amended, provides for tribal administration of federal Indian programs, especially BIA and IHS programs. The act allows tribes to assume some control over the management of their health care services by negotiating "self-determination contracts" with IHS for tribal management of specific IHS programs. Under a self-determination contract, IHS transfers to tribal control the funds it would have spent for the contracted program so the tribe might operate the program. Under ISDEAA authority, IHS has also established a tribal consultation policy giving tribes an opportunity to help formulate health priorities in the President's annual budget request. Tribal Self-Governance Program Beginning in 1992, Congress amended ISDEAA to allow tribal governments to consolidate IHS self-determination contracts for multiple IHS programs into a single "self-governance compact." Under a self-governance compact, the same transfer of IHS funds and operating control takes place as happens with a self-determination contract, but the compacting tribe is authorized to redesign programs and services and to reallocate funds for those programs and services. BIA programs had been authorized for compacting under a demonstration program in 1988, and similar authority was extended to IHS programs in 1992. In 2000, the Tribal Self-Governance Amendments made the IHS self-governance program permanent, as Title V of ISDEAA. Indian Health Care Improvement Act (IHCIA) of 1976 88 IHCIA authorizes many specific IHS activities, sets out the national policy for health services administered to Indians, and sets health condition goals for the IHS service population in order to "assure the highest possible health status for Indians and urban Indians." Most significantly, IHCIA authorizes direct collections from Medicare, Medicaid, and other third party insurers. It also gives IHS authority to grant funding to urban Indian organizations to provide health care services to urban Indians and established substance abuse treatment programs, Indian health professions recruitment programs, and many other programs. The IHCIA was last fully reauthorized by the Indian Health Amendments of 1992, which extended authorizations of its appropriations through FY2000. The authorizations for all IHCIA programs were later extended through FY2001. Alaska Native and American Indian Direct Reimbursement Act of 2000 This act amended IHCIA to make permanent a demonstration program for direct billing of Medicare, Medicaid, and other third-party payors by Indian tribes and health organizations with self-determination contracts or self-governance compacts. The demonstration program, involving four tribally operated IHS-owned hospitals and clinics, had increased collections, reduced the turn-around time between billing and receipt of payment, eased tracking of billings and collections, and reduced administrative costs. Congressional Committee Jurisdiction Currently a number of committees hold jurisdiction over legislation affecting the Indian Health Service. In general, legislation amending an existing statute is likely to be referred to the committees that held jurisdiction over the original legislation. House Jurisdiction Major jurisdiction over Native American issues, Indian health care legislation, and self-governance is held by the Natural Resources Committee. In matters of public health care and health facilities legislation and for programs such as Medicaid, Medicare Part B, and the State Children's Health Insurance Program (SCHIP), the Energy and Commerce Committee has jurisdiction. However, the Energy and Commerce Committee shares jurisdiction with the Committee on Ways and Means for legislation dealing with Medicare Part B. The Committee on Ways and Means has exclusive jurisdiction over Medicare Part A. Bills to reauthorize IHCIA have been referred to the Committee on Natural Resources, and, in addition, to the Committees on Energy and Commerce and on Ways and Means for consideration of provisions that come under their jurisdiction. Recent IHCIA reauthorization bills also contain a provision to elevate the IHS director to the level of an assistant secretary within HHS; a reauthorization bill with this provision in the 107 th Congress ( H.R. 1662 ) was referred to the Committee on Government Reform (now the Committee on Oversight and Government Reform), but bills with the same provision were not so referred in the 108 th -110 th Congresses. Senate Jurisdiction In general, the Committee on Indian Affairs holds jurisdiction over all Senate legislation relating to Indians. The Senate Health, Education, Labor and Pensions Committee has jurisdiction over matters of public health. The Senate Finance Committee has jurisdiction over Medicare, Medicaid, and SCHIP. Recent Senate IHCIA reauthorization bills have been referred to the Indian Affairs Committee alone, but in the 109 th and 110 th Congresses several bills relating to provisions in the Social Security Act added by IHCIA, regarding Medicaid and Medicare, originated in or were referred only to the Finance Committee. Appropriations Jurisdiction Although IHS is part of the Public Health Service of HHS, its annual appropriation is under the jurisdiction of the Interior and Environment subcommittees of the Appropriation Committees, in both houses. Current Legislative Issues There are a number of Indian health issues that have been or likely will be debated in the 110 th Congress. Foremost is the reauthorization of the IHCIA (and related amendments to the Social Security Act (SSA)). Reauthorization of the Indian Health Care Improvement Act Although many, if not all, IHS programs may be considered permanently authorized by the Snyder Act's authorization of expenditures for "conservation of health," the IHCIA authorized a number of specific new programs and inserted Indian provisions in the SSA. IHCIA's specific authorizations of appropriations expired at the end of FY2001. Congress has continued to appropriate funds for its programs. IHCIA reauthorization has been under consideration since 1999. Negotiations among Indian health proponents, HHS agencies, other departments, the Administration, and congressional committees and offices have led to numerous changes in the bills from one Congress to the next. Extensive hearings have been held on most bills, but only in the 108 th -110 th Congresses have bills been reported from committee. In the 110 th Congress, the Senate's IHCIA reauthorization bill, S. 1200 , was introduced on April 24, 2007, and reported, with amendments, by the Senate Indian Affairs Committee on October 16, 2007 ( S.Rept. 110-197 ). The House IHCIA reauthorization bill in the 110 th Congress, H.R. 1328 , which was very similar to S. 1200 , was introduced March 6, 2007, and referred to the Natural Resources Committee, as well as to the Energy and Commerce Committee and the Ways and Means Committee for provisions within their jurisdictions. The Natural Resources Committee ordered H.R. 1328 reported, with amendments, on April 25, 2007; the printed report was published April 4, 2008 ( H.Rept. 110-564 , part 1). The House Subcommittee on Health of the Energy and Commerce Committee held hearings on H.R. 1328 on June 7, 2007, and marked up the bill and forwarded it, amended, to the full committee on November 7, 2007. Another Senate bill, which addressed only IHCIA-related amendments to the SSA, was ordered reported by the Senate Finance Committee on September 12, 2007; this bill was introduced January 8, 2008, as S. 2532 and was reported the same day ( S.Rept. 110-255 ). S. 2532 's provisions had already been incorporated into S. 1200 as reported and into H.R. 1328 as ordered reported by the House Natural Resources Committee. S. 1200 was passed, amended, in the Senate on February 28, 2008, and referred in the House to the same committees as H.R. 1328 . H.R. 1328 was discharged from the Energy and Commerce Committee and the Ways and Means Committee on June 6, 2008, and the Natural Resources-reported bill was placed on the House calendar. Neither S. 1200 nor H.R. 1328 came to a vote on the House floor before the end of the 110 th Congress. No IHCIA reauthorization bill has been introduced in the 111 th Congress as of the date of this report, although Medicaid-related provisions concerning cost-sharing, property exclusions, and consultation have been included in current draft economic-stimulus legislation. The discussion below examines the IHCIA bills from the 110 th Congress. S. 1200 and H.R. 1328 have two health-related titles. Title I of each bill contains three sections, one subsection of which (§101(a)) reauthorizes all of IHCIA's eight titles. The other subsections of Section 101 make technical amendments elsewhere in federal law. Section 102 of Title I concerns sanitation facilities for the Soboba Band of Luiseno Indians, and Section 103 amends the ISDEAA to create a new Native American health and wellness foundation. The Senate added to Title I of S. 1200 four more sections, two related to Indian health and two to other matters. Title II of each bill contains amendments to the SSA, including SSA provisions previously added or amended by the IHCIA. The Senate added to Title II of S. 1200 six additional sections, two on Indian matters and four on non-Indian Medicare and Medicaid issues. The Senate also added a Title III to S. 1200 , apologizing to Native American peoples for U.S. Indian policy. S. 1200 , as passed by the Senate, and H.R. 1328 , as reported, would make numerous significant changes to current law. They would expand the roles of tribes, tribal organizations (TOs), and urban Indian organizations (UIOs) in management and decision-making; organize behavioral health services (alcohol and substance abuse, social services, and mental health programs) into a "comprehensive continuum" of prevention and treatment programs; create a construction priority system for IHS-funded health facilities; authorize long-term and hospice care; exempt Indians from Medicaid and SCHIP premiums and copayments; allow urban Indian health programs (UIHPs) to get reimbursements from Medicare and other third parties; and establish a commission on how to improve Indian health care delivery. While retaining the same general structure of the current IHCIA, the bills would rearrange many existing IHCIA sections so that provisions dealing with similar topics, such as mental health or third-party reimbursements, are in the same title. The bills would also centralize separate appropriations authorizations, now scattered within each of IHCIA's titles, into a single general authorization of appropriations for each title and extend authorizations of appropriations through FY2017. Issues and provisions are discussed below in their general order of occurrence in the bills— S. 1200 as passed by the Senate and H.R. 1328 as reported. Changes are also noted that were made in H.R. 1328 by the House Health Subcommittee of the Energy and Commerce Committee, in the version it forwarded to the full committee in November 2007. The bills are compared with current law and sometimes with bills from previous Congresses. During the Senate's consideration of S. 1200 , the Administration issued a "Statement of Administration Policy" (SAP) on S. 1200 . The SAP objected to about a dozen and a half items in S. 1200 and threatened a veto over a provision involving the " Davis-Bacon Act Application " (see below). Some of the new concerns raised by the SAP are noted in the discussions below. Definitions The bills add or amend many of the definitions used in the act, set in IHCIA Section 4. Some of the changes may have program or policy implications, discussed below. Expansion of Services Definitions The bills greatly expand the definitions of health promotion and disease prevention , which increases the range of services that Indians may demand of IHS, since the terms occur frequently in IHCIA. For instance, IHCIA Section 203(b) of the bills would require that the HHS Secretary "shall provide health promotion and disease prevention services to Indians." The term health promotion would be expanded from seven items to 34 and would include general activities, such as "improving the physical, economic, cultural, psychological, and social environment," as well as many more specific programs, such as abuse prevention, community health, and safe work environments (§4(11)). The definition of disease prevention would be expanded to include limitation and prevention of disease in general, not just of specific conditions (§4(9)). IHS fears it may not have the funding or ability to provide all such expanded services (e.g., safe housing or a safe work environment ). Entities The bills would add several new terms for Indian health services managed by various entities: "Tribal Health Program" and "Indian Health Program." The term Tribal Health Program (THP) is defined as a tribe or TO that operates a health program or facility funded partly or wholly by the IHS under an ISDEAA funding agreement (§4(24)). An Indian Health Program (IHP) is defined as any Indian health program administered directly by the IHS, by a THP, or by a tribe or TO with HHS funding under the Buy Indian Act (§4(13)). Many references to tribes and TOs in current law are changed to THPs in the bills; similarly, references to the IHS, tribes, and TOs in current law are changed to IHPs. Current law already authorizes TOs or tribes to operate some IHS-funded programs, but in the bills the new terms often expand the types of entities eligible to receive funding or administer programs. Traditional Health Care The bills in several sections authorize or direct IHS to fund traditional Indian health care practices, training, and practitioners. Some earlier IHCIA reauthorization bills defined "traditional health care practices" as "the application by Native healing practitioners of the Native healing sciences" as opposed to western medicine (e.g., S. 1057 , 109 th Congress, §4(23)), but the current bills contain no definition of traditional health care practices. The SAP objected to IHS-connected use of traditional health care practices without language protecting the U.S. government from possible liability and litigation. Indian Health Professional and Human Resources As in current law, Title I of both bills covers personnel recruitment, scholarships, and other educational programs. The purpose of this title is to increase the number, and enhance the skills, of Indian and non-Indian health professionals and other health personnel in the IHS. To do this, the act authorizes scholarships for preparatory and professional schools. The bills add UIO programs and employees, where possible, to be eligible for involvement with training. They also expand the right to a "retention bonus" to all health professionals employed in or assigned to IHP or UIO programs. They eliminate nursing school clinics and restrict the existing community-college health training programs to accredited community colleges on or near reservations. Community Health Title I of the bills also reauthorizes two programs, the Community Health Representative Program and the Community Health Aide/Practitioner (CHAP) program in Alaska. These two programs not only recruit and train health representatives and aides, but also authorize them to provide health care, health promotion, and disease prevention services (including some dental services) to Indian communities, especially rural communities that have difficulty accessing health services. A new provision in the CHAP authorization in the bills authorizes a national CHAP program, although excluding certain community dental health services. Community Dental Health Services The Alaska CHAP program recently started a new Alaska Dental Health Aide Therapist Program. The program seeks to provide access to dental care for residents of remote Alaskan villages which cannot support full-time dentists. It expands an existing CHAP program, which trains aides in dental education, dental assistance, and preventive dental services, to allow the aides to be trained as dental health aide therapists , who can perform more complicated dental work. Although support exists for this expansion of responsibilities for dental health aide therapists, including among dental hygienists and the American Public Health Association, the American Dental Association (ADA) is opposed, because of concerns that dental health aide therapists could be performing dental work in Alaska that would not be up to the standards of care offered to everyone else, and concerns that a CHAP dental health aide therapist program may be extended to the lower 48 states. The ADA argues that because of severe oral disease in the Alaskan Native population, highly skilled and trained dentists are needed to solve these dental challenges. Supporters of the dental health aide therapist program, on the other hand, claim that the need is so great that specially trained dental therapists could assist and solve many of the dental problems faced by remote villages. Currently, Alaska CHAP dental health aide therapists receive training outside the United States, because there are no U.S. programs training such dental health aide therapists. Both bills would allow the CHAP dental health aide therapist program in Alaska to continue, but would prohibit any CHAP dental health aide therapists outside Alaska, and would prohibit most oral surgery by therapists and limit their ability to perform simple tooth extractions and pulpal therapy to situations certified as medical emergencies by licensed dentists. Both bills would also require a study of the Alaska CHAP dental health aide therapist program, to be conducted by a neutral panel of "clinicians, economists, community practitioners, oral epidemiologists, and Alaska Natives" (§121(c)(1)(B)), who would make several determinations on the quality and adequacy of dental health aide therapist services and on safer and cheaper alternatives, and report to Congress and the HHS Secretary. Health Services In current law, the health services title (Title II) authorizes a number of specific health programs. In the bills Title II authorizes specific physical, but not mental, health programs. Programs are moved in from other titles, new programs are created, and a number of programs are moved to other titles; for instance, most of the mental health provisions of this title in current law are moved to the bills' "behavioral health" title (Title VII), and provisions on third-party reimbursements and managed care are moved to Title IV, which covers Medicare, Medicaid, and other programs (see discussions below). The provisions that remain in the health services title broaden the range of health care services that the IHCIA authorizes IHS to provide. They add to the purposes of the Indian Health Care Improvement Fund the elimination of funding inequities for health care programs. They set out the requirements for the Catastrophic Health Emergency Fund, including a new single-value threshold cost ($19,000) for treatment of victims. They broaden the provisions on diabetes prevention, treatment, and control; create an IHS Office of Indian Men's Health; and add oral health and youth programs to Indian school health education programs. They enlarge and combine the contract health service delivery areas (CHSDAs) in North and South Dakota to become one CHSDA covering both states. Both bills include the current requirement that the IHS establish an epidemiological center in every IHS service area (§209). Health-Care-Related Services The current IHCIA authorizes an IHS feasibility study of hospice care for terminally ill Indians and demonstration projects for home- and community-based care for functionally disabled Indians. IHCIA Section 213 in both S. 1200 and H.R. 1328 would substitute a general authorization to fund, via IHS, tribes, and TOs, other health-care-related services and programs, specifically including hospice care, home- and community-based services, assisted living, and long-term care. The House Health Subcommittee's version of H.R. 1328 would require that funding to flow only through the IHS. Concerns have been raised about the standards under which these types of care would be provided, the specific services that might be included, and the persons eligible for such care. H.R. 1328 but not S. 1200 requires conformance with the "accepted and appropriate standards" for the type of care provided and requires that the relevant state's standards apply to the care provided (unless the HHS Secretary establishes standards by regulation, which may be no more stringent than state standards). S. 1200 only requires that assisted living and home- and community-based services meet "applicable standards." Both bills define the services included through definitions; both bills define hospice care and home- and community-based services by reference to the SSA (and, for hospice care, other services that a tribe or TO determines necessary). S. 1200 but not H.R. 1328 defines assisted living services and long-term care services by references to other laws. While silent on services to ineligible persons, both bills specify that individuals eligible for long-term care must meet certain disability criteria, or be determined eligible by an IHP, and do not require IHS eligibility. The Administration's SAP, however, objects to the possibility that currently ineligible persons may become eligible for IHS-funded services, and also objects to the expansion to new services. S. 1200 , but not H.R. 1328 , authorizes funding for IHP "convenient care services" programs, which are defined elsewhere in the bill as primary health care services (such as urgent care, and "non-emergent" care, prevention, and screening) that are provided outside regular operating hours or at alternative settings (IHCIA §§213(d) and 306(c)(2) in S. 1200 ). Diabetes IHCIA Section 204 of S. 1200 (as passed by the Senate) and H.R. 1328 (as reported) replaces the existing diabetes provision with new language that would require that IHS screen each eligible Indian for diabetes, determine the prevalence of and the types of complications of this disease, and take steps to reduce the incidence of diabetes. These bills would also require the Secretary to continue funding all IHS diabetes programs in existence on the date of enactment or established thereafter, a provision to which the Administration objects. The House Health Subcommittee version of H.R. 1328 limits the funding requirement to model diabetes prevention programs in existence on the date of enactment, and adds an end date of FY2017. The bills would authorize the establishment of dialysis programs, including purchasing equipment and providing necessary staffing. In addition, if funding is available, the Secretary is required to consult with THPs in each IHS area to establish a registry of diabetics in order to track the incidence and complications of diabetes in the area and further to ensure that the data are disseminated among all other area offices. The IHS could also establish a diabetes control officer in each IHS area office. The bills would also authorize IHS to establish criteria under which urban Indian organizations could receive grant funding for the prevention, treatment, and control of diabetes. Licensing of Health Professionals Under current IHS rules, health professionals employed directly by IHS are required to have a state license, certificate, or registration for their professional field, but the rules do not require state licensure from each state in which an IHS health professional may practice. Hence an IHS-employed health professional, if licensed by any one state, may provide services in an IHS facility in the same or any other state. Both bills (§222 of H.R. 1328 as reported, and §221 of S. 1200 and the House Health Subcommittee version of H.R. 1328 ) would extend this licensing exemption to THP-employed health professionals, to provide services under the THP's ISDEAA contract or compact in any state served by that THP. Concerns have been expressed that this provision of the bills may reduce the quality of health care to Indians. The House Health Subcommittee version of H.R. 1328 limits the exemption to licensed health professionals and to the services provided in the THP's facilities. Health and Sanitation Facilities In current law, health and sanitation facilities are covered in Title III. In the bills, several programs are transferred into Title III from other titles and new programs are created. Among the new provisions in the bills are a requirement (instead of a discretionary authorization) that the Secretary provide financial and technical assistance to tribes, TOs, and Indian communities to establish utility organizations to operate and maintain sanitation facilities; an authorization for short-term, emergency IHS assistance to tribes in the operation of sanitation facilities; a requirement for a feasibility study for a new health-facility construction loan fund for tribes and TOs; authority for THPs to set rents on staff quarters; and authority for IHS to accept funding for health care facility construction from federal, state, and non-governmental sources. The current IHCIA prohibits closure of all or part of an IHS-operated health care facility unless an impact report has been submitted to Congress at least one year in advance, but, to prevent facility closures based on reports done many years previously, the bills add a requirement that the impact report be submitted no more than two years in advance ( S. 1200 applies these strictures to reductions in service hours as well as closures). Allocation of Funds Another new provision is a requirement that the Secretary develop a priority system for health-care facility construction, instead of just reporting on the priority system now in use (§301(c)). The bills, however, retain current priority levels for the top 10 projects in four categories of facilities (inpatient, outpatient, staff quarters, and youth treatment centers), to avoid penalizing projects that have been slowly rising up the current priority ladder. This retention, or "grandfathering," of certain projects' current priority levels concerns tribes whose projects might be delayed even if, under a new system, they were to be assigned higher priority levels than current top-10 projects. Both bills require the Secretary to consult with tribes, TOs, and UIOs in developing innovative approaches to meeting unmet facility needs, but S. 1200 specifies that this may include an "area distribution fund," composed of part of health facilities funding, under which each IHS area would receive at least some health facilities funding (which is not the case under the current priority system). Small Ambulatory Care Facilities Section 305 of S. 1200 and H.R. 1328 (as reported) amends a current provision, which authorizes grants to tribes and TOs to construct or modernize small ambulatory care facilities, to reduce the minimum service-population size for the grants and change the minimum user-population size to a minimum number of visits. It also expands an exemption from these minimum-size requirements, from (under current law) tribes or TOs on islands, to tribal or TO facilities that are either on islands or on road systems that do not give direct access to inpatient hospitals. The bills also expand the allowable uses of the grants to include the reduction of tribal or TO debt incurred to construct or modernize such ambulatory facilities. The House Health Subcommittee's version of H.R. 1328 restores current language regarding minimum population sizes and deletes the use for debt reduction, but adds a set-aside for grants to Indian communities below a minimum size. Convenient Care Facilities S. 1200 , but not H.R. 1328 , authorizes demonstration grants for convenient care services at IHS-funded facilities. S. 1200 defines convenient care services as primary health care services, including urgent and nonemergent care, prevention services, screenings, and health promotion and disease prevention services that are "provided outside the regular hours of operation of a health care facility; or offered at an alternative setting" (IHCIA §306(c)(2)(A)). Sanitation Facility Loans Section 302(c) of H.R. 1328 adds new authority to use appropriations for IHS sanitation-facilities construction to fund tribes' loans for sanitation facility construction and to meet other programs' matching or cost-participation requirements. Section 302(c) of S. 1200 changes this to an authorization for the Secretary to guarantee loans made to tribes to construct sanitation facilities, in accordance with Section 302(c) and certain sections of the Public Health Service Act, and to the extent appropriations are specifically provided and appropriations for IHS sanitation-facilities construction are not reduced. The House Health Subcommittee version of H.R. 1328 deletes the authorization to fund tribal loans from sanitation-facilities appropriations. HUD Housing Sanitation Both bills prohibit the use of IHS sanitation-facilities funding to provide sanitation facilities for new homes funded by the Department of Housing and Urban Development (HUD) (§302(c)(3)). Congress has included a similar prohibition in annual IHS appropriations acts since FY2003. The goal of this provision is for HUD to fund sanitation facilities for HUD-financed new homes, so that IHS funds can be used to provide sanitation upgrades or initial sanitation services to existing Indian homes and to homes built or improved by tribes, the BIA, individuals, or other non-HUD public or private programs. Davis-Bacon Act Application The Davis-Bacon Act requires the payment of "prevailing wages" in construction and renovation contracts to which the federal government is a party and authorizes the Secretary of Labor to determine the prevailing wages for a project. The current IHCIA applies the Davis-Bacon Act to facility construction or renovation funded in whole or part by funds authorized under Title III. Provisions in the ISDEAA exempt tribes and TOs from Davis-Bacon if they both perform the construction under a self-determination contract or self-governance compact and use their own employees. Critics of Davis-Bacon argue that the act's effect is to increase construction costs and reduce the volume of construction, while proponents of Davis-Bacon argue that it prevents unfair competition and improves craftsmanship and efficiency. Both bills retain the current application of Davis-Bacon. The Senate-reported version of S. 1200 , however, had added exemptions from Davis-Bacon if a tribe or TO either carried out the project with its own employees (whether under ISDEAA or not) or else contracted for the work with ISDEAA (or other federal) funds and made its own determination of prevailing wages. The January 2008 Statement of Administration Policy had objected to S. 1200 's Davis-Bacon provision as an expansion of Davis-Bacon requirements, and the Senate replaced the reported language with current law. Negotiated Rulemaking for Facilities Title III of some earlier versions of IHCIA reauthorization, such as S. 1057 (109 th Congress), greatly expanded the application of negotiated rulemaking for IHS facilities. Negotiated rulemaking would have been required in establishing construction standards, sanitation facility needs, criteria for participating in IHS-tribal joint ventures, and the priority systems for facilities construction and for IHS funding to operate tribally constructed facilities, as well as in applying Indian preference in construction or renovation of IHS facilities and approving applications for Indian health care delivery demonstration projects. The Administration objected, arguing that requiring negotiated rulemaking was resource-intensive and unnecessary. S. 1200 and H.R. 1328 drop almost all the requirements for negotiated rulemaking, except in the setting of the maximum renovation cost threshold for a health care facility above which a tribe may use maintenance and improvement funds to replace the facility, where the bills require that the threshold be determined through negotiated rulemaking (§313(c)). The House Health Subcommittee version of H.R. 1328 drops this remaining requirement for negotiated rulemaking. Access to Federal Health Services and Reimbursements Authority for IHS health-care facilities to receive reimbursements from SSA's Medicare and Medicaid programs, contained in IHCIA's Title IV in current law, was a major component of the original IHCIA. The current bills consolidate provisions covering reimbursements from third parties, whether from SSA programs or private parties, into both Title II of the bills and IHCIA's Title IV as rewritten in Section 101(a) of the bills. Several programs are moved in from other titles of current law, especially from the health services and miscellaneous provisions titles (IHCIA Titles II and VIII, respectively), and new provisions are added. Jurisdiction over Medicare, Medicaid, and SCHIP in the Senate is assigned to the Finance Committee, which reported bills in the 109 th ( S. 3524 ) and 110 th ( S. 2532 ) Congresses that moved all IHCIA provisions (whether in current law or proposed) that amend the SSA out of the IHCIA proper and placed them in a distinct part of the reauthorization bills. In the 109 th Congress, several of the IHCIA reauthorization bills ( H.R. 5312 as reported and S. 4122 as introduced) later incorporated much of the Finance Committee proposals as Title II of each bill. S. 1200 and H.R. 1328 in the 110 th Congress followed suit, retaining in IHCIA's Title IV only those provisions related to Medicare, Medicaid, and SCHIP that do not amend the SSA, and placing amendments to the SSA in Title II of each bill. To reduce confusion, this section of the report (as well as the section below titled " Amendments to the Social Security Act ") distinguishes between "Title II of the bills," where the bills place SSA amendments, and "IHCIA Title IV," which is amended in Title I of the bills. This section discusses only provisions in IHCIA's Title IV. Several of the revised IHCIA provisions would change the status of tribes and TOs with regard to recovering funds under federal health care programs, in particular Medicare, Medicaid, and SCHIP. (These programs are administered in HHS's Centers for Medicare and Medicaid Services, or CMS, and so are called CMS programs.) For example, IHCIA Section 401(a) in S. 1200 and H.R. 1328 adds UIOs and SCHIP to existing IHCIA Title IV language excluding Medicare or Medicaid reimbursements from being considered when determining annual Indian health appropriations. Additional changes to IHCIA's Title IV are discussed below. Special Fund for Reimbursements IHCIA Section 401(c) in S. 1200 and H.R. 1328 (as reported) continues the authority for a special fund (administered by the HHS Secretary) into which must be paid Medicaid reimbursements for services provided by IHS facilities, but expands the special fund's reach to include not only Medicaid payments but also payments from any SSA program. Payments from the special fund go to IHS service units, and Section 401(c) of the bills increases from 80% to 100% the proportion of any reimbursement that must go to the service unit that provided the health services. Section 401(c) also broadens the allowable uses of the reimbursement funds to authorize expenditures to reduce health resource deficiencies in the tribe(s) served, once expenditures sufficient for compliance with Medicare and Medicaid requirements have been made. The House Health Subcommittee version of H.R. 1328 limits the SSA programs that pay reimbursements into the special fund to Medicare and Medicaid, and limits the allowable uses (after compliance expenditures) to increasing the capacity, quality, and accessibility of the facility's services. Direct Reimbursement The Alaska Native and American Indian Direct Reimbursement Act of 2000 (see " Statutory Authority " above) amended the IHCIA to require HHS to establish a program under which THPs might directly bill and receive reimbursements from Medicare, Medicaid, and other third-party payors, for prescribed services provided to eligible participants. Under current IHCIA law, reimbursements for THPs choosing direct billing go directly to the THP, not into the special fund. HHS must approve THPs' applications to participate and must monitor participating health facilities' performance. Participating health facilities must report annually to HHS and must expend reimbursements first to achieve or maintain compliance with Medicare and Medicaid requirements, and may expend the funds to improve the tribe's health resources deficiency level only if there are funds left over. In the bills, IHCIA Section 401(d) provides THPs with direct authority to do direct billing and deletes current requirements for HHS approval, monitoring, and reports. It expands the allowable uses of the reimbursements to include not only complying with CMS programs' requirements but also providing additional health care services, improving health care facilities and programs, achieving any of the IHCIA objectives listed in IHCIA Section 3, or carrying out "any health care related purpose." It also subjects reimbursements to all applicable auditing requirements. HHS has objected to expanding the allowable uses beyond the original purpose of meeting CMS program requirements; specifically it objects to the inclusion of any IHCIA Section 3 objective and "any health care related purpose" as allowable uses. The House Health Subcommittee version of H.R. 1328 expands the programs covered to include SCHIP and limits the allowable uses to the same ones as the special fund (compliance expenditures and increasing the capacity, quality, and accessibility of the services). Outreach Grants IHCIA Section 402 of the bills expands the current program of grants to TOs for outreach—intended to encourage Indian enrollment in Medicare and Medicaid, including by paying premiums and processing applications—to cover SCHIP enrollment and to include grants to UIOs. H.R. 1328 (as reported) requires that HHS facilitate cooperation with and agreements between the states and IHS, tribes, TOs, and UIOs (a parallel provision is contained in Section 202 of Title II of the bills). S. 1200 and the House Health Subcommittee version of H.R. 1328 change the requirement to facilitate cooperation to a requirement to develop and disseminate best practices for facilitating agreements (the Health Subcommittee version further requires the Secretary, acting through CMS, to consult with states, IHS, tribes, TOs, and UIOs on this activity). The application processing provision in current law is moved to Title II of the bills. Rights to Reimbursements from Third Parties Current IHCIA law gives the United States, tribes, and TOs the right to recover the "reasonable expenses incurred" in providing health services to individuals, including through civil actions in court (except the United States may not recover against a tribal or TO self-insurance plan). IHCIA Section 403 in the bills expands the right to recover to UIOs, changes the right to recover to "reasonable charges billed," and grants tribes and TOs the same rights of recovery from any persons with liability (or their insurers) under the Federal Medical Care Recovery Act as the United States would have. HHS is concerned that the change from "expenses incurred" to "charges billed" may—because IHPs do not bill for services to IHS-eligible persons—allow responsible third parties to argue that they are not liable because no charges have been billed. The House Health Subcommittee version of H.R. 1328 allows recovery of the highest amount the third party would pay for care by nongovernmental providers (even if higher than reasonable charges billed). Purchase of Health Coverage with Federal Funds A new provision in the bills, IHCIA Section 405, allows tribes, TOs, and UIOs to use federal health services funds and reimbursements to purchase health benefits coverage, such as through a tribal health care plan, a health insurance provider or managed care plan, or a self-insurance plan. Tribes, TOs, and UIOs are allowed to base the purchase of health care coverage on beneficiaries' financial need. S. 1200 allows purchase of coverage through high deductible or health savings account plans, while the House Health Subcommittee version of H.R. 1328 excludes purchase of coverage through high-deductible health plans (or through health flexible spending arrangements). The House Health Subcommittee version of H.R. 1328 adds a requirement that the coverage must qualify as "creditable coverage" as defined in the Public Health Service Act. Sharing Arrangements with Veterans Affairs and Defense Departments Another new provision in the bills, IHCIA Section 406, authorizes HHS to enter agreements for IHS, tribes, and TOs to share medical facilities and services with the VA and the Defense Department. This provision also creates a new requirement that the VA and the Defense Department reimburse IHS, tribes, or TOs for services provided to beneficiaries eligible for services from either the VA or Defense. The House Health Subcommittee version of H.R. 1328 deletes this requirement for VA and Defense reimbursements. The Administration's SAP objected to the reimbursement provision as a change to the allocation of costs for Indian veterans' health care costs between IHS and the VA under current law. S. 1200 adds a new Section 407 that reaffirms the goals of a 2003 memorandum of understanding between IHS and VA's Veterans Health Administration regarding VA treatment of eligible Indian veterans at IHS facilities. New Section 407 requires the HHS Secretary to provide for payment for such treatment and to establish guidelines for such payments to the VA, and prohibits use of funds appropriated for IHS facilities, CHS, or contract support costs to make such payments. The section also authorizes local memoranda of understanding, requires consultation with affected tribes in negotiating such local memoranda, and defines "eligible Indian veteran." H.R. 1328 has no similar provision. Payor of Last Resort If an Indian is eligible for health care services under any other federal or state program, the IHS may assist that Indian to enroll in the program and collect for that Indian's health services provided through the IHS. After all other sources of payment are applied (including Medicaid, Medicare, SCHIP, any state program, or any private insurance), the IHS pays for services or costs not covered by those programs. Under a regulation in the current Code of Federal Regulations , the IHS is designated as the payor of last resort, although only for contract health services. New IHCIA Section 408 in S. 1200 and Section 407 in H.R. 1328 broaden the "payor of last resort" designation to cover all services provided to eligible persons and extend the designation from the IHS to THPs and UIO health care programs. The House Health Subcommittee version of H.R. 1328 adds an exception, specifying that IHPs and UIOs are not payors of last resort for services to individuals eligible for VA or Defense health services. Exemption of Entities from State or Local Licensing IHS-operated entities are exempt from state licensure requirements because of their federal status. Facilities funded by IHS but operated by tribes, TOs, or UIOs are not so exempt. New IHCIA Section 408 in H.R. 1328 and Section 409 in S. 1200 exempt entities operated by the IHS, tribes, TOs, and UIOs from having to be licensed or recognized under state or local laws as a condition for eligibility for reimbursement from any federal health care program. Instead, such an entity shall be deemed to have met such state or local licensing requirements if it is determined that the entity "meets all applicable standards for such licensure." If any staff member of the entity lacks a state or local license required for its location, that fact may not be taken into account if the staff member has a valid license from another state. The bills prohibit payments by federal health care programs to entities or individuals who have been excluded from participation in any federal health care program or whose license is under suspension by the state. A parallel amendment to the SSA is in Section 205 of Title II of the bills. HHS opposes exemption of tribal, TO, and UIO entities from state licensure, arguing that it would not be consistent with maintaining quality of care. The bills do not state who determines that an entity meets all the applicable standards, and place no limits on the number or proportion of entity staffers who may not have state or local licenses. The House Health Subcommittee version of H.R. 1328 deletes both this section and Section 205 in Title II of the bills. Feasibility Study of Treating the Navajo Nation as a State under Medicaid Both bills require the Secretary to study the feasibility of allowing the Navajo Nation—a tribe with significant reservation land and population in three states (Arizona, New Mexico, and Utah)—to be treated as a state for the purposes of Medicaid services for all Indians within its boundaries. The study would assess whether an entity should be established to which, like a state Medicaid agency, the Secretary could pay all Medicaid and related administrative expenditures that would ordinarily go to the states of Arizona, New Mexico, and Utah for Indians living within Navajo boundaries. Urban Indian Health Services In current law, IHS funding for urban Indian health programs is authorized in IHCIA Title V. The same title in the bills contains new and more inclusive programs for urban Indians and establishes a Division of Urban Indian Health in IHS. It also adds several new programs and greatly revises others. The bills authorize a UIO to provide health care services in any urban center, instead of just in the urban center where the UIO is located, and also authorize HHS funding for the construction and operation of at least two (in S. 1200 , one) residential treatment centers in each state, for urban Indian youth who need culturally competent alcohol and substance abuse treatment services. Besides the annual onsite evaluations of UIHPs required in current law, the bills add as an alternative the option of accepting evidence of the UIO's accreditation by a recognized Medicare review entity (the House Health Subcommittee version of H.R. 1328 deletes this alternative option). Grants to UIOs are authorized for diabetes prevention, treatment, and control, similar to existing diabetes grants to tribes and TOs under IHCIA Title II. UIOs are given access to the Community Health Representatives program (see IHCIA Title I). Both bills authorize HHS to study the feasibility of federal direct or guaranteed loans for UIO facilities construction, and require that IHS consult (or, in S. 1200 , confer) with UIOs "to the greatest extent practicable." The bills make all changes effective immediately upon enactment, whether any implementing regulations have been promulgated or not. Some previous bills reauthorizing the IHCIA would have extended to UIOs the protections of the Federal Tort Claims Act (FTCA), given UIOs access to federal vendors and suppliers on the same basis as federal executive agencies, and expanded the current authorization for UIOs to use HHS federal facilities to include equipment and other personal property in the facilities. None of these proposals are included in S. 1200 or H.R. 1328 . Constitutionality of Urban Indian Health Program IHCIA extends eligibility for its urban Indian health program not only to members of federally recognized tribes but also to persons who are not members of such tribes, including members of state recognized tribes, members of tribes whose federal recognition was terminated after 1940, non-member descendants of tribes, and individuals who are Alaska Native or are considered to be Indian by the Secretary of the Interior or the HHS Secretary. Federally recognized Indian tribes are considered political entities by the federal government, so federal assistance to such tribes and their members is not based on race. The U.S. Department of Justice has questioned whether the urban Indian eligibility standards, insofar as they go beyond federally recognized tribes, are racially based, and thus whether the current urban Indian health program meets Constitutional equal protection standards. Proponents of the urban Indian health program argue that state-recognized tribes are also political entities and that the IHCIA's definition of urban Indians meets the necessary legal tests. In the years since the urban Indian health program was authorized in the original IHCIA in 1976, there have been no challenges to the constitutionality of the urban Indian health program, so there are no federal court decisions on the questions raised by the Justice Department. IHS Organizational Changes The bills make no change in IHS's organizational status as a part of the PHS within HHS, but H.R. 1328 establishes a new position of Assistant Secretary of Indian Health. The bills also authorize contracts and agreements with federal and state agencies and private and nonprofit organizations for enhancing information technology and add requirements that the automated management information system include a training component and an interface mechanism for the patient billing and accounts receivable system. Elevation of the Director Section 601 of H.R. 1328 , in all versions, elevates the Director of IHS to the new position of Assistant Secretary of Indian Health under the Secretary of Health and Human Services. The new assistant secretary would be responsible for reporting to the Secretary on all policy and budget matters relating to Indian health, coordinating department activities on Indian health matters, advising on all Indian health matters, and representing Indian issues to the heads of other HHS agencies and programs. S. 1200 as passed by the Senate dropped this provision. Behavioral Health Programs Current law has a title (IHCIA Title VII) covering alcohol and substance abuse programs. The bills expand the existing title to cover all mental and behavioral health programs, not just alcohol and substance abuse. The aim is to create a "comprehensive behavioral health prevention and treatment program" (see Sections 701 and 703 in the bills). Title VII in the bills brings together all the mental and behavioral health programs that are in other titles of current law, generally substitutes the term "behavioral health" for the terms "mental health" and "alcohol and substance abuse," expands eligibility and additional practices, and adds mandates to consult with tribes and TOs on policy decisions. The bills require HHS to provide a "comprehensive continuum of behavioral health care " (within feasibility and appropriations limitations) that includes nine specified sets of services, including outpatient and residential treatment, acute hospitalization, detoxification, emergency shelter, transitional living, and community-based prevention, intervention, and aftercare (§701). The section also requires various specific behavioral health services for Indian children, adults, families, and elders. Section 703 expands the current requirement for a comprehensive alcohol and substance abuse prevention and treatment program to a comprehensive behavioral health, prevention, treatment, and aftercare program. Section 703 in S. 1200 and H.R. 1328 (as reported, but not the House Health Subcommittee version) adds tribes and TOs to the current authorization for IHS to use CHS for treatment services. Section 709 of the bills authorizes HHS to provide one inpatient mental health care facility in each IHS service area (with California being divided into two areas). Section 708 creates a youth telemental health demonstration project targeting Indian youth suicide. In addition, Title VII of the bills expands the alcohol and substance abuse programs for women and youth to cover all behavioral health problems and adds a set-aside for UIOs in the women's program (§§706-707). Title VII also expands the program for community education and involvement to all behavioral health issues and allows (in S. 1200 and H.R. 1328 as reported but not in the House Health Subcommittee version) implementation by tribes and TOs (§710); changes the fetal alcohol disorder (FAD) program to add diagnostic clinics, early intervention projects, and FAD housing (§712); requires (current law authorizes) establishment in every IHS service area of treatment programs for both child sexual abuse victims and (in H.R. 1328 but not S. 1200 ) child sexual abuse perpetrators (§713); and changes the behavioral health research program by making tribes, TOs, and UIOs, instead of the IHS, the contractors with research institutions (§714 in H.R. 1328 and §716 in S. 1200 ). Other Issues In current law, a number of separate provisions covering reports, regulations, and a variety of other topics are included in a "Miscellaneous" title (IHCIA Title VIII). The bills retain this title, but add a number of new programs and move many provisions of current law to other titles. Reports Many titles of the current IHCIA contain requirements for annual or one-time reports to Congress, and current IHCIA Title VIII requires additional reports and directs that most of the reports be transmitted to Congress with the President's annual submission of the U.S. government budget (§801). S. 1200 and H.R. 1328 retain this pattern, but they require the reports to be transmitted directly to Congress; expand the required report on the impact of new national health-care programs to cover HHS consultation with TOs and UIOs; add SCHIP to the accounting on reimbursements from other CMS programs (Medicaid and Medicare); and add a report on Indian use of contract health services. The bills drop a provision of earlier versions (e.g., H.R. 5312 and S. 1057 in the 109 th Congress) requiring a comparison of actual Indian health appropriations with the amounts needed to achieve Indian parity with the general population in health status and services. The House Health Subcommittee version of H.R. 1328 adds a report on compliance by IHS, tribal, TO, and UIO facilities with IHS credentialing and state licensure requirements. It also moves to the CMS accounting report (from Title II, Section 209, of the bills) requirements for information on Indians who use CMS programs, their use of IHS, and their health status. The Statement of Administration Policy objects to requirements for new reports, arguing that they restrict HHS flexibility to deliver health care services. Negotiated Rulemaking for Regulations S. 1200 and H.R. 1328 increase the number of instances where IHS must conduct negotiated rulemaking to create programs' regulations. Under the current IHCIA (§802), the requirements for regulations are that IHS must first consult with tribes and TOs and must publish final regulations in the Federal Register at least 60 days prior to their effective date. The new IHCIA Section 802 in the bills requires negotiated rulemaking for regulations relating to health services (Title II), behavioral health (Title VII), and Section 313(c) (see " Health and Sanitation Facilities " above) and Section 807 (regarding health services for IHS-ineligible persons), and allows discretionary rulemaking under the Administrative Procedure Act for human resources (Title I), facilities (Title III), reimbursements (Title IV), and urban Indian health (Title V). Earlier versions of IHCIA reauthorization (e.g., S. 1057 in the 109 th Congress) required negotiated rulemaking in many more programs, including most of human resources (Title I) and facilities (Title III), and also prohibited rulemaking on IHS organization (Title VI) and for the miscellaneous-provisions title (Title VIII). Section 802 in the bills also sets a deadline for publication of all proposed regulations of two years after enactment, requires a minimum time length for comment periods, and sets a deadline for publication of all final regulations of three years after enactment. A provision in earlier bills, setting a deadline after which HHS authority to make IHCIA regulations would expire, is not included in H.R. 1328 or S. 1200 . As noted above, the Administration opposed many negotiated rulemaking requirements, arguing that negotiated rulemaking was more resource-intensive and was not necessary. Abortion Under current IHCIA law, funds appropriated for the IHS must follow whatever limitations on funding for abortions there are in the HHS appropriations act for the same time period. This restriction, added in its current form to the IHCIA in 1988, applies to any IHS funds expended by IHPs and UIHPs. Such limitations on federal funding for abortion are usually known as "Hyde Amendments." The Hyde Amendment in the current HHS appropriations act forbids funding for abortion—or for health benefits coverage (defined as the package of services provided by a managed care organization) that includes coverage of abortion—except in cases of rape or incest or when the mother has a physical condition that would endanger her life unless an abortion were performed. S. 1200 was amended on the Senate floor to add a provision (Sec. 805(a)-(b)) that replaces the current law with language similar but not identical to the current Hyde Amendment. The provision differs from the Hyde Amendment in two respects: the incest exception is applied only to incest against a minor, and the term "health benefits coverage" is redefined to include services under a contract, compact, grant, or other agreement. Proponents of the provision argued that, because the Hyde Amendment in HHS appropriations acts must be voted on every year, it is subject to change every year, while the provision would make the Hyde Amendment permanent in its application to the IHS. An opponent of the provision, the private nonprofit National Indian Health Board, argued that the IHS already complies with the Hyde Amendment and should not be held to different standards from other HHS programs, and that the amendment is unnecessary and duplicative insofar as it is the same as the Hyde Amendment. H.R. 1328 , in both the introduced and House Health Subcommittee versions, retains the abortion provision in current law. Eligibility for Services Section 811 of H.R. 1328 (but not S. 1200 ) adds to IHCIA a provision postponing the application of a 1987 IHS regulation on health services eligibility until IHS submits to the House and Senate Appropriations Committees a budget proposal that reflects any increased costs associated with the proposed changes in eligibility, and the budget proposal has been enacted into law. Application of the 1987 regulation has been continually postponed in annual appropriations acts. (See " Eligible Population ," above.) Labor Law Exemption Section 811 of S. 1200 , as passed by the Senate, extends to tribes and TOs carrying out self-determination contracts or self-governance compacts the same exemptions from the National Labor Relations Act that federal, state, and local governments enjoy. H.R. 1328 has no similar provision, in any of its versions, nor does current IHCIA law. Section 811 of S. 1200 does not limit the application of this exemption to ISDEAA contracts or compacts with IHS or HHS, so the exemption may apply to ISDEAA contracts and compacts with all federal agencies. Entitlement or Non-Entitlement IHCIA Section 813 of S. 1200 and H.R. 1328 as reported (Section 812 of the House Health Subcommittee version of H.R. 1328 ) would establish a national bi-partisan commission on the delivery of Indian health care. Earlier versions of IHCIA reauthorization, introduced in the 108 th and preceding Congresses, would have created a commission focused entirely on Indian health care entitlement, with directions to recommend whether health services could be provided to Indians under an entitlement program. The IHS health care delivery program is not an entitlement under federal law. IHS cannot commit funding for services if that funding has not been appropriated. Consequently, IHS health services depend each year on the annual appropriation. An entitlement program, on the other hand, such as Medicaid and Medicare, statutorily obligates the federal government to make payments to any person who meets the legal criteria for eligibility. An entitlement program may be funded through either permanent or annual appropriations, but the program's law requires that Congress appropriate whatever funds are needed. One of the major issues addressed in the IHCIA reauthorization bills before Congress is the tension between (1) the choices that must be made under the constraints of a finite annual appropriation and (2) the view of many Indians that their health care services are (or should be) an entitlement and, as such, are the sole responsibility of the federal government under trust or treaty obligations. To its proponents, the advantage of an entitlement program for Indians would be that federal spending on eligible Indians' health care would not be limited to a specific appropriated amount. Spending controls on entitlement programs are done either by reducing benefits, limiting the conditions covered, changing the eligibility requirements for beneficiaries, or generating new revenues, so among the issues to be considered would be whether and how to limit the entitlement's level of spending. Entitlement proponents argue that Indians' loss of land and resources justifies making Indian health care an entitlement program, despite the cost. Some advocates are concerned about how a "beneficiary" would be defined, and whether Congress would require "means testing" as part of the eligibility criteria. These supporters argue that if Congress imposed means testing, those Indians not meeting the means test would have their treaty rights abrogated. Some opponents argue that federal Indian treaties and agreements did not promise unlimited health care services to all Indians, or else that Indians have already been compensated for lost lands and resources. Other opponents question whether an entitlement's "benefit package" would cover the non-clinical services (e.g., sanitation facilities) provided now through IHS. If non-clinical services were not provided, some believe that the quality of care would diminish under an entitlement program. The commission authorized under S. 1200 and H.R. 1328 would make recommendations on Indian health care delivery and related issues, including "the optimal manner"—such as entitlement—in which to provide Indian health care. The Administration's SAP objected to the commission, arguing it was unnecessary because HHS and IHS continually try to improve health care services delivery to Indians. Charges for Health Care Services (Cost-Sharing) Currently the IHS is forbidden to charge eligible Indians for services, nor can it require tribes and TOs with ISDEAA arrangements to charge them. IHS policy since at least 1967 had been that it was not required to charge Indians for services. Congress added annual prohibitions against IHS charging for services in the annual appropriations acts for IHS for FY1985-FY1995, before making the prohibition permanent in 1996. Four years later Congress also forbade IHS from billing under ISDEAA and from requiring tribes or TOs to do so. IHS had assumed that the statutory prohibitions against its charging for services also covered tribes and TOs with ISDEAA arrangements, as had been confirmed in a 1996 ruling by the HHS Departmental Appeals Board. In January 2008, however, in a case involving a California tribe negotiating an ISDEAA self-governance compact with IHS, a federal district court rejected that argument, finding that IHS could not deny the tribe's compact merely because the tribe planned to charge Indians for services for which IHS could not charge. IHS did not appeal this ruling. The Senate amended S. 1200 to add a new provision, Sec. 816, that specifies that nothing in the IHCIA limits the ability of a THP operating an IHS-funded program through an ISDEAA self-governance compact to charge an Indian for services it provides. (Section 816 also adds that nothing in the IHCIA authorizes IHS either to charge an Indian for services or to require a THP to charge an Indian for services.) The provision does not address whether THPs operating programs under an ISDEAA self-determination contract may charge Indians for services, and leaves to compacting THPs the decisions on the amounts to charge, the criteria for charging, or the programs for which to charge. The Senate passed S. 1200 with this amendment. H.R. 1328 has no similar provision, in either the reported version or the House Health Subcommittee's version. Cherokee Freedmen A membership dispute within the Cherokee Nation of Oklahoma (CNO) may lead to the addition of a provision to an IHCIA reauthorization bill that would restrict CNO access to IHS funding and services. The Cherokee Nation, one of the two largest federally recognized tribes, voted in March 2007 to amend the membership criteria in its tribal constitution so as to limit membership to descendants of only one of the CNO "Dawes Rolls" (compiled by the federal government in the early 20 th century), namely the so-called "blood roll." The effect of the amendment is to drop from tribal membership all those descended solely from another Dawes Roll, the so-called "Freedmen roll." The previous tribal constitution approved in 1976 included descendants of either roll as members. The Cherokee Freedmen oppose the 2007 amendment, arguing that it is discriminatory and violates an 1866 treaty between the United States and the Cherokee Nation. The CNO argues that a tribe should be able to determine its own membership and that the amendment simply limits CNO membership to persons with Cherokee ancestry. Both CNO courts and federal courts are considering cases related to Cherokee Freedmen membership in the CNO. A May 2007 CNO court injunction reinstated the Cherokee Freedmen's tribal membership until the court decided whether the 2007 amendment was legal. Legislation already introduced ( H.R. 2824 , 110 th Cong.) would sever the CNO's government-to-government relationship with the federal government (making the CNO ineligible for federal Indian programs), and suspend the CNO's right to conduct gaming under the Indian Gaming Regulatory Act, until the CNO is in compliance with the 1866 treaty and the Cherokee Freedmen's tribal membership is restored. Amendments to House bills concerning Indian housing ( H.R. 2786 ) and economic development ( H.R. 3002 ) programs would also make the CNO ineligible for these programs pending CNO compliance with the 1866 treaty and restoration of Cherokee Freedmen membership (although H.R. 2786 would suspend CNO ineligibility while the CNO court injunction against the 2007 amendment is in force). It is likely that a Cherokee Freedmen provision, were it offered as an amendment to an IHCIA reauthorization bill, would place restrictions on IHS and other federal health funding for the CNO similar to those in these three bills. Amendments to the Social Security Act Separate from the reauthorization of the IHCIA, S. 1200 and H.R. 1328 amend several sections of titles XVIII (Medicare), XIX (Medicaid), XXI (SCHIP), and XI (general provisions) of the Social Security Act. As noted above ("Access to Federal Health Services and Reimbursements"), amendments to SSA were removed from the IHCIA proper and incorporated into a Title II of the bills in the 109 th Congress. SSA amendments remain in Title II in both S. 1200 and H.R. 1328 in the 110 th Congress. As in the above section, this section of the report distinguishes between "Title II of the bills," where the bills place SSA amendments, and "IHCIA's Title IV," which is amended in Title I of the bills. This section discusses provisions in Title II of the bills. Medicaid Under current law, Section 1911 of the SSA —added to the SSA by the 1976 IHCIA—makes IHS health facilities, whether operated by IHS, a tribe, or a TO, eligible for reimbursement from Medicaid for coverable services, and authorizes HHS to make agreements to reimburse states for Medicaid-eligible services provided by IHS, tribal, and TO facilities. Title II, Section 201(a), of the bills amends SSA Section 1911 to extend Medicaid eligibility to UIOs. It also changes the eligible entities from IHS facilities to IHS, tribes, TOs, and UIOs as organizations , whether or not the organizations are IHPs (i.e., provide health services under ISDEAA or the Buy Indian Act—see " Definitions " above). This change may broaden the range of eligible health services, facilities, and entities. HHS objects to the addition of UIOs, arguing that eligible UIOs can already get Medicaid reimbursements through states. It also objects to the extension of eligibility beyond IHPs, to organizations. The House Health Subcommittee version of H.R. 1328 drops the addition of UIOs and limits eligibility for Medicaid reimbursement to IHPs. Other amendments by Section 201(a) of Title II of the bills to SSA Section 1911 require reimbursements for benefits covered under a state Medicaid waiver as well as under a state plan, and specify that health services may be covered whether the delivery of the services is direct, through referral, or under contract or other arrangements. HHS considers the new service delivery language confusing, and the House Health Subcommittee version of H.R. 1328 deletes this language. Section 201(a) of the bills also renews a long-dormant provision in Section 1911, which gave facilities up to 18 months from IHCIA's 1976 enactment to meet Medicaid requirements, by bringing the provision up to date, adding tribes, TOs, and UIOs, and adding to the original requirement for a plan to meet Medicaid conditions a further requirement that a facility make improvements in accordance with the plan. HHS opposes this renewal, arguing that current IHS and tribal facilities have long been in compliance with Medicaid requirements and that IHS and CMS processes are sufficient to resolve any compliance problems. The House Health Subcommittee version of H.R. 1328 drops the renewal, deleting the provision altogether. Section 201(a) also adds definitions of "Indian tribe," "Indian Health Program," "Tribal Health Program," and other terms to Section 1911 by referral to definitions in IHCIA Section 4. The House Health Subcommittee version of H.R. 1328 moves the definitions to the general SSA definitions section in Title XI of the SSA. Medicare Under current law, Section 1880 of the SSA —added to the SSA by the 1976 IHCIA—makes IHS health facilities, whether operated by IHS, a tribe, or a TO, eligible for reimbursement from Medicare for coverable services, as long as they meet applicable Medicare requirements. The 1976 IHCIA amendment was necessary because the SSA prohibits payment to a federal agency for Medicare-covered services (with exceptions for VA hospitals and certain hospital emergency services). Section 201(b) of Title II of the bills makes amendments to current Medicare law that parallel many of the amendments made by Section 201(a) to the Medicaid section. Section 201(b) of Title II of the bills amends Section 1880 to add facilities operated by UIOs as eligible for Medicare reimbursements, and to cover all Medicare-covered items and services provided by IHS or a tribe, TO, or UIO, without reference to a health facility. HHS opposes inclusion of UIOs under Section 1880 because they are eligible under general Medicare law. HHS also argues that the language covering IHS, tribes, and TOs is too broad, suggesting IHPs as a narrower term. As with Medicaid, the House Health Subcommittee version of H.R. 1328 drops the addition of UIOs and limits eligibility for Medicare reimbursement to IHPs. Section 201(b) of the bills also renews a dormant provision in Section 1880, similar to that in the Medicaid section, giving facilities 18 months from IHCIA's 1976 enactment to meet Medicare requirements and makes the same amendments as in the Medicaid section. HHS has the same objections to this renewal as to the Medicaid renewal, and the House Health Subcommittee version of H.R. 1328 drops the provision. Title II of the bills also adds the same definitions as for Medicaid, which the House Health Subcommittee version of H.R. 1328 moves to the general SSA definitions section. SCHIP Currently, Section 2105 of the SSA exempts an IHS-operated or IHS-funded insurance program from the SCHIP prohibition on federal reimbursements to states for child health services where another federal health insurance program has paid or is expected to make the payment. Section 203(c) of Title II of the bills adds tribes, TOs, and UIOs to SSA Section 2105 and changes the type of program for which reimbursements are allowed from insurance to health care. Section 201(c) of Title II of the bills amends SSA Section 2107, which lists SSA sections that apply to SCHIP in the same way as they do to the Medicaid program, to add most of the amended SSA Section 1911's Medicaid provisions to the provisions that apply to SCHIP. This includes such provisions as eligibility (thus extending eligibility from IHS alone to tribes, TOs, and UIOs), HHS agreements with states for reimbursement to Indian entities, direct billing by Indian entities, and definitions of Indian entities. The provision regarding payment of reimbursements into the special fund would not apply to SCHIP. The House Health Subcommittee version of H.R. 1328 , by changing the bills' amendments to SSA Section 1911, drops UIOs from SSA Section 2107. Increasing Indian Enrollment in Medicaid and SCHIP Title II of the bills amends the SSA, including replacing current SSA Section 1139, to add a number of new provisions intended to improve outreach to and enrollment of Indians in Medicaid and SCHIP. Section 202 of Title II of the bills amends a provision in IHCIA Title IV of current law—which allows HHS agreements with tribes, TOs, and UIOs for receipt and processing of applications for Medicare and Medicaid at IHS-funded facilities—to require HHS to encourage states to provide for Medicaid and SCHIP enrollment on or near Indian reservations, including state agreements with IHS, tribes, TOs, and UIOs for the Indian entities to provide outreach services including enrollment. Existing arrangements between states and IHS, tribes, TOs, and UIOs regarding such administrative activities are not to be affected. Section 202 of the bills also requires the HHS Secretary, through CMS, to "take such steps as are necessary to facilitate cooperation with, and agreements between" states and the IHS, tribes, TOs, and UIOs regarding provision of health care under the CMS programs (similar language is included in IHCIA Section 402 of the bills). HHS objects to the mandate that HHS take whatever steps are necessary to facilitate cooperation and agreements, arguing that the provision invites litigation over whether HHS has taken sufficient steps to meet the mandate. The House Health Subcommittee version of H.R. 1328 changes the requirement to facilitate cooperation to a requirement that HHS consult with states, IHS, tribes, TOs, and UIOs in the development and dissemination of best practices for facilitating agreements. The SSA currently sets a cap on expenditures for outreach and other specified purposes at 10% of federal payments to a state for SCHIP benefits. Section 203(a) of Title II of the bills excludes from the 10% cap expenditures for outreach activities to families of Indian children likely to be eligible for SCHIP or Medicaid, including outreach under agreements under Section 202 of Title II of the bills. HHS opposes the exclusion from the 10% cap, arguing that it would permit unlimited expenditures from a state's federal SCHIP allotment for outreach to Indian families, and further that such unlimited expenditures might be used for Medicaid outreach, which might expand the federal reimbursements for Medicaid beyond normal expenditures. Documentation of U.S. Citizenship for Medicaid The SSA requires that states, to receive federal reimbursement for Medicaid services, must obtain satisfactory documentary evidence of citizenship and identity for all Medicaid applicants who have declared they are U.S. citizens or nationals. SSA specifies certain documents as satisfying this requirement to demonstrate citizenship and identity, including U.S. passports, certain DHS naturalization and citizenship certificates, state driver's licenses for those states that require either proof of U.S. citizenship or a verified social security number, or other documentation to be established by HHS regulations. Many Indian citizens, especially older ones, because of their current and past remote locations and poverty, lack such standard documents as birth certificates, Social Security cards, driver's licenses, or passports. Moreover, some Indian groups were divided by U.S. international borders, and their descendant tribes may have members who are not U.S. citizens. Section 203(d) of Title II of the bills amends SSA's list of satisfactory documentation, at SSA Section 1903(x), to add documents from a federally recognized Indian tribe evidencing membership or enrollment in, or affiliation with, that tribe. Under this amendment, for Medicaid citizenship and identity purposes, such tribal membership documents would be treated as equivalent to U.S. passports, the DHS certificates, and driver's licenses from states that require proof of U.S. citizenship or a verified social security number. For tribes that both are in states with international borders and have members who are not U.S. citizens, Section 203(d) requires HHS to issue regulations authorizing use of other documentation of U.S. citizenship (including, if appropriate, tribal documents); until the regulations are issued, members of such border tribes could use the same tribal documents as other tribes. HHS opposes Section 203(d), arguing that the language is unworkable and that the HHS regulations implementing SSA Section 1903(x) took tribal members' situation into account and included satisfactory tribal documentation of U.S. citizenship. Some opponents question whether tribal membership documents provide reliable proof of citizenship and identity and also resist counterfeiting. The HHS regulations make tribal documents acceptable for purposes of identity (but not citizenship) if they carry a photograph or other personal identifying information (e.g., weight, height, race, age, sex). For a similar function—proving citizenship and identity for border-crossing purposes—the Department of Homeland Security (DHS) makes tribal documents acceptable for citizenship and identity if the documents are designated by DHS as meeting DHS document security standards; DHS promises to work with tribes to develop, test, and produce tribal documents compliant with its standards. Both S. 1200 and the House Health Subcommittee version of H.R. 1328 add examples of tribal documentation to Section 203(d), but S. 1200 , for border tribes with non-citizen members, adds a requirement for interim final HHS regulations within 90 days and also requires that, during the period before these regulations are issued, tribal documents be accompanied by a signed attestation of U.S. citizenship and a tribal certificate that the member was born in the United States. Exemptions from Medicaid Cost-Sharing Charges and Payments Section 204(a) of Title II of the bills amends SSA Section 1916 to exempt Indians from deductibles, co-payments, coinsurance payments, premiums, enrollment fees, or other cost-sharing charges under Medicaid for items and services provided by (or on a CHS referral by) IHS, a tribe, TO, or UIO. No means test is required. S. 1200 , but not H.R. 1328 , excludes from this exemption Indians who would only be eligible for such programs and services under IHCIA Sections 102 and 103 (Indian health professions recruitment and undergraduate scholarships) or IHCIA Title V (urban Indian health programs); this would exclude those members of terminated, state-recognized, or other non-federally-recognized tribes (or their children and grandchildren), as well as Alaska Natives and persons considered Indian by HHS or DOI, who are not otherwise eligible for IHS-funded health care services. Section 204(a) prohibits Medicaid reimbursements to IHS, a tribe, TO, UIO, or CHS provider from being reduced by the amount of any cost-sharing otherwise due. S. 1200 and H.R. 1328 as reported include definitions of Indian entities and contract health services, but the House Health Subcommittee version of H.R. 1328 does not. Further, S. 1200 , but neither version of H.R. 1328 , specifies that Section 204(a) takes effect October 1, 2009. Earlier versions of this provision (e.g., in S. 1057 as reported in the 109 th Congress) included SCHIP as well as Medicaid and did not limit the exemption to services and items provided by or through IHS, a tribe, TO, or UIO. In the 111 th Congress, a draft economic stimulus bill being considered by the House Energy and Commerce Committee contains a provision that is very similar to Sec. 204(a) of the House Health Subcommittee version of H.R. 1328 . The draft provision exempts Indians from Medicaid cost-sharing but, unlike S. 1200 and H.R. 1328 as reported, does not include definitions of Indian entities and contract health services. The Energy and Commerce Committee began marking up the draft stimulus bill with this provision on January 22, 2009. Under current Medicaid law, most cost-sharing is nominal or prohibited for many categories of beneficiaries. The most recent estimate by the Congressional Budget Office (CBO) for S. 1200 is that the cost-sharing exemption in Section 204(a) would increase federal Medicaid spending by $5 million in FY2008 and $74 million over FY2008-FY2017. (For the broader exemption in S. 1057 , 109 th Congress, CBO estimated its cost would have increased Medicaid and SCHIP spending by $26 million in FY2007 and by $357 million over the period FY2007-FY2016. ) Exclusion of Property from Medicaid and SCHIP Eligibility Determinations Section 204(b) of Title II of the bills amends SSA Section 1902 to exclude certain Indian property from being considered in determining Medicaid or SCHIP eligibility. Property to be excluded, or "disregarded," in determining eligibility would include all real property and improvements, in trust or restricted status, located within current Indian reservations, former reservations in Oklahoma (which may cover almost all of the state except the Panhandle and perhaps certain lands in southwestern Oklahoma), Alaska Native regions established under the Alaska Native Claims Settlement Act (which cover all of Alaska), and BIA-approved Indian allotments on or near reservations. For members of a federally recognized tribe that is not covered by the preceding sentence, any property, whether in trust or restricted status or not, located within the most recent boundaries of a prior federal reservation is excluded. Also excluded are ownership interests in income from natural-resource properties when the income results from exercising federally protected rights, and interests or use rights in property that is of "unique religious, spiritual, traditional, or cultural significance" or that is used for subsistence or to support traditional lifestyles, according to tribal law or custom. The House Health Subcommittee version of Sec. 204(b) specifies that the property is excluded from resources (as opposed to income) in determining eligibility. Section 204(b) contains a definition of "Indian" (by reference to the ISDEAA definition) that is deleted in the House Health Subcommittee version of H.R. 1328 . In the 111 th Congress, an economic stimulus bill being considered by the House Energy and Commerce Committee contains a provision that is nearly identical to Sec. 204(b) of the House Health Subcommittee version of H.R. 1328 . The provision excludes the same Indian property from being considered in Medicaid and SCHIP eligibility determinations. The Energy and Commerce Committee began marking up the draft stimulus bill with this provision on January 22, 2009. Current Medicaid law provides numerous eligibility categories, for some of which states are required to apply asset or property tests, and for some of which such tests are optional for states. For many of the asset tests, states may choose different guidelines in counting or disregarding assets. One guideline frequently used by states, that for Supplemental Security Income, excludes trust property of Indians in (or descended from) federally recognized tribes and Alaska Natives' stock in Native regional or village corporations. To some extent, then, Indian trust property and similar Alaska Native property may already be excluded in defining Medicaid eligibility, at least in some states. Section 204(b)'s provision would expand the types of property excluded from Medicaid eligibility tests and require all states to exclude such property. CBO's cost estimates have not addressed any costs connected to the exclusions. Exemption of Entities from State or Local Licensing Section 205 of Title II of the bills—exempting IHS, tribal, TO, and UIO entities from state or local licensing to be eligible for reimbursement from federal health programs—is nearly identical to IHCIA Title IV, Section 408. See the discussion in " Exemption of Entities from State or Local Licensing " above. The House Health Subcommittee version of H.R. 1328 deletes both this section and IHCIA Section 408. Required Medicaid Consultations Section 206 of Title II of the bills (Section 205 in the Health Subcommittee version of H.R. 1328 ) requires the Secretary to maintain an existing national Tribal Technical Advisory Group within CMS, in accordance with a charter dated September 30, 2003, with IHS and UIO as well as tribal and TO representatives. No other state or entity has such access given by statute. Section 206 also authorizes a state receiving Medicaid or SCHIP payments to establish a consultation process with IHPs and UIOs that provide health care for which Medicaid assistance is available within that state. The state should consult regularly with these federal and Indian entities, especially before it submits any Medicaid plan amendments, waiver requests, or proposals for demonstration projects that are likely to have a direct effect on IHPs or UIOs. S. 1200 , but neither version of H.R. 1328 , specifies that Section 206 takes effect October 1, 2009. In the 111 th Congress, an economic stimulus bill being considered by the House Energy and Commerce Committee contains a provision regarding consultation that is nearly identical to Sec. 205 of the House Health Subcommittee version of H.R. 1328 . The Energy and Commerce Committee began marking up the draft stimulus bill with this provision on January 22, 2009. Safe Harbors from Criminal Prohibition of Remunerations Current SSA, Title XI, has an anti-kickback provision that authorizes criminal penalties for soliciting or receiving remuneration in return for either referrals for services or purchases, leases, or orders for goods, facilities, services, or items, when the payment for the services, items, etc., may be made under a federal health care program. The provision allows for a number of exceptions, and the HHS Secretary must annually solicit proposals for additions or amendments to such "safe harbors" (i.e., payments not considered kickbacks). Section 207(b) of Title II of S. 1200 and H.R. 1328 (as reported) amends the SSA anti-kickback provision to add safe harbors from criminal prosecution for certain transactions (1) among IHPs, tribes, TOs, and UIOs (covered are transfers of inventory or supplies, staff, waiver of premiums or cost sharing, and the collection, transport, analysis, or interpretation of diagnostic specimens or test data); (2) among patients and IHPs, tribes, TOs, and UIOs (covered are transfers for expenditures for patient transportation, patient or family housing, escorts, or payment of cost sharing); (3) between an IHP, tribe, TO, or UIO under a contract, or between IHS and an outside health care provider under a CHS contract (covered are transfers of anything of value, provided the transfer is not tied to referrals or other business and is limited to fair market value); and (4) any other transfer of anything of value involving an IHP, tribe, TO, UIO, or patient that the HHS Secretary, in consultation with the U.S. Attorney General, determines is appropriate. According to its supporters, the intent of the safe harbor provision is "to eliminate any ambiguity about whether tribal health programs can continue to share resources after assuming the programs from IHS. Such interactions are an integral part of the Indian health system funded by IHS and are essential to maintaining continuity of care for patients and efficient, cost effective operations." HHS opposes this safe harbor provision, stating that it does not know what problems the provision is supposed to address, that statutory exceptions may undermine the criminal prohibition, that lack of a statutory safe harbor may not make a particular transaction or arrangement illegal, and that current law authorizes the HHS Secretary to create safe harbors through regulations. The House Health Subcommittee version of H.R. 1328 deletes the language in this section of Title II of the bills, substituting instead (as Section 206 of the Health Subcommittee version) a requirement that the HHS Secretary, through the HHS Inspector General, solicit a proposal for safe harbors related to IHP and UIO health care items and services. Indians and Medicaid and SCHIP Managed Care Organizations The SSA, Title XIX, authorizes states to elect to provide Medicaid services through Medicaid managed care organizations or entities (MCEs), in which Medicaid beneficiaries enroll to receive Medicaid services. Section 208 of Title II of the bills (Section 207 of the House Health Subcommittee version of H.R. 1328 ) makes two sets of changes regarding Indian health entities and Medicaid managed care. First, Section 208 adds Medicaid and SCHIP rules applying to all Medicaid MCEs. The rules require non-Indian Medicaid MCEs to allow IHS-eligible Indian enrollees to choose an "Indian health care provider" (defined as an IHP or UIO) as their primary care provider. The rules also place additional requirements on an MCE with a "significant percentage" of enrollees who are Indian; the additional requirements concern such issues as the number of Indian health care providers in the MCE's network, rates and promptness of payments to Indian health care providers (whether participating in the MCE network or not), exemption of Indian health care providers from compliance with an MCE requirement if it conflicted with a statute or regulation, satisfaction of Indian enrollees' claim-submission requirements by submission of claims by Indian health care providers, and use of FTCA coverage to allow an Indian health care provider to meet requirements for medical malpractice insurance. The House Health Subcommittee version of H.R. 1328 drops the Medicaid compliance exemption, claims submission, and malpractice coverage provisions, and also drops the requirement that MCEs subject to the remaining rules have a significant percentage of Indian enrollees. Second, Section 208 adds rules regarding Indian Medicaid MCEs. It requires that a state offer to make agreements to allow an Indian Medicaid MCE (as defined in the section) to serve as the Medicaid or SCHIP MCE for eligible Indians, if (1) the state has elected to provide Medicaid services through MCEs and (2) an Indian health care provider (funded wholly or partly by IHS) or a consortium of IHPs or UIOs has established an Indian Medicaid MCE that meets the relevant required quality standards. Section 208 establishes special rules for these Indian Medicaid MCEs, covering such areas as enrollment restrictions by Indian Medicaid MCEs or states, default enrollment of Indians in Indian Medicaid MCEs, application of Medicaid solvency standards by HHS instead of the state, status of the Indian Medicaid MCE as a "public entity" under Medicaid law (hence exemption from certain state solvency standards and risk-related licensing requirements), waiver of certain requirements for patients' advance directives, and modification of MCE marketing and information rules to allow culturally appropriate and understandable materials. The House Health Subcommittee version of H.R. 1328 deletes the requirement for states to offer to make agreements with Indian Medicaid MCEs, and drops all the special rules for Indian Medicaid MCEs except the rule regarding enrollment restrictions. S. 1200 , but not H.R. 1328 , specifies that Section 208 takes effect October 1, 2009. HHS worked with Indian health care proponents on many of Section 208's provisions, but opposes requiring states to take the actions envisioned in Section 208 and has other, more specific objections. Annual Report on Indian SSA Health Program Beneficiaries Section 209 of Title II of S. 1200 and H.R. 1328 (as reported) amends SSA to require the HHS Secretary, acting through CMS and IHS, to report annually to Congress on the enrollment and health status of Indians receiving items or services under SSA health benefits programs during the previous year. Among the subjects to be covered would be the number of Indians receiving benefits under each SSA health program, the health status of such Indians (disaggregated by specific diseases or conditions), the number of Indians who receive benefits from both IHS and SSA health programs, and the status of IHP and UIO facilities' compliance with CMS conditions and requirements. HHS opposes this provision, stating that neither CMS nor IHS has the data and arguing that collecting the data would be burdensome. The House Health Subcommittee version of H.R. 1328 (in Section 208 of this version) drops the report on facilities' compliance with CMS requirements; moves to IHCIA Title VIII the requirement for information on Indians who use CMS programs, their use of IHS, and their health status; and adds a requirement that CMS and IHS collect data on provision of CMS services to Indians in a way that provides for the Title VIII report. Other Legislative Issues Congress has also considered other legislative initiatives that have a direct impact on Indian health. Contract Support Costs Under the ISDEAA, IHS pays annual contract support costs to a tribe to cover the tribe's expenses for administering IHS programs under a self-determination contract (ISDEAA Title I) or a self-governance compact (ISDEAA Title V). Contract support costs are separate from direct program operating costs. They include pre-award costs (such as planning), one-time start-up costs (such as office-equipment purchases), direct costs (such as unemployment taxes on program salaries or training required for program personnel certification), and indirect costs (overhead costs shared with other programs, such as financial management, data processing, utilities, and janitorial services). The amount of each tribe's contract support costs for IHS programs is negotiated between the tribe and IHS. The ISDEAA, however, makes the funding of contract support costs dependent on "the availability of appropriations." Funding has been insufficient to cover tribal contract support costs. While appropriations for IHS contract support costs have risen over time (see Table 4 above), they have seldom covered 100% of the total contract support costs negotiated with tribes. Moreover, the expenses that contract support costs are to pay have also gone up, because more tribes are electing to operate health delivery services, the total amount of program dollars contracted by the tribes has increased, and administrative costs have risen. When tribes' contract support costs are not fully funded through appropriations, the tribes must either use program funds to make up the difference or forego the administrative support. Contracting and compacting tribes argue that usage of program funds for contract support costs means less health treatment can be offered at IHS-funded facilities. They have argued further that federal failure to pay contract support costs is a breach of federal contract law. The Cherokee Nation of Oklahoma and the Duck Valley Shoshone-Paiute Tribes of Nevada filed suits against the United States in the late 1990s over IHS failure to fully fund the tribe's contract support costs, and eventually won their case before the U.S. Supreme Court. The tribes' victory in court does not appear, however, to fix the problem of the underfunding of contract support costs. The Supreme Court noted that the entire IHS appropriation from which contract support costs are drawn is available to pay the costs, but only if the appropriations act does not cap the amount appropriated for contract support costs. Even before the Court decision, however, from FY1998 on, Congress began including language in appropriation acts that explicitly limited amounts for IHS contract support costs. The main proposals for fully funding contract support costs—besides increasing the appropriations—involve making them an entitlement. Proponents of entitlement argue that contracting and compacting tribes are operating federal programs and carrying out federal responsibilities and that tribes should not have to use tribal financial resources to subsidize federal contract support costs. Critics warn the proposal would be extremely expensive and argue that making an entitlement for one IHS funding source would jeopardize funding for other programs. Bills introduced in the 106 th and 108 th Congresses ( H.R. 4148 and S. 2172 , respectively) would have made these costs an entitlement for IHS and BIA contracts and compacts, but neither bill was enacted. Substance Abuse and Mental Health Program Consolidation Indian communities are plagued by mental health problems and alcohol and substance abuse, at rates generally far greater than those of the general population. Alcohol continues to be an important risk factor associated with the top three killers of AI/AN youth—accidents, suicide, and homicide. In fact, in 2002, alcohol was the primary abuse substance over illicit drugs among all AI/AN. Compared to the average American, AI/AN are 6.5 times more likely to die from alcoholism-related diseases or accidents (see Table 3 above). According to a 2003 Senate Committee on Indian Affairs report, mental health and social problems are associated with more than one-third of the demands made on Indian health facilities for services. An HHS report states that, although little evidence is available, the existing data suggest that AI/AN youth and adults suffer a disproportionate burden of mental health problems when compared with other ethnic and racial groups in the United States. Recognizing that there is significant co-morbidity of mental and substance abuse disorders, particularly alcohol abuse, the federal government offers several disparate mental health and substance abuse prevention and treatment programs for which Indian tribes and tribal health organizations are eligible to receive funding. According to the 2003 Senate Committee on Indian Affairs report, however, the funding available for the operation of these programs is generally very small. According to the Senate Committee report, when Indian tribes and tribal organizations are able to access program funding from several different sources, the amounts are generally so meager, and the auditing and reporting requirements so onerous, that it is simply not cost effective to attempt to operate a program which combines multiple sources of available funding. The Senate Committee report also stated that an HHS study identified those department programs that could be consolidated by tribes into a self-governance compact, or that would be useful to a self-governance compact, but could not be consolidated due to statutory restrictions. Legislation was introduced in the 106 th ( S. 1507 ), 107 th ( S. 210 ), and 108 th ( S. 285 ) Congresses to allow Indian tribes or TOs operating federal substance abuse and mental health programs to consolidate them into a single program for administrative purposes. IHCIA Title VII in S. 1200 and H.R. 1328 (110 th Congress) emphasized coordination of behavioral health care, but did not authorize consolidation of federal program funding. New legislation may be introduced to authorize tribal consolidation of federal substance abuse and mental health funding. Appendix. Brief History of Federal Indian Health Services From 1789 to 1849, the Department of War was charged by Congress with handling Indian affairs (1 Stat. 49), so early federal health services to Indians were most likely to be provided by military doctors and were probably chiefly to prevent the spread of infectious diseases. Congressional appropriations for the War Department in this period did not mention Indian health care. In addition to whatever the War Department spent, some of the funds the federal government provided to missionaries for educating Indians may have been used for medical care of Indian students. The earliest statutory authorization (and appropriation) explicitly for federal Indian health care was the act of May 5,1832 (4 Stat. 514), which authorized Indian agents to employ local or U.S. Army doctors to provide smallpox vaccinations to Indians, and appropriated $12,000 for the purpose. Additional appropriations for smallpox vaccinations were made in 1839 (5 Stat. 328), 1853 (10 Stat. 226), and annually from 1860 to 1915. The earliest Indian treaty providing for health services was signed on September 15, 1832 (7 Stat. 370), with the Winnebago of Wisconsin; it included funding for two physicians for 27 years as part of the compensation for a land cession. Of the approximately 210 treaties made with Indian tribes after this 1832 treaty until 1871 (when Congress ended Indian treaty-making), about 44 treaties committed the federal government to provide the signatory tribe(s) a physician, a hospital, medicines, or vaccine, or some combination of these, usually for a delimited period of time. After 1849, when Indian affairs were transferred from the War Department to the new Department of the Interior (9 Stat. 395), federal executive activities regarding Indian health care fell under civilian rather than military authority. As the placement of Indian tribes on reservations accelerated in the second half of the 19 th century, the federal government gradually became aware of the need for medical care on reservations. As noted, Congress made annual appropriations for Indian vaccination against smallpox from 1860 to 1915. By the 1860s Congress was also making appropriations for doctors and medicine for some agencies, and the BIA was appointing physicians, although only at some agencies. The number of medical employees in BIA agencies and schools increased from at least 12 in 1865 to 86 in 1897, and by 1888 there were four BIA hospitals. By 1884 the BIA published regulations specifying physicians' responsibilities. Except for 1873-1877, however, BIA had no organized medical division. It was not until 1908 that the Commissioner of Indian Affairs first appointed a chief medical supervisor. Critics and studies inside and outside the BIA pointed out the severity of health problems, especially tuberculosis, in Indian schools and reservations. Between 1900 and 1911, the number of BIA hospitals and sanatoria jumped from five to 50. In 1910 Congress enacted its first appropriation for general Indian medical needs (36 Stat. 271), as opposed to appropriations for specific reservations or diseases, for $40,000. By 1920 Congress had increased this overall Indian health appropriation to $375,000, and had also added appropriations specifically for hospital construction and operation and for general medical treatment of Indians (and, for a few years, "correction of sanitary defects in Indian homes"). In 1921, Congress passed the Snyder Act (P.L. 67-85), a general authorization of appropriations for Indian health services, without time or dollar limitations (see " Statutory Authority ," above). Despite these actions and further appropriations increases, criticism of BIA health services continued, including suggestions to transfer BIA medical services to the Public Health Service (PHS). In 1926 a PHS surgeon was assigned to supervise the BIA medical division. In 1929 Congress authorized the Secretary of the Interior to permit state agents to inspect AI/AN health and education conditions and to enforce sanitation and quarantine regulations (P.L. 70-760), and in 1934, through the Johnson-O'Malley Act (P.L. 73-167), Congress gave the BIA authority to contract for medical services from states, local governments, and private organizations. Indian health problems were still severe, however. In 1955, under authority of the Transfer Act of 1954 (P.L. 83-568), the BIA's Indian health programs were transferred to the PHS in the then-new Department of Health, Education and Welfare, now HHS (see " Statutory Authority ," above). Indian Health Service appropriations increased markedly after the transfer, and Indians' health status improved greatly in the next 20 years. It still lagged behind that of the American population, however, and in 1976 Congress enacted the Indian Health Care Improvement Act ( P.L. 94-437 ), authorizing new programs and IHS access to Medicaid and Medicare funds (see " Statutory Authority "). A year earlier, Congress had enacted the Indian Self-Determination and Education Assistance Act ( P.L. 93-638 ), whose authorization of self-determination contracts and, through amendments, self-governance compacts has led to tribal operation of a majority of IHS facilities. Printed Sources Kappler, Charles J., comp. Indian Affairs: Laws and Treaties , 7 vols. (Washington: GPO, 1904-[1979]). Pfefferbaum, Betty, et al. "Learning How to Heal: An Analysis of the History, Policy, and Framework of Indian Health Care," American Indian Law Review , vol. 20, no. 2, 1995-1996, pp. 365-397. Prucha, Francis Paul. The Great Father: The United States Government and the American Indians (Lincoln: University of Nebraska Press, 1984). Schmeckebier, Laurence F. The Office of Indian Affairs: Its History, Activities, and Organization (Baltimore: Johns Hopkins Press, 1927). Stuart, Paul. The Indian Office: Growth and Development of an American Institution, 1865-1900 (Ann Arbor, MI: UMI Research Press, 1978). —— Nations Within a Nation, Historical Statistics of American Indians (New York, Greenwood Press, 1987). United States, United States Statutes At Large (Boston: Little, Brown, 1851-1869, and Washington: GPO, 1875-present). U.S. American Indian Policy Review Commission, Task Force Six: Indian Health, Report on Indian Health. Final Report to the American Indian Policy Review Commission , July 1976 (Washington: GPO, 1978). U.S. Congress. House of Representatives. Committee on Energy and Commerce. Subcommittee on Health and the Environment. Indian Health Care: An Overview of the Federal Government ' s Role , 98 th Cong., 2 nd sess. H.Prt. 98-Y, April 1984 (Washington: GPO, 1984). Online Sources United States Statutes At Large , in the Library of Congress's American Memory site, "A Century of Lawmaking For a New Nation: U.S. Congressional Documents and Debates," at http://memory.loc.gov/ammem/amlaw/lwsl.html . Kappler ' s Indian Affairs: Laws and Treaties , at http://digital.library.okstate.edu/ kappler/.

The Indian Health Service (IHS), an agency in the Department of Health and Human Services (HHS), provides health care for eligible American Indians/Alaskan Natives through a system of programs and facilities located on or near Indian reservations and in certain urban areas. The IHS health delivery program is organized into 12 regional area offices and 161 local service units, and serves federal reservations, Indian communities, and urban Indians. In general, persons eligible for IHS services must be in IHS service areas and belong to federally recognized tribes. The IHS-served population generally has a higher incidence of illness and premature mortality than the U.S. population as a whole. Several IHS publications compare the health conditions and causes of death of the IHS service population with those for the entire U.S. population. According to the latest of these, the average life expectancy at birth for the IHS service area population in 1999-2001 was 74.5 years, or 2.4 years less than the 76.9 years for the total U.S. population. IHS appropriations are separated into two budget categories: health services and health facilities. For FY2008, the total appropriation for IHS was $3.35 billion, of which $2.97 billion (89%) was for health services and $374.6 million (11%) was for health facilities. Other sources of IHS funding include a special diabetes program and reimbursements from Medicare, Medicaid, and private insurance. Total IHS "program-level" funding, including all sources, was $4.28 billion in FY2008. Indian health advocates argue that IHS funding falls short of the need. Although a number of legislative issues concerning IHS face the 111th Congress, the primary focus has been on the reauthorization of the Indian Health Care Improvement Act (IHCIA). Two bills (S. 1200 and H.R. 1328) were introduced in the 110th Congress to reauthorize the IHCIA. Both reauthorization bills would have expanded health services, eased processes for reimbursements from Medicaid and other federal programs, coordinated behavioral health programs, and authorized other actions. S. 1200 was reported, amended, by the Senate Indian Affairs Committee on October 17, 2007 (S.Rept. 110-197). S. 1200 was passed, amended, by the Senate February 28, 2008, and sent to the House. H.R. 1328 was reported, amended, by the House Natural Resources Committee on April 4, 2008 (H.Rept. 110-564, part 1). Separately H.R. 1328 was forwarded, amended, by the House Energy and Commerce Committee's Health Subcommittee to the full Committee on November 7, 2007. H.R. 1328 was discharged by the Energy and Commerce and Ways and Means Committees on June 6, 2008, and the Natural Resources version reported in April was placed on the calendar. Concerns continue about many issues in the IHCIA bills, including provisions on Medicaid and other issues listed in a January 2008 Statement of Administration Policy on S. 1200, which threatened a veto of that bill. Neither S. 1200 nor H.R. 1328 were passed by Congress. No IHCIA bill has been introduced in the 111th Congress as of the date of this report, but certain Medicaid-related provisions have been included in draft economic-stimulus legislation. This report will be updated.

Introduction Small businesses have always been of interest to Congress when discussing tax policies to promote economic growth and job creation. Within these discussions it is common to equate, or at least associate, "small" businesses with pass-through businesses (e.g., sole proprietorships, partnerships, limited liability companies, S corporations). An obvious question is then, are all small businesses also pass-throughs? Relatedly, are all large businesses also C corporations? Answering these questions may help to better target particular tax, and nontax, policies. This report uses 2015 U.S. Census data to investigate how the size of businesses varies by legal form (corporate and pass-through), as well as the distribution of employment across firm types. Firm size is measured by using employment. The majority of both corporations and pass-throughs in 2011 had fewer than five employees (55% of C corporations and 64% of pass-throughs). Nearly 99% of both corporations and pass-throughs had fewer than 500 employees, the most common employment-based threshold used by the Small Business Administration (SBA). Thus, it appears that based on an employment-based measure of size most businesses were small, with the exact share depending on the definition chosen. Looking further into the data reveals that while the majority of firms were small, the largest firms accounted for the majority of employment. For example, about 53% of all employees worked at firms with 500 or more employees. This statistic is being driven mostly, but not wholly, by corporate employment. Roughly 76% of corporate employees worked at firms with more than 500 employees. In contrast, 25% of pass-through employees worked at firms with more than 500 employees. Thus, a nontrivial share of pass-through workers were employed at the largest firms, but not to the same degree as in the corporate sector. This report may prove useful to Congress when considering tax and nontax policies directed at businesses based on size. This report does not analyze questions related to the economics of providing preferential tax treatment for small businesses, or the extent to which small businesses are responsible for job creation in the economy. Tax Treatment of Business Income Before discussing the data in greater detail it may be helpful to briefly review the tax treatment of business income. In the United States, how a business is taxed at the federal level is partly dependent on how it is organized. The income of C corporations, often referred to as simply corporations, is taxed once at the corporate level according to the corporate tax system, and then a second time at the individual-shareholder level according to the individual tax system when corporate dividend payments are made or capital gains are realized. This leads to the so-called double taxation of corporate profits. The income of pass-through businesses is, in general, taxed only once at individual income tax rates. That is, the income of certain businesses passes through to the individual business owners and is taxed according to individual income tax rates. The most popular forms of these alternative pass-through forms of organization are sole proprietorships, partnerships, limited liability companies (LLCs), and subchapter S corporations. While this report relies on data from tax year 2015, it is important to note that the 2017 tax revision ( P.L. 115-97 ) made significant changes to the federal tax system that affected corporations and pass-throughs. A detailed discussion of these changes is beyond the scope of this report; however, it is worth highlighting two changes starting in 2018. First, the revision permanently reduced the top corporate tax rate from 35% to 21%. Second, the revision provided pass-throughs, depending on their size and line of business, with a special deduction equal to up to 23% of their income. The deduction reduces the amount of income subject to tax at the individual income tax rates, thus reducing the effective tax rate on qualifying pass-throughs. This change is scheduled to expire after 2025. Comparing the Size of Pass-Throughs and Corporations Comparing the size of pass-throughs and corporations is complicated by the fact that there are several different ways to measure firm size. Size could be measured by employment, profits, assets, or a variety of other statistics. Additionally, two different industries may require different measures of size. For example, one industry may be more capital intensive (i.e., more machines and equipment per worker) than another, leading firms in that industry to naturally have more capital assets, whereas firms in another industry may generally have fewer capital assets while employing a large number of workers. Still, given the association of small businesses with pass-throughs, and small businesses with job creation, particularly startups, the presentation below relies on an employment-based measure of firm size. Settling on an employment-based metric to measure size still leaves another unresolved issue: what is the employment threshold between small businesses and large businesses? A business with only a handful of employees would constitute being a small business in nearly all cases. But what if a business has 50, 100, 200, or even 500 employees? Currently, there is no consensus on a single criterion that determines the threshold between large and small businesses. For most industries the Small Business Administration (SBA) considers a business small if it has 500 or fewer employees, although this threshold can reach 1,500 employees in some cases. This report does not attempt to resolve the debate over what exactly constitutes a small business. The data presented below are from the Census Bureau's 2015 Statistics of U.S. Businesses, the most recent Census data by legal form. The Census provides data separately for businesses with no employees (their nonemployer data) and businesses with at least one employee (their employer data) at some point in the year. This report uses employer data only, mainly because nonemployers generate less than 4% of all business sales and receipts according to Census, and because Census excludes nonemployers from the majority of its own statistics. It could also be argued that many nonemployers likely represent individuals involved in side work or short-term contract work, which can be viewed as distinct from the more traditional businesses captured in the employer data. In 2015, 124.1 million people were employed by employer firms. C corporations accounted for approximately 54.9 million employees (44.2%), S corporations accounted for 32.6 million employees (26.2%), partnerships accounted for 14.3 million employees (11.6%), sole proprietors accounted for 4.7 million employees (3.8%), nonprofits accounted for 15.7 million employees (12.6%), governments accounted for 1.3 million employees (1.0%), and 0.5 million employees were categorized as being employed at "other" entities (0.4%). Corporations and pass-throughs account for a combined 96.5 million workers, with 55% employed at corporations and 45% employed at pass-throughs. In 2015, there were 5.5 million corporations and pass-throughs with at least one employee at some point during the year. There were 2.9 million S corporations, 1.0 million C corporations, 0.9 million sole proprietorships, and 0.7 million partnerships. As a percentage of the total, C corporations accounted for 18.1% of firms while pass-throughs accounted for 81.9%, with 52.9% of all firms being S corporations, 16.3% being sole proprietorships, and 12.7% being partnerships. Distribution of Firms by Number of Employees Figure 1 displays the distribution of corporations and pass-throughs by firm size. The employment categories used to create the distributions are the same as those used by the Census to present the data. Figure 1 shows a key fact about the size of corporations and pass-throughs: the majority of both (55% of corporations and 64% of pass-throughs) had fewer than five employees in 2015. Naturally, as the definition of small is expanded to include more employees, the share of businesses that fall into this classification increases. For example, 73% of corporations and 81% of pass-throughs had fewer than 10 employees; 85% of corporations and 91% of pass-throughs had fewer than 20 employees; 97% of corporations and 99% of pass-throughs had fewer than 100 employees; and 99% of corporations and 99.7% of pass-throughs had fewer than 500 employees—the most common employee-based threshold used by the SBA for small business determination. The general pattern displayed in Figure 1 holds across the various pass-through types. Figure 2 displays the distribution of sole proprietors, partnerships, and S corporations by firm size. The greatest concentration of pass-throughs is found in the 0 to 4 employees category, with the number of firms dropping off rather quickly as firm size increases. This relationship is the most pronounced with sole proprietorships, which had the greatest proportion of small firms; almost 78% of sole proprietorships had 0 to 4 employees, with the remaining proportion of firms decreasing more rapidly than partnerships and S corporations. Interestingly, comparing corporations ( Figure 1 ) and partnerships ( Figure 2 ) reveals they have nearly the same size distributions. Distribution of Employees by Firm Size An alternative way to analyze the data is to examine the distribution of employment by firm size. This approach reveals that while the majority of firms had fewer than 500 employees in 2015 (see Figure 2 ), the largest firms account for the majority of employment. Figure 3 shows that just over 53% of employees worked at firms with 500 or more employees. Firms with fewer employees employ a smaller share of the overall workforce. About 14% of employees worked at firms with 100 to 499 employees; 17% worked at firms with 20 to 99 employees; 7% worked at firms with 10 to 19 employees; 5% worked at firms with 5 to 9 employees; and 5% worked at firms with fewer than 5 employees. The picture changes somewhat when employee distributions are plotted separately for the corporations and pass-throughs as in Figure 4 . Two features of the data are immediately apparent. First, employment in the corporate sector was heavily skewed toward the largest firms. Roughly 76% of corporate employees worked at firms with more than 500 employees in 2015. No other size category accounts for more than 10% of corporate employment. Second, employment in the pass-through sector was more evenly distributed across the employee size categories. For example, about 25% of employees at pass-throughs worked at firms with more than 500 employees, which is less than the portion who worked at firms with 20-99 employees (27%), but more than double the share who worked at firms with either 0-4 employees, or 5-9 employees (with 9% each). Thus, nearly a quarter of pass-through workers were employed at the largest firms, while in the corporate sector the share was nearly 76%. Average Number of Employees at the Largest Firms Observing the average number of employees at large firms (more than 500 employees) offers insight into how large the largest firms were in 2015. Among firms with more than 500 employees the average number of employees differs quite significantly between corporations and pass-throughs (see Figure 5 ). The average number of employees at the largest C corporations (500 or more employees) was slightly above 4,100, while the average number of employees for pass-throughs was just over 1,100. Among large pass-throughs, partnerships tended to have the most employees on average with 1,203, S-corporations fall in the middle with 1,102 employees on average, and sole proprietorships have the fewest with 1,086 employees on average. Conclusion The analysis presented here sheds light on the distribution of small and large businesses, the distribution of employment across businesses of various sizes, and differences in the employment patterns and sizes of corporations and pass-throughs. Understanding these data may help policymakers when considering tax policy. For example, particular attention is often given to the effect tax policy may have on pass-throughs under the assumption that pass-throughs and small business are synonymous. But the analysis presented here shows this is not the case. Additionally, 99% (968,134) of C corporations have less than 500 employees, which is the most common employment-based threshold used by the SBA. Not considering the ramifications of particular policies on small C corporations could result in a large share of small businesses being overlooked. Additionally, when formulating policy it may be useful to keep in mind the distribution of employment across firm size. While the vast majority of corporate and pass-through businesses are small in terms of number of employees, the 0.4% (21,561) of firms with more than 500 employees account for over 50% of all employees.

In tax policy discussions it is not uncommon for the terms pass-through and small business to be interchanged, or, similarly, for the terms corporation and large business to be interchanged. This report uses 2015 U.S. Census data to investigate how the size of businesses varies by legal form (corporate versus pass-through). For this report, firm size is based on employment. The analysis finds that the majority of both corporations and pass-throughs in 2015 had fewer than five employees (55% of C corporations and 64% of pass-throughs). Nearly 99% of both corporations and pass-throughs had fewer than 500 employees, the most common employment-based threshold used by the Small Business Administration (SBA). Thus, when using an employment-based measure of size, the majority of all businesses can be considered small, with the exact share depending on the chosen definition of small. Analysis of the data also reveals that while the majority of firms were small, the largest firms accounted for the majority of employment. About 53% of all employees worked at firms (corporate and pass-through) with 500 or more employees in 2015. Looking at this statistic separately for corporations and pass-throughs, 76% of corporate employees worked at firms with more than 500 employees, while 25% of pass-through employees worked at firms with more than 500 employees. Thus, while a greater proportion of workers in the corporate sector were employed by the largest firms, the proportion of pass-through employees employed at the largest firms was not small. The average number of employees at large firms (more than 500 employees) was computed to gain insight into how large the largest firms were in 2015. There was a substantial difference in the average number of employees at large firms that were corporations as opposed to pass-throughs. The average number of employees at the largest C corporations (500 or more employees) was 4,143, while the average number of employees for pass-throughs was 1,141. Among large pass-throughs, partnerships tended to have the most employees on average with 1,203, S-corporations fall in the middle with 1,102 employees on average, and sole proprietorships have the fewest with 1,086 employees on average. Understanding the data presented in this report may help policymakers when considering tax and nontax policies. Specifically, it may help to better target policies that are geared toward affecting businesses of a particular size.

Introduction Congress was an active participant in the policy responses to the 2007-2009 recession and its aftermath and has an ongoing interest in macroeconomic conditions. Current macroeconomic concerns include whether the economy is in a sustained recovery, rapidly reducing unemployment, and speeding a return to normal output and employment growth. Faced with fiscal consolidation and limited further impetus from monetary policy, the momentum of the current economic recovery will likely be determined by the strength of spending by the private economy, particularly the strength of consumer spending. In the aftermath of the deep 2007-2009 recession, involving a huge loss of net worth and a large increase in the burden of debt, households' actions to repair their balance sheets is thought by many economists to be a key factor dissipating the strength of consumer spending and, in turn, slowing economy-wide recovery and job creation. Where households currently stand in repairing their balance sheets is likely to have a strong effect on the strength of consumer spending. If substantially complete, it would point to the prospect of stronger consumer spending and increased momentum of the economic recovery; but if substantial wealth building is still needed, it would diminish that prospect. This report begins with a discussion (accompanied by graphics) of the slower than normal pace of the ongoing economic recovery and the likely role in that of weak consumer spending forced by a sharp loss of household net worth during the recession and the subsequent need to rebuild that lost wealth. Next, the report examines (also accompanied by graphics) where balance sheet repair currently stands, paying particular attention to the composition of assets that have been accumulated and the degree of debt reduction achieved. The report then considers the near-term prospect for stronger consumer spending and more rapid economic recovery. The report concludes with a discussion of the possible implications of household balance sheet repair for economic policy. Background: Household Wealth and Economic Activity A Deep Recession and a Slower Than Normal Recovery The 2007-2009 recession was long and deep, and according to several indicators was the most severe economic contraction since the 1930s (but nevertheless much less severe than the Great Depression). When the fall of economic activity finally bottomed out in the second half of 2009, real gross domestic product (GDP) had contracted by approximately 5.1%, or by about $680 billion. The pace of economic recovery from the recession has been lackluster. Over four years of recovery, the annual rate of growth of real GDP has averaged 2%, well below the 3% to 5% typical of other post-WWII recoveries. As a result, the output gap—the difference between what the economy could produce and what it actually produced—has only declined from a high of 8.1% in mid-2009 to a still large 5.8% in mid- 2013 (see Figure 1 ). Slow growth of output has also meant a slow reduction of unemployment; down from a peak of 10.1% reached in October 2009, the unemployment rate remains near 7.5%, leaving 12 million persons still without a job. Albeit slower than hoped, the recovery has persisted. In part, steady growth was the result of support given to aggregate spending by policies of fiscal and monetary stimulus. However, fiscal stimulus has steadily dissipated since 2010 and in 2013 it has turned contractionary. And while monetary policy is expected to remain stimulative through 2013, it is unlikely to add to that stimulus to counteract increasing fiscal drag. Therefore, sustaining the recovery's momentum in the remainder of 2013 and into 2014 may require a greater push from private spending, particularly household consumption spending. Unusually Weak Consumption Spending Personal consumption expenditures historically constitute the largest and most stable component of aggregate spending in the U.S. economy. Since the 1980s, consumption spending's share of GDP has averaged between 65% and 70% and during previous post-war recoveries consumption spending has typically increased at a 4%-5% annual pace. Typically, a strong rebound by the largest component of final demand was a central driver sustaining the momentum of economic recovery, causing a quick closing of the output gap opened up by the preceding recession, and a quick return to full employment. This recovery, however, has been characterized by relatively weak consumption spending by households, averaging a sluggish 2% annual pace for the four-year period. Several factors have likely contributed to households spending less vigorously in this recovery than in previous economic recoveries. Persistent high rates of unemployment have directly dampened spending by decreasing income for millions of households and more broadly dampened spending by eroding consumers' confidence in their immediate economic prospects. In addition, sharp spikes in energy prices in 2010 and 2012 had significant negative effects on household budgets. The Impact of a Large Decrease in Household Wealth Many economists have argued that the most important factor making consumer spending in this recovery historically weak is that, unlike previous post-war recessions in which reduced household income impeded spending, the 2007-2009 recession carried with it an enormous decrease in household net worth (wealth) caused by the associated collapse of the housing and stock markets. The $542 billion or 5.3% decrease in disposable income during the recession was large but substantially smaller than the decline in aggregate household wealth, which decreased by $16.4 trillion or 26% (see Figure 2 ). However, the loss of wealth for the typical household was proportionately greater than the fall of aggregate household wealth. A clearer view of the damage to the net worth of a typical household is provided by the change in median household net worth—the level of net worth at which half the households are richer and half poorer. The estimated decrease in median household real net worth was 39%. Overall, it is estimated that the bottom 80% of households lost two decades' worth of wealth. Although declines in the values of financial assets or businesses were important factors for some families, owner equity in the home has typically constituted 75%-80% of households' total assets. Therefore, the decrease in the median household's net worth appears to have been driven most strongly by an $8.4 trillion or 35% decrease in the value of real estate assets that began in 2006 and continued through mid-2011 (see Figure 3 ). The variation in housing wealth is largely explained by changes in home values, rather than changes in home ownership rates, which have remained largely unchanged. A commonly used measure of home prices is the Case-Shiller index, which tracks home prices in 20 metropolitan regions. Over the 2006-2011 period, the Case-Shiller index fell 33% and its path essentially mirrors the path of the value of household real estate assets (see Figure 4 ). Research suggests that housing wealth has a much stronger impact on household spending than does financial wealth, making it a major factor governing consumption spending by most households. It is estimated that a one-time decrease in housing wealth of 1% leads to a 0.10% decrease in consumer spending each year afterward. On the other hand, the same change in financial wealth (i.e., stocks, bonds, pension funds) led to a smaller 0.03% permanent decrease in consumer spending. That degree of consumption sensitivity to housing wealth implies that the 35% decrease in housing wealth experienced between 2006 and 2011 would reduce household consumption by 3.5% or by about $350 billion, which is equivalent to more than half of the $680 billion economy-wide contraction of real GDP during the 2007-2009 recession. The Added Burden on Households of Increased Financial Leverage The loss of wealth by itself would have likely caused households to divert more income from consumption to saving in an attempt to rebuild their net worth. However, there was another exacerbating factor—a sharp increase in financial leverage. Leverage is the degree to which household assets are financed with debt and is typically measured as the ratio of household debt to assets. In 2007 the leverage ratio of households balance sheet was at a historically high 18%, up from 14% in 2000. With the collapse of asset prices that began in 2006, the leverage ratio would rise, reaching over 21% at the end of the recession in mid-2009 (see Figure 5 ). Many analysts argued that this "debt overhang" created an additional motive for household deleveraging, giving rise to a further diversion of current income to balance sheet repair and, in turn, causing slower aggregate spending. Sharply rising debt likely dampens household spending by raising financial discomfort, increasing debt service costs, and reducing access to credit markets. A recent study suggests that highly leveraged households had larger declines in spending than other households, despite having smaller changes in net worth. Together, a substantial loss of net worth and historically high leverage created a particularly weak aggregate household balance sheet, increasing the severity of the 2007-2009 recession and slowing the pace of the subsequent recovery. Research suggests that roughly two out of every three jobs lost between 2007 and 2009 were attributable to household balance sheet weakness leading to weak consumption spending . Similarly, unlike in earlier post-war recoveries, the need for households to rebuild a sizable amount of lost wealth and to reduce a large debt overhang would cause a substantial diversion of current income from consumption spending to saving. The process of repairing the household balance sheet has been, arguably, a major factor causing the below average pace of the economic recovery since 2009. The ratio of net worth to disposable income is one indicator that households have been repairing their balance sheets; it has been increasing, moving from a recession low of 4.5 to 5.9 in the first quarter of 2013 (see Figure 6 ). Since the start of the recession, the personal saving rate also shows that a larger share of income has been directed toward wealth building. Saving rose from about 2% of income prior to the recession to near 6% during the recession, and it has remained above 5% during the recovery (see Figure 7 ). The Current State of Household Net Worth Aggregate Nominal Household Net Worth is Now Above the Pre-Crisis Level Aggregate household net worth has more than fully recouped the wealth lost during the 2008-2009 recession. In the first quarter of 2013, aggregate household net worth reached $70.3 trillion, an increase of $18.3 trillion from the $52.0 trillion low reached in the first quarter of 2009, and about $2.0 trillion above the pre-recession peak of $68.1 trillion reached in the second quarter of 2007 (see Figure 2 ). The increase in household wealth since 2009 was the net effect of a rising value of assets and falling value of liabilities (debt) although the former was by far the largest contributor to the improvement in net worth (see Figure 8 ). Since the first quarter of 2009, the value of total assets held by households increased by $17.8 trillion, representing about 97% of the increase in net worth, whereas total liabilities fell by $0.5 trillion, representing the remaining 3% of the increase in net worth. However, aggregate net worth does not tell the complete story about the health of the typical household's balance sheet and the likely inducement provided to consumer spending. The Recovery in Real Household Net Worth is Incomplete Inflation affects the real purchasing power of wealth. Although inflation has been historically low since the beginning of the recession in late 2007, consumer prices, as measured by the Personal Consumption Expenditures (PCE) price index, have increased at an annual rate near 2%; the cumulative effect has resulted in a decrease in the purchasing power of a dollar of wealth over the 2007-2013 period by 9.6%. Deflating the current value of household net worth by that factor reduces aggregate net worth in the first quarter of 2013 from $70.3 trillion to $64.3 trillion in 2007dollars; placing real net worth about $4.0 trillion or about 6% short of full recovery of the 2007 level of purchasing power. Assets With Greatest Increase in Value Since 2009 Are Not Widely Held The aggregate net worth numbers masks a significant change in the composition of the households underlying assets. On the asset side, the total gain of household net worth was $10.8 trillion. Most (96%) of that gain was highly concentrated in financial assets (i.e., bank deposits, stocks, bonds, pension fund reserves), which increased by $10.4 trillion, and the share of financial assets that comprise total household assets increased from 63% to 69% (see Figure 9 ). The value of households' nonfinancial assets increased a comparatively modest $2.2 trillion, an increase that was largely the consequence of a like-sized increase in the value of household real estate holdings and is relatively recent, beginning in mid-2011. In addition, non-financial assets share of total household assets has fallen from a pre-crisis share of 35 % to 31% currently. The possible significance of this shift toward holding more financial assets as a percentage of totals assets is that such assets are not held widely, tending to be concentrated among a relatively small number of wealthier households whose tendency to spend in response to a rise in wealth is likely relatively low. Census data indicates that the real net worth of the median household, at least through 2011, had not increased. Data on the wealth of the median household are only available for select years, the most recent being 2011. In 2005, median household net worth was estimated to be $93,200; at the recessions trough in 2009, it had fallen to $68,900; and remained essentially unchanged in 2011 at $68,800. The lack of improvement in the median household's net worth is largely a reflection of the decline in the value of household real estate holdings; historically a major component of the median household's wealth. Home equity fell by more than $7 trillion from 2006 to 2009 and has only begun to recover since 2012 (see Figure 10 ), for which median wealth data are not yet available. Consequently, most households have not seen the degree of recovery in their net worth indicated by the aggregate numbers and have a commensurately smaller inducement to boost spending. Looking at the aggregate home equity data, during much of this period, more than 30% of all mortgages were estimated to be "underwater," meaning that the remaining balance of the mortgage exceeded the value of the home. In the first quarter of 2013, the percentage of underwater mortgages decreased to about 27%, indicating that this important component of net worth has still not fully recovered for an estimated 13 million households, whose ability to spend is likely to be particularly liquidity constrained. Recent Upturn in House Prices Could Boost Typical Household Net Worth In the second half of 2011, home prices did stabilize and begin to increase, up about 9% on average nationwide through the first quarter of 2013. Rising home prices are likely to have a strong positive effect on the wealth of the median household, and such an improvement is evident in the aggregate net worth data. With house prices once again rising, owner equity in real estate, which had fallen $7.5 trillion from 2006 to 2011, increased $2.6 trillion through the first quarter of 2013 (see Figure 10 ). The recent upturn in house prices is likely to have had a positive effect on the net worth of the typical household in 2012 and will continue to do so in 2013 if prices continue rising. Furthermore, dollar for dollar increased housing wealth is likely to have a larger positive effect on household spending relative to increased financial wealth. As also noted above, however, large numbers of mortgage holding households still remain "underwater." A Modest Reduction in Debt On the liability side of household's balance sheet, debt obligations decreased from a pre-crisis high of about $14.4 trillion to $13.4 trillion through the first quarter of 2013, reflecting a net decrease of about $1.0 trillion or 7% (see Figure 11 ). That decline was more than fully explained by a $1.3 trillion decrease in mortgage debt. (Other components of total liabilities, such as consumer credit, increased.) However, these aggregate liability numbers likely overstate changes in active debt repayment behavior by households due to the effect of charge-offs resulting from mortgage defaults that increased greatly between 2007 and 2013. Data limitations prevent a precise allocation of percentages of mortgage debt decline to charge-offs; however, estimates are typically tallied to be several hundreds of billions of dollars. Households' debt service costs have decreased, down from a high of 14% of disposable income in 2007 to about 10.5% in the first quarter of 2013. However, in addition to a reduced level of debt, a sizable fall in interest rates since 2007 has also lowered debt service costs. Leverage in the Household Balance Sheet Has Been Reduced The improvement in the aggregate household balance sheet has also reduced the degree of financial leverage, falling from the recession high of 21% to 16%, which is below the pre-recession leverage ratio value of 17% (See Figure 5 ). Nevertheless, whether there is still excess leverage or a debt overhang depends on where the current leverage ratio stands relative to where households would prefer to be, but this "desired" leverage is difficult to gauge. A 16% leverage ratio is still historically high. For comparison, from 1970 to 2000 that ratio was consistently below 16%, moving in a band from 12% to 15%. Perhaps, the typical household may not view a reduction of the aggregate leverage ratio, which largely resulted from the increased value of financial assets with only modest debt reduction, as favorably as the same reduction generated primarily by a sizable increase in housing wealth or a sizable reduction of mortgage debt. There is the possibility that the severity of the financial crisis and the recent precarious state of household finances may have forced a sharp decline in the desired leverage ratio for any given mix of assets on their balance sheet, possibly below the 2006 benchmark. A leverage ratio that looks more narrowly at the major asset and liability held by the median household, that is, household mortgage debt relative to the market value of household real estate does not show the same degree of improvement as does the broader aggregate leverage ratio. The narrower measure rises from a pre-housing crisis low of 36% in 2006 to a high of 56% in mid-2009, but had fallen to only 45% through the first quarter of 2013 (see Figure 12 ). By this measure, more deleveraging would be needed to get the ratio back to its 2006 value. Again, there is the possibility that the severity of the financial crisis and the recent precarious state of household finances may have forced a sharp lowering below the 2006 benchmark of the desired leverage ratio for real estate assets. Prior to the 1990s, this ratio was typically below 30%. One study judged that in 2011, between 20 percent and 25 percent of households were still above their target leverage ratio. How Much Balance Sheet Repair Has Occurred? Despite clear progress, more repair of the severely damaged household balance sheet may be needed before households begin to spend at a faster pace. The typical household has likely only seen modest improvement in its net worth (in large measure) because the value of real estate assets has only recently been rising. The rebound of the housing market portends well for the typical household rebuilding its wealth, but it is unlikely that this process will be completed in 2013, making it also likely that tepid spending by consumers will continue. Any Signs Consumers Are Spending More Freely? A number of indicators paint a mixed picture of the prospect for stronger consumer spending. Consumer confidence, as measured by households' attitudes and expectations about their finances, economic conditions and the buying climate has increased to the highest level in six years according to the Thomson Reuters/ University of Michigan Index. The Federal Reserve's senior loan officer opinion survey on bank lending practices reported for the fifth consecutive month that the demand for prime residential mortgages had strengthened on net. In addition, the demand for automobile and credit card loans had strengthened on balance. The personal saving rate out of real disposable income in 2012 was 4.1%, down from 5.1% in 2011. In the first quarter of 2013, the personal saving rate decreased to 2.5%. A fall in the saving rate could be an indicator of households turning away from balance sheet repair and toward increased consumption spending. However, the first quarter result could also be a manifestation of lower disposable income caused by the increase in the payroll tax in January. With income down, households may have reached into saving to maintain their level of consumption spending, an action unlikely to be sustainable. Real consumer spending in the first half of 2013 increased at an annual rate of 2.0%, slower than the 2.2% pace seen over the previous three years. This rate of spending falls short of what would be needed to accelerate the pace of the recovery (and as noted above may have received a temporary boost from reduced saving). Also, core retail sales for April through June 2013 have slowed relative to the first three months of the year. Policy Implications If household net worth is judged not to have fully recovered from the damage incurred in 2008-2009, particularly for the typical household, then this would suggest to some a continuing need for macroeconomic policy to provide stimulus to maintain the recovery's upward momentum. At this point, stimulus from fiscal policy has ended and concerns about long term fiscal imbalance are a barrier to its being reapplied. So the question of continued need relates to monetary policy and when the Federal Reserve could begin to taper its asset purchases associated with its current policy of quantitative easing (commonly referred to as QE3). The Fed has said that a slowing of QE3 is contingent on clear signs of improving economic conditions, particularly labor market conditions. The incomplete repair of the household balance sheet would be one factor suggesting that those clear signs are not likely to appear in the immediate future. The current state of household net worth, particularly the still large number of households with negative equity in their homes, could also have implications for the continuing need for federal policies such as the Home Affordable Modification Program (HAMP) that are aimed at providing direct help in removing the burden of household debt through policies that restructure mortgage debt.

The pace of economic recovery from the 2007-2009 recession has been historically slow. Over four years of recovery, the annual rate of growth of real gross domestic product (GDP) has averaged 2%, well below the 3% to 5% typical of other post-WWII recoveries. As a result, the output gap—the difference between what the economy could produce and what it actually produced—has only declined from a high of 8.1% in mid-2009 to a still large 5.8% in mid- 2013. Slow growth of output has translated into a slow reduction of unemployment. The recovery has persisted, in part, due to support to aggregate spending by policies of fiscal and monetary stimulus. However, fiscal stimulus has steadily dissipated since 2010 and in 2013 the federal budget has turned contractionary. While monetary policy is expected to remain stimulative through 2013, it is unlikely to add to that stimulus to counteract the increasing drag of falling federal budget deficits on economic activity. Therefore, sustaining the recovery's momentum in the remainder of 2013 and into 2014 may require a greater push from private spending, particularly household consumption spending. In the aftermath of the 2007-2009 recession, which involved a substantial loss of net worth and increase in the burden of debt, households' actions to repair their severely damaged balance sheets by reducing debt and building wealth is thought by many economists to be a key factor dissipating the strength of consumer spending. Although this repair is necessary for building a stronger economy in the long run, it has slowed the economy-wide recovery and job creation in the short run. Where households currently stand in repairing their balance sheets is likely to influence the strength of consumer spending going forward. If substantially complete, it would point to the prospect of stronger consumer spending and increased momentum of the economic recovery; but if substantial wealth building is still needed, it would diminish that prospect. A number of indicators paint a mixed picture of the prospect for stronger consumer spending. Despite clear progress, more repair of the severely damaged household balance sheet may be needed before households begin to spend at a faster pace. The typical household has likely only seen modest improvement in its net worth in large measure because the value of real estate, most often the largest asset it holds, has only recently been increasing. The rebound of the housing market portends progress for the typical household rebuilding its wealth, but it is unlikely that this process will be completed in 2013, making it also likely that tepid spending by consumers will continue. Determining the state of household net worth has implications for the optimal policy response going forward. If household net worth is judged to have not fully recovered from the damage incurred in 2007-2009, particularly for the typical household, some may regard this as an indicator of a continuing need for macroeconomic policy to provide stimulus to maintain the recovery's upward momentum. It could also have implications for federal policy measures that are aimed at providing direct help in removing the burden of household debt through programs that restructure mortgage debt.

Introduction On May 1, 2007, President George W. Bush vetoed the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, H.R. 1591 , in part because of measures designed to limit the U.S. military role in Iraq. He called the bill "unconstitutional because it purports to direct the conduct of operations of war in a way that infringes upon the powers vested in the presidency by the Constitution, including as commander in chief of the Armed Forces." The next day, the House of Representatives voted to approve the bill by a vote of 222 to 203, failing to muster the two-thirds majority necessary to override the veto. Congress then passed a new version of the supplemental appropriations bill, H.R. 2206 ( P.L. 110-28 ), without providing timetables for withdrawal from Iraq, but conditioning the release of reconstruction assistance to Iraq on achievement of certain benchmarks by the Iraqi government, unless the President waives the requirements. The House of Representatives agreed to vote on a withdrawal deadline when it takes up FY2008 supplemental appropriations, which is expected in September. As Congress considers defense authorization and appropriations bills for FY2008, there may be a renewed focus on whether or to what extent Congress has the constitutional authority to legislate limits on the President's authority to conduct military operations in Iraq. Congress may consider measures, for example, to repeal the authorization to use force in Iraq, to set deadlines for the withdrawal of most troops from Iraq, to set requirements for unit rotations into Iraq, or to make other requirements that could affect the deployment of armed forces to Iraq. It has been suggested that the President's role as Commander in Chief of the Armed Forces provides sufficient authority for his deployment of additional troops, and any efforts on the part of Congress to intervene could represent an unconstitutional violation of separation-of-powers principles. While even proponents of strong executive prerogative in matters of war appear to concede that it is within Congress's authority to cut off funding entirely for a military operation, it has been suggested that spending measures that restrict but do not end financial support for the war in Iraq would amount to an "unconstitutional condition." The question may turn on whether the President's decisions on troop deployment and mission assignment are purely operational decisions committed to the President in his role as Commander in Chief, or whether congressional action to limit the availability of troops and the missions they may perform is a valid exercise of Congress's authority to allocate resources using its war powers and power of the purse. Background On October 16, 2002, Congress passed and President Bush signed the Authorization for Use of Military Force Against Iraq Resolution of 2002. While the President noted he had sought a "resolution of support" from Congress to use force against Iraq, and appreciated receiving that support, he also stated that: ... my request for it did not, and my signing this resolution does not, constitute any change in the long-standing positions of the executive branch on either the President's constitutional authority to use force to deter, prevent, or respond to aggression or other threats to U.S. interests or on the constitutionality of the War Powers Resolution. The President indicated he would continue to consult with Congress and to submit written reports to Congress every 60 days on matters relevant to the resolution to use force, which authorizes the President to use the armed forces of the United States as he determines to be necessary and appropriate in order to (1) defend the national security of the United States against the continuing threat posed by Iraq; and (2) enforce all relevant United Nations Security Council resolutions regarding Iraq. The statute required certain conditions to be met prior to the initiation of military operations and made periodic reports to Congress mandatory, but did not set a timetable or any criteria for determining when to withdraw troops from Iraq. It appears to incorporate future UN Security Council resolutions concerning Iraq that may be adopted by the Security Council as well as those adopted prior to its enactment, effectively authorizing military force not only to compel disarmament but to carry out other functions necessary for achieving the goals adopted or that may be adopted by the Security Council. Thus, it appears that the resolution authorizes force deemed necessary by the President for so long as Iraq poses a continuing threat to the United States and the U.S. military presence is not inconsistent with relevant U.N. resolutions. The resolution does not itself stipulate limitations with respect to the amount of force that may be used or the resources that may be expended to accomplish the authorized objectives; however, Congress may set limits by means of legislation or the budgeting process. The Department of Defense has some latitude regarding how it allocates funds for various operations, and may have additional statutory authority to obligate funds without additional prior express authorization from Congress. I. Constitutional Provisions At least two arguments support the constitutionality of Congress's authority to limit the President's ability to increase or maintain troop levels in Iraq. First, Congress's constitutional power over the nation's armed forces provides ample authority to legislate with respect to how they may be employed. Under Article I, § 8, Congress has the power "To lay and collect Taxes ... to ... pay the Debts and provide for the common Defence," "To raise and support Armies," "To provide and maintain a Navy," "To make Rules for the Government and Regulation of the land and naval Forces," and "To declare War, grant letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water," as well as "To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions" and "To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be employed in the Service of the United States." Further, Congress is empowered "To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers ..." as well as "all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof." Secondly, Congress has virtually plenary constitutional power over appropriations, one that is not qualified with reference to its powers in section 8. Article I, § 9 provides that "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law." It is well established, as a consequence of these provisions, that "no money can be paid out of the Treasury unless it has been appropriated by an act of Congress" and that Congress can specify the terms and conditions under which an appropriation may be used, so long as it does not impose an unconstitutional condition on the use of the funds. On the executive side, the Constitution vests the President with the "executive Power," Article II, § 1, cl. 1, and appoints him "Commander in Chief of the Army and Navy of the United States," id ., § 2, cl. 1. The President is empowered, "by and with the Advice and Consent of the Senate, to make Treaties," authorized "from time to time [to] give to the Congress Information on the State of the Union, and [to] recommend to their Consideration such Measures as he shall judge necessary and expedient," and bound to "take Care that the Laws be faithfully executed." Id ., § 3. He is bound by oath to "faithfully execute the Office of President of the United States," and, to the best of his "Ability, preserve, protect and defend the Constitution of the United States." Id ., § 1, cl. 8. It is clear that the Constitution allocates powers necessary to conduct war between the President and Congress. While the ratification record of the Constitution reveals little about the meaning of the specific war powers clauses, the importance of preventing all of those powers from accumulating in one branch appears to have been well understood, and vesting the powers of the sword and the purse in separate hands appears to have been part of a careful design. It is generally agreed that some aspects of the exercise of those powers are reserved to the Commander in Chief, and that Congress could conceivably legislate beyond its authority in such a way as to intrude impermissibly into presidential power. The precise boundaries separating legislative from executive functions, however, remain elusive. There can be little doubt that Congress would exceed its bounds if it were to confer exclusive power to direct military operations on an officer not subordinate to the President, or to purport to issue military orders directly to subordinate officers. At the same time, Congress's power to make rules for the government and regulation of the armed forces provides it wide latitude for restricting the nature of orders the President may give. Congress's power of appropriations gives it ample power to supply or withhold resources, even if the President deems them necessary to carry out planned military operations. Congress's War Powers The power "To Declare War" has long been construed to mean not only that Congress can formally take the nation into war but also that it can authorize the use of the armed forces for military expeditions that may not amount to war. While a restrictive interpretation of the power "To declare War" is possible, for example, by viewing the Framers' use of the verb "to declare" rather than "to make" as an indication of an intent to limit Congress's ability to affect the course of a war once it is validly commenced, Congress's other powers over the use of the military would likely fill any resulting void. In practice, courts have not sought to delineate the boundaries of each clause relating to war powers or identify gaps between them to find specific powers that are denied to Congress. Early exercises of Congress's war powers may shed some light on the original understanding of how the war powers clauses might empower Congress to limit the President's use of the armed forces. In the absence of a standing army, early presidents were constrained to ask Congress for support in advance of undertaking any military operations. Congress generally provided the requested support and granted the authority to raise the necessary troops to defend the frontiers from deprivations by hostile Indians and to build a navy to protect U.S. commerce at sea. Congress, in exercising its authority to raise the army and navy, sometimes raised forces for specific purposes, which may be viewed as both an implicit authorization to use the forces for such purposes and as an implicit limitation on their use. On the other hand, Congress often delegated broad discretion to the President within those limits, and appears to have acquiesced to military actions that were not explicitly authorized. In several early instances, Congress authorized the President to use military forces for operations that did not amount to a full war. Rather than declaring a formal war with France, Congress authorized the employment of the naval forces for limited hostilities. The Third Congress authorized the President to lay and enforce embargoes of U.S. ports, but only while Congress was not in session (and embargo orders were to expire 15 days after the commencement of the next session of Congress). The Fifth Congress authorized the President to issue instructions to the commanders of public armed ships to capture certain French armed vessels and to recapture ships from them, and to retaliate against captured French citizens who had seized U.S. citizens and subjected them to mistreatment. Congress also authorized U.S. merchant vessels to defend themselves against French vessels. The Supreme Court treated these statutes as authorizing a state of "partial war" between the United States and France. Such an undeclared war was described as an "imperfect" war, as distinguished from a "Solemn" or "perfect" war, declared as such, in that, in the first case, all members of one nation are at war with all members of the other nation; in the second case, those who are authorized to commit hostilities act "under special authority." This suggests an early understanding that Congress's war powers extend to establishing the scope of hostilities to be carried out by the armed forces. In the majority of cases, however, it appears that Congress has given broad deference to the President to decide how much of the armed forces to employ in a given situation. After Tripoli declared war against the United States in 1801 and U.S. vessels were already engaged in defensive actions against them, Congress did not enact a full declaration of war. Rather, it issued a sweeping authorization for the commissioning of privateers, captures, and other actions to "equip, officer, man, and employ such of the armed vessels of the United States as may be judged requisite by the President of the United States , for protecting effectually the commerce and seamen thereof on the Atlantic ocean, the Mediterranean and adjoining seas," as well as to "cause to be done all such other acts of precaution or hostility as the state of war will justify, and may, in his opinion, require ." In declaring war against Great Britain in 1812, Congress authorized the President to "use the whole land and naval force of the United States to carry the same into effect, and to issue to private armed vessels of the United States commissions or letters of marque and general reprisal, in such form as he shall think proper...." That Congress has traditionally left it up to the President to decide how much of the armed forces to employ in a given conflict need not imply that such deference is constitutionally mandated. The fact that Congress has seen fit to include such language may just as easily be read as an indication that Congress believes that the decision is its to delegate. Under this view, even in the case of a declaration of war, Congress retains the power to authorize the President to use only a portion of the armed forces to engage in a particular conflict. On the other hand, some have argued that the President is authorized to deploy all of the armed forces as he sees fit, with or without an express authorization to use force or a declaration of war. According to this theory, in essence, Congress can stop the deployment of military forces only by cutting appropriations and discharging the troops. Congress has also used its authority to provide for the organization and regulation of the armed forces to regulate how military personnel are to be organized and employed. The earliest statutes prescribed in fairly precise terms how military units were to be formed and commanded. For example, the 1798 act establishing the Marine Corps mandated the raising of a corps to consist of "one major, four captains, sixteen first lieutenants, twelve second lieutenants, forty-eight sergeants, forty-eight corporals, thirty-two drums and fifes, and seven hundred and twenty privates...." Congress authorized the President to appoint certain other officers as necessary if he were to assign the Marine Corps or any part of it to shore duty, and to assign the detachment to duty in "forts and garrisons of the United States, on the sea-coast, or any other duty on shore." Officers of the Marine Corps could be detached to serve on board frigates and other armed vessels. The Marine Corps was increased in size and reorganized in 1834 to be commanded by a colonel, with the proviso that no Marine Corps officer could be placed in command of a navy yard or vessel of the United States. It appears to have been understood that personnel and units authorized to perform certain duties could not be assigned to perform other duties without authorization from Congress. In 1808, when Congress authorized eight new regiments of specific types and composition, it felt compelled to include language making members of the light dragoon regiment liable to "serve on foot as light infantry" until sufficient horses and other accouterments could be provided. The Supreme Court later interpreted an 1802 statute providing for the establishment of the Corps of Engineers, although broadly worded to permit the President to direct that its members serve such duty in such places as he saw fit, to authorize only engineering duties: But, however broad this enactment is in its language, it never has been supposed to authorize the President to employ the corps of engineers upon any other duty, except such as belongs either to military engineering, or to civil engineering. The Commander-in-Chief Clause Early in the nation's history, the Commander-in-Chief power was understood to connote "nothing more than the supreme command and direction of the military and naval forces, as first general and admiral of the confederacy." Concurring in that view in 1850, Chief Justice Taney stated: [The President's] duty and his power are purely military. As Commander-in-Chief, he is authorized to direct the movements of the naval and military forces placed by law at his command, and to employ them in the manner he may deem most effectual to harass and conquer and subdue the enemy. This formula, taken alone, provides only an approximate demarcation of the line separating Congress's role from the President's. Advocates of a strong role for Congress might characterize a legislative effort to limit the number of troops available in Iraq as placing troops "by law" under the President's command, while proponents of a strong executive would likely view it as a limitation on the President's ability to "employ them in the manner" he sees fit. With respect to the latter argument, however, it should be noted that the particular question before the Fleming Court did not call into question the extent to which Congress could restrict the manner of employing troops once placed at the command of the President. Other early cases demonstrate Congress's authority to restrict the President's options for the conduct of war. In Little v. Barreme , Chief Justice Marshall had occasion to recognize congressional war power and to deny the exclusivity of presidential power. There, after Congress had authorized limited hostilities with France, a U.S. vessel under orders from the President had seized what its commander believed was a U.S. merchant ship bound from a French port, allegedly carrying contraband material. Congress had, however, provided by statute only for seizure of such vessels bound to French ports. Upholding an award of damages to the ship's owners for wrongful seizure, the Chief Justice said: It is by no means clear that the president of the United States whose high duty it is to 'take care that the laws be faithfully executed,' and who is commander in chief of the armies and navies of the United States, might not, without any special authority for that purpose in the then existing state of things, have empowered the officers commanding the armed vessels of the United States, to seize and send into port for adjudication, American vessels which were forfeited by being engaged in this illicit commerce. But when it is observed that [an act of Congress] gives a special authority to seize on the high seas, and limits that authority to the seizure of vessels bound or sailing to a French port, the legislature seems to have prescribed that the manner in which this law shall be carried into execution, was to exclude a seizure of any vessel not bound to a French port. Accordingly, the Court held, the President's instructions exceeded the authority granted by Congress and were not to be given force of law, even in the context of the President's military powers and even though the instructions might have been valid in the absence of contradictory legislation. In Bas v. Tingy , the Court looked to congressional enactments rather than plenary presidential power to uphold military conduct related to the limited war with France. The following year, in Talbot v. Seeman , the Court upheld as authorized by Congress a U.S. commander's capture of a neutral ship, saying that "[t]he whole powers of war being, by the constitution of the United States, vested in congress, the acts of that body can alone be resorted to as our guides in this inquiry." During the War of 1812, the Court recognized in Brown v. United States , that Congress was empowered to authorize the confiscation of enemy property during wartime, but that absent such authorization, a seizure authorized by the President was void. The onset of the Civil War provided some grist for later assertions of unimpeded presidential prerogative in matters of war. In the Prize Cases , the Supreme Court sustained the blockade of Southern ports instituted by President Lincoln in April, 1861, at a time when Congress was not in session. Congress had at the first opportunity ratified the President's actions, so that it was not necessary for the Court to consider the constitutional basis of the President's action in the absence of congressional authorization or in the face of any prohibition. Nevertheless, the Court approved the blockade five-to-four as an exercise of presidential power alone, on the basis that a state of war was a fact and that, the nation being under attack, the President was bound to take action without waiting for Congress. The case has frequently been cited to support claims of greater presidential autonomy by reason of his role as Commander in Chief. However, it should be recalled that where Lincoln's suspension of the Writ of Habeas Corpus varied from legislation enacted later to ratify it, the Court looked to the statute rather than to the executive proclamation to determine the breadth of its application. The Chief Justice described the allocation of war powers as follows: The power to make the necessary laws is in Congress; the power to execute in the President. Both powers imply many subordinate and auxiliary powers. Each includes all authorities essential to its due exercise. But neither can the President, in war more than in peace, intrude upon the proper authority of Congress, nor Congress upon the proper authority of the President.... The Chief Justice described the Commander-in-Chief power as entailing "the command of the forces and the conduct of campaigns," but nevertheless agreed that military trials of civilians accused of violating the law of war in Union states were invalid without congressional approval, despite the government's assertion that the "[Commander in Chief's] power to make an effectual use of his forces [must include the] power to arrest and punish one who arms men to join the enemy in the field against him." On the other hand, the Supreme Court has also suggested that the President has some independent authority to employ the armed forces, at least in the absence of contrary congressional action. In the 1890 case of In re Neagle , the Supreme Court suggested, in dictum, that the President has the power to deploy the military abroad to protect or rescue persons with significant ties to the United States. Discussing examples of the executive lawfully acting in the absence of express statutory authority, Justice Miller approvingly described the Martin Koszta affair, in which an American naval ship intervened to prevent a lawful immigrant from being captured by an Austrian vessel, despite the absence of clear statutory authorization. Only one federal court, in an 1860 opinion, has clearly held that in the absence of congressional authorization, the President has authority to deploy military forces abroad to protect U.S. persons (and property). Nevertheless, there historically appears to be some support for this view by both the executive and legislative branches. However, the scope of any such authority remains unclear, as does the degree to which it may be limited by an act of Congress. The expansion of presidential power related to war, asserted as a combination of Commander-in-Chief authority and the President's inherent authority over the nation's foreign affairs, began in earnest in the twentieth century. In United States v. Curtiss-Wright Export Corp , the Supreme Court confirmed that the President enjoys greater discretion when acting with respect to matters of foreign affairs than may be the case when only domestic issues are involved. In that case, Congress, concerned with the outside arming of the belligerents in the war between Paraguay and Bolivia, had authorized the President to proclaim an arms embargo if he found that such action might contribute to a peaceful resolution of the dispute. President Franklin Roosevelt issued the requisite finding and proclamation, and Curtiss-Wright and associate companies were indicted for violating the embargo. They challenged the statute, arguing that Congress had failed adequately to elaborate standards to guide the President's exercise of the power thus delegated. Justice Sutherland concluded that the limitations on delegation in the domestic field were irrelevant where foreign affairs are involved, a result he based on the premise that foreign relations is exclusively an executive function combined with his constitutional model positing that internationally, the power of the federal government is not one of enumerated but of inherent powers, emanating from concepts of sovereignty rather than the Constitution. The Court affirmed the convictions, stating that: It is important to bear in mind that we are here dealing not alone with an authority vested in the President by an exertion of legislative power, but with such an authority plus the very delicate, plenary and exclusive power of the President as the sole organ of the federal government in the field of international relations—a power which does not require as a basis for its exercise an act of Congress, but which, of course, like every other governmental power, must be exercised in subordination to the applicable provisions of the Constitution. It is quite apparent that if, in the maintenance of our international relations, embarrassment—perhaps serious embarrassment—is to be avoided and success for our aims achieved, congressional legislation which is to be made effective through negotiation and inquiry within the international field must often accord to the President a degree of discretion and freedom from statutory restriction which would not be admissible were domestic affairs alone involved. Moreover, he, not Congress, has the better opportunity of knowing the conditions which prevail in foreign countries, and especially is this true in time of war. The case is cited frequently to support a theory of presidential power not subject to restriction by Congress, although the case in fact involved an exercise of authority delegated by Congress. Curtiss-Wright remains precedent admonishing courts to show deference to the President in matters involving international affairs, including by interpreting ambiguous statutes in such a manner as to increase the President's discretion. The case has also been cited in favor of broad presidential discretion to implement statutes related to military affairs. To the extent, however, that Justice Sutherland interpreted presidential power as being virtually plenary in the realms of foreign affairs and national defense, the case has not been followed to establish that Congress lacks authority in these areas. The constitutional allocation of war powers between the President and Congress, where Congress had not delegated the powers exercised by the President, was described by Justice Jackson, concurring in the Steel Seizure Case : The Constitution expressly places in Congress power "to raise and support Armies" and "to provide and maintain a Navy." This certainly lays upon Congress primary responsibility for supplying the armed forces. Congress alone controls the raising of revenues and their appropriation and may determine in what manner and by what means they shall be spent for military and naval procurement.... There are indications that the Constitution did not contemplate that the title Commander in Chief of the Army and Navy will constitute him also Commander in Chief of the country, its industries and its inhabitants. He has no monopoly of "war powers," whatever they are. While Congress cannot deprive the President of the command of the army and navy, only Congress can provide him any army or navy to command. The Jackson opinion is commonly understood to establish that whatever powers the President may exercise in the absence of congressional authorization, the President may act contrary to an act of Congress only in matters involving exclusive presidential prerogatives. Presidents from Truman to George W. Bush have claimed independent authority to commit U.S. armed forces to involvements abroad absent any Congressional participation other than consultation and after-the-fact financing. In 1994, for example, President Clinton based his authority to order the participation of U.S. forces in NATO actions in Bosnia-Herzegovina on his "constitutional authority to conduct U.S. foreign relations" and as his role as Commander in Chief, and protested efforts to restrict the use of military forces there and elsewhere as an improper and possibly unconstitutional limitation on his "command and control" of U.S. forces. Ever since Congress passed the War Powers Resolution over President Nixon's veto, all Presidents have regarded it as an unconstitutional infringement on presidential powers. In the context of what it terms the "Global War on Terror," the Bush Administration has claimed that the President's commander-in-chief authority entails inherent authority with respect to the capture and detention of suspected terrorists, authority he has claimed cannot be infringed by legislation. In 2004, the Supreme Court avoided deciding whether Congress could pass a statute to prohibit or regulate the detention and interrogation of captured suspects, which the Administration had asserted would unconstitutionally interfere with core commander-in-chief powers, by finding that Congress had implicitly authorized the detention of enemy combatants when it authorized the use of force in the aftermath of the September 11, 2001, terrorist attacks. However, the Supreme Court in 2006 invalidated President Bush's military order authorizing trials of aliens accused of terrorist offenses by military commission, finding that the regulations promulgated to implement the order did not comply with relevant statutes. The Court did not expressly pass on the constitutionality of any statute or discuss possible congressional incursion into areas of exclusive presidential authority, which was seen by many as implicitly confirming Congress's authority to legislate in such a way as to limit the power of the Commander in Chief. II. Repeal of Prior Authorization to Use Military Force While it is well-established that Congress and the President each possess authority on ending a military conflict, issues may arise if the political branches are in disagreement as to whether or how to end a military conflict. Inter-branch disagreement regarding the cessation of hostilities has been a rare occurrence, but it is not unprecedented. In the 110 th Congress, a number of proposals have been introduced that would repeal or establish an expiration date for the Authorization for Use of Military Force against Iraq Resolution of 2002. The following sections discuss the constitutional authority implicated by a repeal of military authorization, procedural, and other considerations involved in rescinding prior military authorization as compared to limiting appropriations, and the legal effect that a repeal would have on continuing hostilities. Historical Practice Although the U.S. Constitution expressly empowers Congress to declare war, it is notably silent regarding which political body is responsible for returning the United States to a state of peace. Some evidence suggests that this omission was not accidental. During the Constitutional Convention, a motion was made by one of the delegates to modify the draft document by adding the words "and peace" after the words "to declare war." This motion, however, was unanimously rejected. Convention records do not clearly evidence the framers' intent in rejecting the motion. Some early constitutional commentators suggested that the motion failed because the framers believed that the power to make peace more naturally belonged to the treaty-making body, as conflicts between nations were typically resolved through treaties of peace. Although the framers did not specifically empower Congress to make peace, they also did not expressly locate the power with the treaty-making body, perhaps because of a recognition that peace might sometimes be more easily achieved through means other than treaty. It has been suggested that the framers did not allocate an exclusive body with peace-making authority because they believed "it should be more easy to get out of a war than into it." Given the framers' failure to designate a single political branch responsible for returning the country from a state of war to a state of peace, the power to make peace was likely understood to be a shared power, with each branch having the authority on terminating a military conflict. The executive could return the country to a state of peace through a treaty with the warring party, subject to the Senate's advice and consent. Congress could declare peace or rescind a previous authorization to use military force pursuant to its plenary authority to repeal prior enactments, its power to regulate commerce with foreign nations, or its power to make laws "necessary and proper" to effectuate its constitutional powers. Regardless of the framers' intent, the legislative and executive branches have historically treated peace-making as a shared power. Peace has been declared in one of three ways: (1) via legislation terminating a conflict, (2) pursuant to a treaty negotiated and signed by the executive and ratified following the advice and consent of the Senate, and (3) through a presidential proclamation. All three methods have been recognized as constitutionally legitimate by the Supreme Court, including most clearly in the 1948 case of Ludecke v. Watkins , where the Court plainly stated, "The state of war may be terminated by treaty or legislation or Presidential proclamation." Notably, the Court has recognized that the termination of a military conflict is a "political act," and it has historically refused to review the political branches' determinations of when a conflict has officially ended. Rescinding Military Authorization Versus Cutting Appropriations: Procedural and Other Considerations As a procedural matter, it is more difficult for Congress to terminate authorization for a military conflict than to limit appropriations necessary for the continuation of hostilities. As in the case of ordinary legislation, congressional declarations of peace and rescissions of military authorization have historically taken the form of a bill or joint resolution passed by both Houses and presented to the President for signature. Like other legislation, such measures are subject to presidential veto, which Congress may override only with a two-thirds majority of each House. In contrast, Congress's ability to deny funds for the continuation of military hostilities is not contingent upon the enactment of a positive law, though such a denial may take the form of a positive enactment. Although the President has the power to veto legislative proposals, he cannot compel Congress to pass legislation, including bills to appropriate funds necessary for the continuation of a military conflict. Thus, while a majority of both Houses would be necessary to terminate military authorization, and a super-majority of both Houses would be required to override a presidential veto, a simple majority of a single House could prevent the appropriation of funds necessary for the continuation of a military conflict. It should be noted, however, that legislation probably would be required to prevent the President from exercising statutory authority to transfer certain funds appropriated to other operations for use in support of the military conflict that Congress was attempting to limit. Like other positive legislation, such a measure would be subject to presidential veto. While it may be procedurally easier for Congress to refuse appropriations for a military conflict than to rescind military authorization, policy considerations may sometimes make the latter option more appealing. For example, some Members of Congress who support the winding down of a military operation might nevertheless be reluctant to reduce the funds for troops on the battlefield. There might also be concerns over potential effects that a denial of appropriations might have on unrelated military operations. Although appropriations legislation can be crafted to effectively terminate hostilities while permitting funding of force protection measures during the orderly redeployment of troops from the battlefield, such legislation, like other positive enactments, would be subject to presidential veto. In certain circumstances, a President may be more willing to agree to a rescission of military authorization than to an appropriations bill that limits the funding of military operations, particularly if the rescission does not include a deadline for troop withdrawal. Indeed, during the Vietnam War, Congress was able to rescind military authorization at an earlier date than it was able to cut off appropriations. In 1971, Congress passed and President Nixon signed a measure rescinding the 1964 Gulf of Tonkin resolution, which had provided congressional authorization for U.S. military operations against North Vietnam. The Mansfield Amendment, enacted later that year, called for the "prompt and orderly" withdrawal of U.S. troops from Indochina at the "earliest possible date." However, these measures did not include a deadline for troop withdrawal. Although U.S. troop presence in South Vietnam diminished considerably pursuant to the Nixon Administration's "Vietnamization" strategy even prior to these enactments, the United States continued significant air bombing campaigns in the years following the rescission of military authorization. During this same period, President Nixon vetoed or threatened to veto a number of appropriations bills that would have either prohibited funds from being used for certain military operations in Southeast Asia or required a complete withdrawal of U.S. troops from Vietnam. In 1973, two years after rescinding military authorization, Congress was finally able to enact appropriations limitations, signed by the President, that barred combat operations in Indochina. These appropriations measures were approved only after the signing of a cease-fire agreement with North Vietnam and the withdrawal of U.S. troops from South Vietnam, and served primarily to end the aerial bombing campaign in Cambodia and prevent U.S. forces from being reintroduced into hostilities. In sum, in situations where Congress seeks to prevent the executive's continuation of military combat operations, it may be procedurally easier for Congress to deny appropriations than it would be to statutorily compel a withdrawal from hostilities. However, past experience suggests that, at least in certain circumstances, policy considerations may cause the two branches to view the rescission of military authorization as a more appealing alternative—postponing an inter-branch conflict on appropriations for a later date, enabling Congress to signal its interest in winding down a conflict, and (at least temporarily) preserving the President's discretion as to how the conflict is waged. Legal Consequences of Congressional Rescission of Military Authorization, Absent Additional Congressional Action Although Congress has the power to rescind authorization of a military conflict or enact a declaration of peace, the practical effect that such an action might have on the President's ability to continue a military conflict may nevertheless remain difficult to predict. Historically, courts have been unwilling to interpret a congressional rescission of military authorization as barring the executive from continuing to wage a military campaign, at least so long as Congress continues to appropriate money in support of such operations . Although the War Powers Resolution establishes procedures by which Congress may direct the withdrawal of U.S. troops from military conflicts that lack statutory authorization, the constitutionality and practical effects of these requirements have been questioned. Finally, even in the absence of express congressional authorization, the President may possess some inherent or implied power as Commander in Chief to continue to engage in certain military operations. The following sections explain these points in greater detail. Judicial Interpretation Jurisprudence suggests that courts would not necessarily view a repeal of prior authorization, by itself, as compelling the immediate withdrawal of U.S. forces. As an overarching matter, courts have been highly reluctant to act in cases involving national security, especially when they require a pronouncement as to the legality of a military conflict or the strategies used therein. Many such cases have been dismissed without reaching the merits of the arguments at issue, including when they involve a political question that the judiciary considers itself ill-suited to answer. Legal actions brought by Members of Congress challenging the lawfulness of military actions have had no greater success than suits brought by private citizens. While the courts have suggested a willingness to intervene in disputes between the two branches that reach a legal (as opposed to political) impasse, they have yet to find an impasse on matters of war that has required judicial settlement. In other words, as long as Congress retains options for bringing about a military disengagement but has not exercised them, courts are unlikely to get involved. The Vietnam conflict is the lone instance where Congress repealed military authorization while major combat operations were still ongoing. Although the Nixon Administration significantly decreased the number of U.S. troops present in South Vietnam following the repeal of the Gulf of Tonkin Resolution and enactment of the Mansfield Amendment in 1971, major combat operations continued into 1973, when Congress cut off all funding for military operations in Indochina. During this period, federal courts heard a number of suits challenging the legality of continued hostilities in the absence of congressional authorization. None of these challenges proved successful, in large part because Congress continued to appropriate money for military operations. It is a well-established principle that Congress's appropriation of funds may serve in some circumstances to confer authority for executive action. Reviewing courts have found this principle no less applicable concerning matters of war. The appropriation of billions of dollars in support of U.S. combat operations in Indochina, even after the repeal of the Gulf of Tonkin resolution, was viewed as congressional authorization for continued U.S. participation in hostilities, regardless of whether some Members of Congress had a motivation for approving continued appropriations other than that reflected in the express language of the enacted legislation. Courts have also declined on political question grounds to examine the motives of Congress in choosing to appropriate funds after rescinding direct authorization for U.S. military activities. In the words of one court, any attempt to assess Congress's intentions in appropriating funds, and determining whether such appropriations were truly meant to further continuing hostilities, would necessarily "require the interrogation of members of Congress regarding what they intended by their votes, and then synthesization of the various answers. To do otherwise would call for gross speculation in a delicate matter pertaining to foreign relations." Such an examination of Congress's motivations was deemed beyond the scope of appropriate judicial scrutiny. Some argued that Congress's termination of statutory authorization for ongoing hostilities and instruction that the conflict end at the soonest practical date barred the President, at the very least, from "escalating" hostilities. Though the Court of Appeals for the Second Circuit suggested in a 1971 case that this argument might be valid, subsequent rulings indicated that the court would only be willing to consider this argument in very limited circumstances. Notably, in the 1973 case of DaCosta v. Laird , the Second Circuit Court of Appeals dismissed a challenge to the President's order to mine the harbors of North Vietnam, where it was argued that this order represented an unlawful escalation of hostilities in light of congressional enactments ordering the withdrawal of U.S. troops at the earliest practicable date. The circuit court dismissed this challenge because it raised a nonjusticiable political question. Deciding such a case would require the court to assess the strategy and tactics used by the executive to wind down a conflict, an assessment it was ill-equipped to make: Judges, deficient in military knowledge, lacking vital information upon which to assess the nature of battlefield decisions, and sitting thousands of miles from the field of action, cannot reasonably determine whether a specific military operation constitutes an "escalation" of the war or is merely a new tactical approach within a continuing strategic plan. What if, for example, the war "de-escalates" so that it is waged as it was prior to the mining of North Vietnam's harbors, and then "escalates" again? Are the courts required to oversee the conduct of the war on a daily basis, away from the scene of action? In this instance, it was the President's view that the mining of North Vietnam's harbor was necessary to preserve the lives of American soldiers in South Vietnam and to bring the war to a close. History will tell whether or not that assessment was correct, but without the benefit of such extended hindsight we are powerless to know. Though the circuit court did not completely rule out the possibility that a further escalation of hostilities could be deemed unlawful, the court suggested it would be willing to consider such arguments only in the most limited of circumstances. For example, the court suggested that a "radical change in the character of war operations—as by an intentional policy of indiscriminate bombing of civilians without any military objective— might be sufficiently measurable judicially to warrant a court's consideration." In Holtzman v. Schlesinger , decided later that year, the Second Circuit Court of Appeals reversed a lower court decision that had declared unlawful the continued bombing of Cambodia following the removal of U.S. troops and prisoners of war from Vietnam. The circuit court held that it was a nonjusticiable political question as to whether the bombing violated the Mansfield Amendment's instruction that hostilities be terminated at the "earliest practicable date." Comparing the situation with that at issue in DaCosta , the court found that the challenge raised "precisely the questions of fact involving military and diplomatic expertise not vested in the judiciary." Further, even assuming arguendo that the military and diplomatic issues raised by the bombing were judicially manageable, the circuit court found that Congress had authorized the bombing through continued appropriations. Taken together, these cases suggest that a reviewing court would probably not interpret a repeal of prior military authorization as requiring the immediate withdrawal of U.S. forces from ongoing hostilities in Iraq. Further, courts may be reluctant to assess whether specific military tactics or strategies pursued by the executive constitute an impermissible "escalation" of a conflict in the aftermath of such a repeal. Accordingly, it does not appear that the termination of direct authorization to use force, absent additional action such as the denial of appropriations or possibly the inclusion of an unambiguous deadline for troop withdrawal, would be interpreted by a reviewing court as constraining the executive's ability to continue U.S. combat operations. Implications of the War Powers Resolution The consequences of a repeal of an authorization to use military force were arguably made more significant with the enactment of the War Powers Resolution (WPR). Enacted in 1973 over President Nixon's veto, the WPR was an effort by Congress to reassert its role in matters of war—a role that many Members believed had been allowed to erode during the Korean and Vietnam conflicts. Among other things, the WPR establishes a procedure by which Congress may (theoretically) compel the President to withdraw U.S. forces from foreign-based conflicts when a declaration of war or authorization to use military force has been terminated. Specifically, WPR § 5(c) provides that at any time that United States Armed Forces are engaged in hostilities outside the territory of the United States, its possessions and territories without a declaration of war or specific statutory authorization, such forces shall be removed by the President if the Congress so directs by concurrent resolution. While § 5(c) offers a mechanism by which Congress might compel presidential compliance with a law that had rescinded statutory authorization to use military force, its constitutional validity is doubtful given the Supreme Court's ruling in the 1983 case of INS v. Chadha . In Chadha , the Court held that for a resolution to become a law, it must go through the bicameral and presentment process in its entirety. Accordingly, a concurrent or simple resolution could not be used as a "legislative veto" against executive action. Although the Chadha Court did not expressly find WPR § 5(c) to be unconstitutional, it was listed in Justice White's dissent as one of nearly 200 legislative vetoes for which the majority had sounded the "death knell," and most commentators have agreed with this assessment. Thus, it seems highly unlikely that the WPR could be used to enforce a congressional repeal of an authorization to use military force in Iraq. Section 5(b) of the WPR establishes a requirement for the withdrawal of U.S. troops 60 days after armed forces are introduced without congressional authorization into a situation where hostilities are imminent, unless Congress enacts legislation providing authority for the use of force or extends the deadline. This provision would not appear to supply a means by which Congress could compel the withdrawal of U.S. forces from Iraq, as the introduction of those forces was done pursuant to congressional authorization. Even if Congress were to rescind that authorization, the legality of actions taken pursuant to it would not be nullified. Arguably, however, a substantial increase in troop levels that takes place subsequent to any repeal of the authorization for use of military force against Iraq could trigger the requirements of WPR § 5(b), although it is unclear how large such an increase would need to be before it would be sufficiently "substantial." Congress has in the past enacted or considered legislation declaring the 60-day limit to have taken effect, although apparently with little practical effect. In any case, it appears that WPR section 5(c), which permits Congress to compel the withdrawal of U.S. troops via concurrent resolution, was intended to address situations where Congress desired an end to previously authorized hostilities. Inherent Presidential Authority to Use Military Force Absent Congressional Authorization Even in the absence of express congressional authorization, it is well-recognized that the President may still employ military force in some circumstances pursuant to his powers as Commander in Chief and his inherent authority in the area of foreign affairs, at least so long as no statute stands in his way. A President would likely argue that this inherent authority would permit him to instruct U.S. forces to engage in certain military operations related to an ongoing conflict, even if statutory authorization for U.S. participation in that conflict had been rescinded. Further, even if Congress were to enact legislation requiring the cessation of military operations after a specified date, it is highly unlikely that this measure would be interpreted to prohibit any and all military operations, specifically as they relate to rescue and evacuation missions. It appears well-understood, at least as a matter of historical practice, that such missions are not intended to be covered under legislation otherwise barring future participation in hostilities. III. Use of the Power of the Purse to Restrict Military Operations Congress has used its spending power to restrict the deployment and use of the armed forces in the past. In 1973, for instance, after other legislative efforts failed to draw down U.S. participation in combat operations in Indochina, Congress effectively ended it by means of appropriations riders prohibiting use of funds. Section 307 of the Second Supplemental Appropriations Act for Fiscal Year 1973, P.L. 93-50 (1973), stated that, "None of the funds herein appropriated under this act may be expended to support directly or indirectly combat activities in or over Cambodia, Laos, North Vietnam, and South Vietnam, and after August 15, 1973, no other funds heretofore appropriated under any other act may be expended for such purpose." Section 108 of the Continuing Appropriations Resolution for Fiscal Year 1974, P.L. 93-52 (1973), provided that, "Notwithstanding any other provision of law, on or after August 15, 1973, no funds herein or heretofore appropriated may be obligated or expended to finance directly or indirectly combat activities by United States military forces in or over or from off the shores of North Vietnam, South Vietnam, Laos or Cambodia." A year later, Congress passed an authorizing statute, section 38(f)(1) of the Foreign Assistance Act of 1974, P.L. 93-559 (1974), which set a total ceiling of U.S. civilian and military personnel in Vietnam of 4,000 six months after enactment and a total ceiling of 3,000 within one year of enactment. A provision of an authorization act, section 404 of the International Security Assistance and Arms Export Control Act of 1976, P.L. 94-329 (1976), comprehensively prohibited using funds for military and paramilitary operations in Angola. It stated that: Notwithstanding any other provision of law, no assistance of any kind may be provided for the purpose, or which would have the effect, of promoting, augmenting, directly or indirectly, the capacity of any nation, group, organization, movement, or individual to conduct military or paramilitary operations in Angola, unless and until Congress expressly authorizes such assistance by law enacted after the date of enactment of this section. This section added that if the President determined that the prohibited assistance to Angola should be furnished, he should submit to the Speaker of the House and the Senate Committee on Foreign Relations a report describing recommended amounts and categories of assistance to be provided and identities of proposed aid recipients. This report also was to include a certification of his determination that furnishing such assistance was important to U.S. national security interests and an unclassified detailed statement of reasons supporting it. Section 109 of the Foreign Assistance and Related Programs Appropriations Act for Fiscal Year 1976, P.L. 94-330 (1976), signed the same day as P.L. 94-329 , provided that, "None of the funds appropriated or made available pursuant to this act shall be obligated to finance directly or indirectly any type of military assistance to Angola." In the 1980s, various versions of the Boland Amendment were enacted to prohibit using funds for various military activities in or around Nicaragua. For example, section 8066 of the Department of Defense Appropriations Act included in the Continuing Appropriations Resolution for Fiscal Year, 1985, P.L. 98-473 , 98 Stat. 1935 (1984), for example, stated that "During Fiscal Year 1985, no funds available to the Central Intelligence Agency, the Department of Defense, or any other agency or entity of the United States involved in intelligence activities may be obligated or expended for the purpose, or which would have the effect of supporting, indirectly or indirectly, military or paramilitary operation in Nicaragua by any nation, group, organization, movement or individual." This provision stated that after February 28, 1985, the President could expend $14 million in funds if the President made a report to Congress which specified certain criteria, including the need to provide further assistance for military or paramilitary operations prohibited by the Boland Amendment, and if Congress passed a joint resolution approving such action. In the 1990s, Congress enacted section 8151 of the DOD Appropriations Act for Fiscal Year 1994, P.L. 103-139 (1993), which approved using armed forces for certain purposes including combat in a security role to protect United Nations units in Somalia, but cut off funding after March 31, 1994, except for a limited number of military troops to protect American diplomatic personnel and American citizens unless further authorized by Congress. Section 8135 of the DOD Appropriations Act for Fiscal Year 1995, P.L. 103-335 (1994), provided that, "None of the funds appropriated in this act may be used for the continuous presence in Somalia of United States military personnel, except for the protection of United States personnel, after September 30, 1994." In title IX of the DOD Appropriations Act for Fiscal Year 1995, P.L. 103-335 (1994), Congress provided that, "No funds provided in this act are available for United States military participation to continue Operation Support Hope in or around Rwanda after October 7, 1994, except for any action that is necessary to protect the lives of United States citizens." These examples reveal the approaches that Congress has employed to prohibit or restrict using military force. They have ranged from the least comprehensive "none of the funds appropriated in this act may be used" to the most comprehensive "notwithstanding any other provision of law, no funds may be used." The phrase "none of the funds appropriated in this act" limits only funds appropriated and made available in the act that carries the restriction, but not funds, if any, that may be available pursuant to other appropriations acts or authorizing statutes. To restrict funds appropriated and made available not only in the act that carries the restriction, but also pursuant to other appropriations acts, Congress has used the phrase "none of the funds appropriated in this act or any other act may be used." The most comprehensive restriction is "notwithstanding any other provision of law, no funds may be used." This language precludes using funds that have been appropriated in any appropriations acts as well as any funds that may be made available pursuant to any authorizing statutes including laws that authorize transfers of appropriated or nonappropriated funds. Procedural Considerations There is a parliamentary impediment to including the phrases "none of the funds appropriated in this act or any other act may be used" or "notwithstanding any other provision of law, no funds may be used" in a general appropriations bill. House Rule XXI, clause 2, makes subject to a point of order language that changes existing law (i.e., legislation) in a general appropriations bill (i.e., one providing appropriations for several agencies). A bill that appropriates funds for a single purpose or a single agency is not a general appropriations bill to which this restriction applies. The intent of Rule XXI, clause 2 is to separate the authorizing and appropriating functions and place them in separate committees. Nonetheless, a practice has developed that just as the House may decline to appropriate funds for a purpose that has been authorized by law, it may by limitation prohibit appropriating money in a general appropriations bill for part of a purpose while appropriating funds for the remainder of it. Such a limitation "... may apply solely to the money of the appropriation under consideration" and "... may not apply to money appropriated in other acts." Thus, the phrase "none of the funds appropriated in this act may be used" is not subject to a point of order, but the phrase "none of the funds appropriated in this act or any other act may be used" and the phrase "notwithstanding any other provision of law, no funds may be used" do not appear to qualify as permissible limitations in a general appropriations bill and would be subject to points of order under Rule XXI, clause 2 because they are considered legislation. To avoid a point of order, a limitation in a general appropriations bill may not impose new or additional duties on an executive official, may not restrict authority to incur obligations, and may not make an appropriation contingent upon (i.e., "unless" or "until") the occurrence of an event not required by law. If a Member raises a point of order that language in a general appropriations bill violates Rule XXI, clause 2, and the point of order is sustained by the chair, the legislative language is stricken. Although legislation in a general appropriations bill is subject to a point of order under Rule XXI, clause 2, a restriction in a House rule is not self-enforcing. Consequently, legislation may be included in a general appropriations bill and become law if no point of order is raised, if a point of order is overruled, or if the House either suspends the rules or agrees to a special order known as a rule reported from the Committee on Rules that waives the point of order against including such legislation. Like House Rule XXI, clause 2, Senate Standing Rule XVI also prohibits including legislation in a general appropriations bill, but the Senate rule permits legislation to be included if it is germane to the subject matter of the bill under consideration. If a point of order that language constitutes legislation on an appropriations bill is raised, the proponent of the language may defend it by asserting that it is germane. The question of germaneness is not decided by the presiding officer; it is submitted to the Senate. If a majority of Senators vote that the language in question is germane, it remains in the bill and the point of order that it constitutes legislation is dismissed and is not presented to the presiding officer for a ruling. If a majority of the Senate votes that language is not germane, the presiding officer then rules on whether it constitutes legislation. If the point of order is sustained, the language is removed; if it is overruled, the language remains in the bill and can be enacted. As mentioned earlier, the intent of these House and Senate rules is to separate authorizing and appropriating functions by constraining the bodies from enacting legislation in appropriations bills, but prohibiting use of funds for a purpose or purposes does not contravene the House or Senate rule provided that the prohibition applies only to funds appropriated in the bill being considered. Because an appropriations act generally funds programs for a fiscal year, each provision contained in the act is presumed to be in effect only until the end of the fiscal year. "A provision contained in an annual appropriation act is not to be construed as permanent legislation unless the language used therein or the nature of the provision makes it clear that Congress intended it to be permanent. The presumption can be overcome if the provision uses language indicating futurity or if the provision is of a general character bearing no relation to the object of the appropriation.... The most common word of futurity is 'hereafter' and provisions using this term have often been construed to be permanent." Other words of futurity include "after the date of approval of this act,""henceforth," and specific references to future fiscal years. While including a word or words of futurity has the effect of making a provision extend beyond the fiscal year covered by an appropriations act, such a provision would constitute legislation that would appear to be subject to a point of order under House Rule XXI, clause 2 and Senate Standing Rule XVI during congressional consideration. If the parliamentary impediments can be overcome, however, such legislation may be enacted and become valid law. Availability of Alternative Funds A fundamental principle in appropriations law is that appropriations may not be augmented with funds from outside sources without statutory authority. As a general proposition, an agency may not augment its appropriations from outside sources without specific statutory authority. When Congress makes an appropriation, it also is establishing an authorized program level. In other words, it is telling the agency that it cannot operate beyond the level that it can finance under its appropriation. To permit an agency to operate beyond this level with funds derived from some other source without specific congressional sanction would amount to a usurpation of the congressional prerogative. Restated, the objective of the rule against augmentation of appropriations is to prevent a government agency from undercutting the congressional power of the purse by circuitously exceeding the amount Congress has appropriated for that activity. While no statute in precise terms expressly prohibits augmenting appropriations, the concept is based on some appropriations laws. The Miscellaneous Receipts Statute, 31 U.S.C. § 3302(b), requires that a government official who receives money for the government from any source must deposit it in the U.S. Treasury as soon as practicable without deduction for any charge or claim. Under the Purpose Statute, 31 U.S.C. § 1301, appropriated funds may be used only for the purposes for which they are appropriated. A criminal provision, 18 U.S.C. § 209, prohibits supplementing the salary of an officer or employee of the government from any source other than the United States government. An example of a statute permitting gift funds from other countries to finance a war is section 202 of the Continuing Resolution for Fiscal Year 1991, P.L. 101-403 (1990), passed before the first Gulf war. Section 202 added a new section 2608 to title 10 of the United States Code to authorize any person, foreign government, or international organization to contribute money or real or personal property for use by the Department of Defense. However, before the Department of Defense could spend the funds, they had to be first appropriated by Congress. The Purpose Statute states that funds may be used only for purposes for which they have been appropriated; by implication it precludes using funds for purposes that Congress has prohibited. When Congress states that no funds may be used for a purpose, an agency would violate the Purpose Statute if it should use funds for that purpose; it also in some circumstances could contravene a provision of the Antideficiency Act, 31 U.S.C. § 1341. Section 1341 prohibits entering into obligations or expending funds in advance of or in excess of an amount appropriated unless authorized by law. If Congress has barred using funds for a purpose, entering into an obligation or expending any amount for it would violate the act by exceeding the amount—zero—that Congress has appropriated for the prohibited purpose. To determine whether an agency has violated the Antideficiency Act, it would be necessary to review the language in an appropriations act or authorizing statute that includes a prohibition on using funds for a specific purpose. If an appropriations act prohibits using funds "in this act" for a purpose, for example, expending any amount from that act for the prohibited purpose would appear to contravene the Antideficiency Act because Congress has appropriated zero funds for it. Entering into obligations or expending funds, if any, that may be available from a different appropriations act or other fund for that purpose, however, would not appear to be prohibited by the Antideficiency Act; an agency would be able to use funds from sources other than the appropriations act that contains the prohibition or limitation. Violating the Antideficiency Act would be significant because it has notification and penalty provisions not found in the Purpose Statute. The Purpose Statute does not expressly provide for penalties; it generally is enforced by imposing administrative sanctions on the officer or employee who violates the statute. The Antideficiency Act, by contrast, contains a provision that not only provides for administrative discipline, including, when circumstances warrant, suspension from duty without pay or removal from office, 31 U.S.C. § 1349, but also one that requires an immediate report of a violation to the President and Congress, 31 U.S.C. § 1351. Moreover, the Antideficiency Act has a criminal penalty provision: Section 1350 of title 31 provides that an officer or employee who "knowingly and willfully" violates the act "shall be fined not more than $5,000, imprisoned for not more than two years, or both." Although the act has a criminal provision, no one appears to have been prosecuted or convicted for violating it. Another criminal provision, 18 U.S.C. § 435, not part of the Antideficiency Act, makes punishable by a fine of $1,000, imprisonment of not more than one year, or both, knowingly contracting to erect, repair, or furnish any public building or for any public improvement for an amount more than the amount appropriated for that purpose. The Antideficiency Act prohibits entering into obligations or expending funds in advance of or in excess of an amount appropriated unless authorized by law . One law that authorizes entering into obligations in advance of appropriations is the Feed and Forage Act. Also referred to as Revised Statute 3732, the Feed and Forage Act is part of and an express exception to the Adequacy of Appropriations Act, 41 U.S.C. § 11. Section 11 generally states that no government contract or purchase may be made unless it is authorized by law or is under an appropriation adequate to its fulfillment. The Feed and Forage Act exception authorizes the Department of Defense and the Department of Transportation with respect to the Coast Guard when it is not operating as service in the Navy to make contracts in advance of appropriations for clothing, subsistence, forage, fuel, quarters, transportation, or medical and hospital supplies. Obligations entered into pursuant to Feed and Forage Act authority must not exceed the necessities of the current year. The Secretary of Defense and the Secretary of Transportation immediately must advise Congress of the exercise of this authority and report quarterly on the estimated obligations incurred pursuant to it. Although the Feed and Forage Act authorizes entering into obligations such as contracts, actual expenditures are not permitted pursuant to this authority until Congress appropriates the necessary funds. Redeployment from Iraq: Provisions in the Vetoed Supplemental On May 1, 2007, President George W. Bush vetoed the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, H.R. 1591 . In his veto message, the President said that the bill was objectionable because it would set an arbitrary date to begin withdrawing American forces from Iraq and would micromanage commanders in the field by restricting their ability to fight. He also objected to the inclusion of billions of dollars of spending and other provisions not related to the war. Finally, he asserted that the bill was unconstitutional because it "purport[ed] to direct the conduct of operations of war in a way that infringes upon the powers vested in the presidency by the Constitution, including as commander in chief of the Armed Forces." The next day, the House of Representatives, by a vote of 222 to 203—two-thirds not voting in the affirmative—failed to override the veto. Criteria Relating to Troops Section 1901 of H.R. 1591 , had it become law, would have provided that none of the funds appropriated or made available in the supplemental appropriations bill or in any other act could be used to deploy any armed forces unit unless the chief of the military department concerned certified in writing to the Committees on Appropriations and the Committees on Armed Services in advance of deployment that the unit was "fully mission capable" (i.e., "capable of performing assigned mission essential tasks to prescribed standards under the conditions expected in the theater of operations, consistent with the guidelines set forth in the Department of Defense readiness reporting system"). The President would have had the authority to waive the capability requirement on a unit-by-unit basis if he certified in writing to the appropriate committees that deploying a unit that is not fully mission-capable were required for reasons of national security and transmitted a report detailing the reason or reasons. Under section 1902, no funds appropriated or made available in the supplemental or in any other act would have been permitted to be obligated or expended to initiate developing, to continue developing, or to execute any order that would have the effect of extending the deployment of any Army, Army Reserve, or Army National Guard unit beyond 365 days or of any Marine Corps or Marine Corps Reserve unit beyond 210 days. This limitation was not to be construed to require force levels in Iraq to be decreased below the total U.S. force levels in Iraq prior to January 10, 2007. The President would have had the authority to waive this limitation on a unit-by-unit basis by certifying in writing national security reasons and reporting details to the Committees on Appropriations and the Committees on Armed Services. Pursuant to section 1903, no funds in the supplemental or in any other act were to be available for deploying Army, Army Reserve, or Army National Guard units for Operation Iraqi Freedom if such unit had been deployed within the previous 365 days, or for deploying any Marine Corps or Marine Corps Reserve unit if such unit had been deployed within the previous 210 days. This limitation was not to be construed to require force levels in Iraq to be decreased below the levels in that country prior to January 10, 2007. Like the limitations in sections 1901 and 1902, this one would have been subject to waiver by the President on a unit-by unit basis under the certification and notification procedures prescribed in the earlier limitations. Benchmarks for Iraqi Government and Dates for Redeployment Section 1904 modified House and Senate language relating to Iraqi benchmarks and timetables. It would have required the President by July 1, 2007, to make and report to Congress determinations relating to progress that the government of Iraq is making in meeting benchmarks taken from the House and Senate bills. The President's inability to make any of the determinations relating to the benchmarks was to have resulted in the commencement of troop redeployment from Iraq no later than July 1, 2007, with a goal of completing redeployment within 180 days. If the President were able to make the determinations, the Secretary of Defense would have been required to commence redeploying forces from Iraq not later than October 1, 2007, with a goal of completing redeployment within 180 days. In either case, funds appropriated or otherwise made available in the bill or any other act were to be immediately available to plan and execute a safe and orderly redeployment of the Armed Forces from Iraq. Section 1904(a) of H.R. 1591 would have directed the President to determine and report findings to Congress on or before July 1, 2007, that relate to several matters including whether the Iraqi government— has given U.S. and Iraqi forces authority to pursue all extremists and is making substantial progress in delivering Iraqi forces to Baghdad and protecting them from political interference; is making substantial progress in meeting its commitment to pursue reconciliation initiatives, including enacting a hydro-carbon law, adopting legislation for conducting provincial and local elections, reforming current laws governing the de-Baathification process, amending the Iraqi constitution, and allocating Iraqi revenues for reconstruction projects; is making, with U.S. armed forces, substantial progress in reducing the level of sectarian violence in Iraq; and is ensuring the rights of minority political parties in the Iraqi Parliament are protected. Under section 1904(e), after the conclusion of the 180-day redeployment period specified above, the Secretary of Defense would not be permitted to deploy or maintain members of the U.S. armed forces for any purpose other than the following: protecting American diplomatic facilities and American citizens, including U.S. armed forces; serving in roles consistent with customary diplomatic positions; engaging in targeted special actions limited in duration and scope to killing or capturing members of al-Qaeda and other terrorist organizations with global reach; or training members of the Iraqi security forces. Section 1904(f) would have required that 50% of funds for assistance to Iraq under the headings "Economic Support Fund" and "International Narcotics Control and Law Enforcement" was to be withheld from obligation until the President had made a determination that the government of Iraq has met certain benchmarks. Finally, Section 1904(h) would have required that, beginning on September 1, 2007, and every 60 days thereafter, the Commander of the Multi-National Forces, Iraq, and the U.S. Ambassador to Iraq were jointly to submit to Congress a report describing and assessing in detail the progress that the government of Iraq is making regarding benchmarks listed in section 1904(a). Other Restrictions Section 1311 would have prohibited the use of funds in the supplemental or in any other act to establish any military installation or base for the permanent stationing of U.S. military forces in Iraq or to exercise U.S. control over oil revenues in Iraq. Section 1312 would have denied authority to use funds in the supplemental to contravene several conventions and laws, including the United Nations Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment and 18 U.S. Code section 2340A. This limitation also applied to renditions. Section 1313 contained a requirement for the Secretary of Defense, within 30 days of enactment and every 90 days thereafter, to submit to the congressional defense committees a classified report assessing the individual transition readiness of units of Iraqi and Afghan security forces. Provisions from the Enacted Supplemental, P.L. 110-28 The House and Senate agreed to H.R. 2206 , the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Act Appropriations Act, P.L. 110-28 , on May 24, 2007, and the President signed it on May 25. This act provides supplemental funding through September 30, 2007, with no timetable for withdrawing troops. Section 1314 contains the major provisions relating to Iraq; it establishes 18 political and security benchmarks for the Iraqi government to meet. These benchmarks, similar to those that were included in the vetoed H.R. 1591 , include enacting and implementing legislation on de-Baathification and on ensuring equitable distribution of hydrocarbon resources, increasing the number of Iraqi security forces units capable of operating independently, and allocating $10 billion in Iraqi revenues for reconstruction projects, including delivering essential services, on an equitable basis. The President is required to submit reports to Congress by July 15, 2007, and by September 15, 2007, on whether the Iraqi government is making sufficient progress in achieving these benchmarks. Obligation of reconstruction assistance to Iraq in the Economic Support Fund, about $1.6 billion, is prohibited unless the President certifies in both reports that Iraq is making progress on all the benchmarks or waives this requirement with a detailed rationale. The act requires an assessment of progress by the Iraqi government in meeting the benchmarks from the Government Accountability Office and an assessment of combat readiness of Iraqi security forces from an independent private sector entity selected by the Department of Defense. P.L. 110-28 does not include criteria relating to United States forces including mission readiness, periods between deployments, and duration of deployments, which were a part of the vetoed H.R. 1591 and could have been waived on a unit-by-unit basis by the President for national security reasons. An earlier version of H.R. 2206 , passed by the House, would have split the total amount into two portions. The first portion, about $47.6 billion, would have been available immediately to fund about two additional months of military operations. The second portion, about $53.2 billion, would have been available only if the President on or before July 13, 2007, submitted a report to Congress detailing progress of the Iraqi government in meeting political and security benchmarks, similar to those that were included in the vetoed H.R. 1591 , and a joint resolution of approval was enacted into law. The Senate passed on May 17, 2007, a version of H.R. 2206 that expressed the sense of Congress in support of United States forces and requested a conference with the House. The House earlier rejected by a vote of 171 to 255 H.R. 2337 , a bill to require the Department of Defense to redeploy service members and contractors from Iraq within 180 days. The rule reported by the Committee on Rules which provided for consideration of H.R. 2206 in the House of Representatives, H.Res. 486 , 110 th Cong., 1 st Sess., makes in order as an amendment the text of H.R. 2451 , which requires withdrawing most United States forces from Iraq by June 28, 2008, when the House considers supplemental appropriations for military operations in Iraq or Afghanistan for FY2008. Provisions from the Consolidated Appropriations Act, P.L. 110-161 The Senate on December 18, 2007, and the House the following day passed H.R. 2764 , the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ), which the President signed on December 26, 2007. The act provides $70 billion in supplemental appropriations for military activities in Iraq. Language requiring redeployment of U.S. armed forces from Iraq is not included, but Section 609 of Division L of the act mandates that the Secretary of Defense should report to Congress on progress toward stability in Iraq within 60 days after enactment and every 90 days thereafter. The Secretary's reports should address several matters including measures of political stability, primary indicators of the degree of security in Iraq, estimated strength of the insurgency, criteria for assessing capabilities and readiness of Iraqi military forces and police, and an assessment of U.S. military requirements, including planned force rotations through the end of calendar year 2008. The supplemental funds for these military activities and the report requirement were part of a floor amendment that the Senate agreed to by a vote of 70 to 25 on December 18. Earlier that day, the Senate rejected an amendment that would have expressed the sense of the Senate that the missions of U.S. armed forces in Iraq should change to more limited ones announced by the President in a September 13, 2007, address to the nation—counterterrorism operations; training, equipping, and supporting Iraqi forces; and the necessary mission of force protection, with the goal of completing that transition by the end of 2008. The vote was 50 to 45, with 60 votes required for passage. An amendment that would have directed the President to commence redeploying U.S. armed forces from Iraq within 90 days after enactment and prohibited funding continued deployments in Iraq after nine months from the enactment date except for limited missions also did not pass by a vote of 24 to 71. Because these amendments did not get 60 votes, they were withdrawn under the terms of the unanimous consent agreement. On November 14, 2007, the House by a vote of 218 to 203 and 1 present passed H.R. 4156 , the Orderly and Responsible Iraq Redeployment Appropriations Act, 2008, that would have provided $50 billion in supplemental funds for military activities in Iraq. A provision would have directed the President within 30 days after enactment to commence an immediate and orderly redeployment of U.S. armed forces from Iraq with a goal of completing a transition to a limited presence and missions not later than December 15, 2008. After concluding the transition, the Secretary of Defense would have been able to deploy or maintain U.S. armed forces in Iraq only to protect U.S. diplomatic facilities, U.S. armed forces, and American citizens; to conduct limited training, equipping, and providing logistical support to Iraqi security forces; and to engage in targeted counterterrorism operations against al-Qaeda, al-Qaeda infiltrated groups, and other terrorist organizations in Iraq. Other provisions of House-passed H.R. 4156 would have prohibited using funds for any treatment or technique not authorized in the Army Field Manual or in contravention of some statutes enacted to implement the U.N. Convention Against Torture and denied funds to deploy any U.S. armed forces unit to Iraq unless the President certified it as fully mission capable or waived the certification requirement for national security reasons. They also would have mandated reports on plans to achieve the transition of the U.S. mission in Iraq, on performance measures for military and political stability in Iraq, and on a comprehensive regional stability plan for the Middle East. The Senate on November 16, 2007, rejected a motion to close further debate on a motion to proceed to H.R. 4156 by a vote of 53 to 45, with 60 needed for passage. IV. Limiting Deployment of Military Personnel The Constitution accords Congress with ample authority to regulate the use of military personnel. Among other things, Congress is designated with the power "To raise and support Armies;" "To provide and maintain a Navy;" "To make Rules for the Government and Regulation of the land and naval Forces;" and "To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be employed in the Service of the United States." In the 110 th Congress, several legislative proposals have been introduced that would limit the deployment of certain military personnel to Iraq. Some have argued that congressional action limiting the use of particular troops during wartime would, at least in certain circumstances, infringe upon the President's authority as commander in chief to conduct a military campaign in a manner that he deems appropriate. As a matter of historical practice, Congress has occasionally imposed limitations and other requirements on the deployment of U.S. troops, including during wartime. These limitations have been effectuated either through the statutory prohibition on the use of military personnel for a particular purpose, or via the denial of appropriations in support of a particular operation. The following are examples in which Congress has limited the President's ability to use particular military personnel for certain purposes: 1915— The Army appropriations act restricted Army tours of duty in the Philippines to two years and tours in the Canal Zone to three years, unless the servicemember requested otherwise or in cases of insurrection or actual or threatened hostilities. The restriction was amended in 1934 to provide for two-year tours and in both areas as well as certain other foreign duty stations. The restriction was repealed in 1945, and replaced with a requirement for the Secretary of Defense to report twice annually to the Armed Services committees regarding regulations governing the lengths of tours of duty for the Army and Air Force outside the continental United States. 1933— The Treasury and Post Office Appropriation Act for FY1934, provided that "Assignments of officers of the Army, Navy, or Marine Corps to permanent duty in the Philippines, on the Asiatic Station, or in China, Hawaii, Puerto Rico, or the Panama Canal Zone shall be for not less than three years. No such officer shall be transferred to duty in the continental United States before the expiration of such period unless the health of such officer or the public interest requires such transfer, and the reason for the transfer shall be stated in the order directing such transfer." 1940— The Selective Training and Service Act of 1940 provided that "Persons inducted into the land forces of the United States under this Act shall not be employed beyond the limits of the Western Hemisphere except in the Territories and possessions of the United States, including the Philippine Islands." 1945— In an act extending the Selective Training and Service Act until the end of World War II, as determined by the earlier of dates proclaimed by the President or by concurrent resolution by both Houses of Congress, provided that no inductee under the age of nineteen "shall be ordered into actual combat service until after he has been given at least six months of [appropriate] military training...." 1948— The Selective Service Act of 1948 provided that eighteen- and nineteen-year old enlistees for one-year tours could not be assigned to land bases outside the continental United States. 1951— The Universal Military Training and Service Act of 1951 required inductees, enlistees, and other persons called to active duty to receive at least four months' "full and adequate" training prior to deployment overseas, and prohibited the expenditure of funds to transport or maintain a servicemember overseas in violation of the provision. 1956— 10 U.S.C. § 6015 prohibited assignment of female servicemembers to duty on combat aircraft and all vessels of the Navy. 10 U.S.C. § 6018 prohibited the assignment of Navy officers to shore duty not explicitly authorized by law. 1985— The National Defense Authorization Act, 1985 prohibited the expenditure of funds to support an end strength of U.S. Armed Forces personnel stationed in NATO countries above a level of 326,414. The measure was later modified to reduce the level further but to provide waiver authority to the President to increase the force level to up to 311,855, upon notification to Congress, if he determined the national security interests required exceeding the ceiling. 1992— The National Defense Authorization Act for FY1992 prohibited the use of appropriated funds to support an end strength level of members of the Armed Forces of the United States assigned to permanent duty ashore in nations outside the United States at any level in excess of 60 percent of the end strength level of such members on September 30, 1992, with exceptions in the event of declarations of war or emergency. The precise scope of Congress's ability to limit the deployment of U.S. military forces has not been ruled upon by the courts, and it is therefore unclear whether legislative measures limiting the use of particular military personnel during wartime would ever be deemed to be an unconstitutional infringement upon the President's authority as Commander in Chief. Nonetheless, historical practice suggests that, at least in some circumstances, Congress may oblige the President to comply with certain requirements on the deployment of particular military personnel, including during periods of armed conflict. Analysis and Conclusion Much of the historical debate over war powers has taken place in the context where a President has initiated the use of military force with ambiguous or no congressional authorization, which is not the case here. There is no obvious reason, however, to suppose that Congress's constitutional power to limit hostilities depends on whether the hostilities were initiated with Congress's express approval at the outset. Likewise, it does not seem consistent to suggest that Congress's authority to limit the scope of hostilities may be exercised validly only at the initiation of hostilities, without opportunity for changing course once troops are engaged. In modern times, federal courts have been reticent to decide cases involving war powers on the merits, including those involving appropriations measures. However, in discussing whether a particular challenge raises non-justiciable political questions involving matters textually committed to the political branches by the Constitution, courts have generally reiterated the understanding of a shared allocation of war powers. That is, it is generally agreed that Congress cannot "direct campaigns," but that Congress can regulate the conduct of hostilities, at least to some degree, and that Congress can limit military operations without the risk of a presidential veto by refusing to appropriate funds. In 1970, in response to a challenge related to the Vietnam conflict, a federal district court expounded on the theme of congressional authority, with particular reference to Congress's appropriations power: The power to commit American military forces under various sets of circumstances is shared by Congress and the Executive.... The Constitutional expression of this arrangement was not agreed upon by the Framers without considerable debate and compromise. A desire to facilitate the independent functioning of the Executive in foreign affairs and as commander-in-chief was tempered by a widely shared sentiment opposing the concentration of unchecked military power in the hands of the president. Thus, while the president was designated commander-in-chief of the armed forces, Congress was given the power to declare war. However, it would be shortsighted to view Art. I, § 8, cl. 11 as the only limitation upon the Executive's military powers.... [I]t is evident that the Founding Fathers envisioned congressional power to raise and support military forces as providing that body with an effective means of controlling presidential use thereof. Specifically, the House of Representatives ... was viewed by the Framers as the bulwark against encroachment by the other branches. In The Federalist No. 58 (Hamilton or Madison), we find: The House of Representatives cannot only refuse, but they alone can propose, the supplies requisite for the support of government. They, in a word, hold the purse—that powerful instrument by which we behold in the history of the British Constitution, an infant and humble representation of the people gradually enlarging the sphere of its activity and importance, and finally reducing, as far as it seems to have wished, all the overgrown prerogatives of the other branches of the government. This power over the purse may, in fact, be regarded as the most complete and effectual weapon with which any constitution can arm the immediate representatives of the people, for obtaining a redress of every grievance, and for carrying into effect every just and salutary measure. Despite Congress's well-established authority over appropriations, it has been argued that the power of the purse cannot be wielded in such a way as to fetter the discretion of the Commander in Chief. Congress's power of the purse is subject to the same constitutional restrictions as any other legislative enactment, including those that affect allocation of powers among the three branches. That is, Congress cannot use appropriations measures to achieve unconstitutional results, although it might, in some circumstances, achieve a similar result simply by failing to appropriate money. The doctrine of "unconstitutional conditions," most frequently applicable to laws conditioning benefits for states or private citizens on their relinquishment of constitutional rights, is said to apply as well to legislation authorizing presidential action. This notion, however, adds little to the analysis. Congress has ample constitutional authority to enact legislation that restricts the scope of military operations. If Congress can enact a limitation on the conduct of military operations directly, it can do so through appropriations. The larger question remains whether the limitation enacted amounts to an unconstitutional usurpation of the actual conduct of war. Some commentators agree that Congress has the authority to cut off funds for military operations entirely, but assert that a partial cut-off or limitation on the use of funds would amount to an unconstitutional condition by interfering with the President's authority to conduct battlefield operations. There has been some suggestion in the past that the President's responsibility to provide for troops in the field justifies further deployments without prior authorization from Congress, with some arguing that the President has an independent implied spending power to carry out these responsibilities. These arguments do not easily square with Congress's established prerogative to limit the scope of wars through its war powers, and do not conform with Congress's absolute authority to appropriate funds. Congress has frequently, although not invariably, acceded to presidential initiatives involving the use of military force. While a history of congressional acquiescence may create a gloss on the Constitutional allocation of powers, such a gloss will not necessarily withstand an express statutory mandate to the contrary. It does not appear that Congress has developed a sufficiently consistent or lengthy historical practice to have abandoned either its war power or its authority over appropriations. The executive branch has objected to legislative proposals it views as intrusive into presidential power, including conditions found in appropriations measures. And it remains possible to construe the function of "conducting military operations" broadly to find impermissible congressional interference in even the most mundane statutes regulating the armed forces. To date, however, no court has invalidated a statute passed by Congress on the basis that it impinges the constitutional authority of the Commander in Chief, whether directly or indirectly through appropriations. In contrast, presidential assertions of authority based on the Commander-in-Chief Clause, in excess of or contrary to congressional authority, have been struck down by the courts. On the other hand, Presidents have sometimes deemed such limitations to be unconstitutional or merely precatory, and have at times not given them the force of law. In other words, Administrations have relied on an argument based on the doctrine of "unconstitutional conditions" to justify the President's authority to reject a limitation on national security spending while continuing to spend the funds. Whether or not the President is constitutionally entitled to spend funds without adhering to relevant legislative conditions appears to be an issue unlikely to be resolved by the courts. In sum, it seems that under the constitutional allocation of powers Congress has the prerogative of placing a legally binding condition on the use of appropriations to regulate or end the deployment of U.S. armed forces to Iraq. Such a prohibition seems directly related to the allocation of resources at the President's disposal, and would therefore not appear to interfere impermissibly with the President's ability to exercise command and control over the U.S. armed forces. Although not beyond question, such a prohibition would arguably survive challenge as an incident both of Congress's war power and of its power over appropriations.

On October 16, 2002, President Bush signed the Authorization for Use of Military Force Against Iraq Resolution of 2002. Since the March 2003 invasion of Iraq, Congress has enacted appropriation bills to fund the continuation of the Iraq war, including military training, reconstruction, and other aid for the government of Iraq. In April, 2007, however, Congress passed a supplemental appropriations bill to fund the war that contained conditions and a deadline for ending some military operations. The President vetoed the bill, arguing in part that some of its provisions are unconstitutional. The current dispute is centered on whether Congress has the constitutional authority to legislate limits on the President's authority to conduct military operations in Iraq, even though it did not initially provide express limits. Specific issues include whether Congress may, through limitations on appropriations, set a ceiling on the number of soldiers or regulate which soldiers the President may assign to duty in Iraq, and whether an outright repeal or expiration of the authorization for use of military force (AUMF) against Iraq would have any effect. It has been suggested that the President's role as Commander in Chief of the Armed Forces provides sufficient authority for his deployment of troops, and any efforts on the part of Congress to intervene could represent an unconstitutional violation of separation-of-powers principles. While even proponents of strong executive prerogative in matters of war appear to concede that it is within Congress's authority to cut off funding entirely for a military operation, it has been suggested that spending measures that restrict but do not end financial support for the war in Iraq would amount to an "unconstitutional condition." The question may turn on whether specific proposals involve purely operational decisions committed to the President in his role as Commander in Chief, or whether they are instead valid exercises of Congress's authority to allocate resources using its war powers and power of the purse. This report begins by providing background, discussing constitutional provisions allocating war powers between Congress and the President, and presenting a historical overview of relevant court cases. It discusses Congress's power to rescind prior military authorization, concluding, in light of relevant jurisprudence and the War Powers Resolution, that the repeal of the AUMF, absent the further denial of appropriations or the establishment of a specific deadline for troop withdrawal, would likely have little, if any, legal effect on the continuation of combat operations. The report discusses Congress's ability to limit funding for military operations in Iraq, examining relevant court cases and prior measures taken by Congress to restrict military operations, as well as possible alternative avenues to fund operations if appropriations are cut. There follows a summary of relevant measures included in the vetoed FY2007 supplemental appropriations bill, H.R. 1591, and the enacted act, H.R. 2206. The report provides historical examples of measures that restrict the use of particular personnel, and concludes with a brief analysis of arguments that might be brought to bear on the question of Congress's authority to limit the availability of troops to serve in Iraq. Although not beyond debate, such a restriction appears to be within Congress's authority to allocate resources for military operations.

Introduction Under Title IV-E of the Social Security Act, states, territories, and tribes are entitled to claim partial federal reimbursement for the cost of providing foster care, adoption assistance, and kinship guardianship assistance to children who meet federal eligibility criteria. The Title IV-E program, as it is commonly called, provides support for monthly payments on behalf of eligible children, as well as funds for related case management activities, training, data collection, and other costs of program administration. For FY2013, states spent $12.3 billion under the Title IV-E program and expected to receive federal reimbursement of $6.7 billion, or 54% of that spending. To be eligible to claim federal support under the Title IV-E program, a state, territory, or tribe must have a Title IV-E plan that is approved by the U.S. Department of Health and Human Services (HHS), Administration for Children and Families (ACF). The plan must provide that the state, tribal, or territorial agency that operates the Title IV-E program will adhere to all federal requirements related to providing direct financial assistance to all eligible children, including those related to ensuring the safety, permanence, and well-being of children receiving Title IV-E assistance. All 50 states, the District of Columbia, Puerto Rico, and 5 tribal entities have an approved Title IV-E plan. This report focuses on the Title IV-E plan requirements that largely address the child welfare goals of safety, permanence, and well-being of children. Safety refers to ensuring that children served are protected from further abuse or neglect. Permanence refers to the goal of ensuring that children do not spend too many of their formative years in foster care. Accordingly, if a child enters foster care the state must work to quickly and safely reunite a child with his or her parents, or, if that is not possible or appropriate, to quickly find another safe and permanent home for the child. Well-being is inextricably linked to children's safety and permanency. The term generally refers to efforts by the child welfare agency to promote positive developmental outcomes for the children they serve—including education and physical and mental health outcomes—as well as to enhance the capacity of children's families to help drive those positive outcomes. Title IV-E Plan Scope and Submission Requirements The Title IV-E plan is a single document that applies to all three Title IV-E program components (foster care, adoption, and kinship guardianship). No state may receive funding under any one of the Title IV-E components without meeting each of the plan requirements (whether that requirement is directed toward children in foster care, or those receiving adoption assistance, or kinship guardianship assistance). Although Title IV-E plan requirements primarily address meeting the needs of children while they are in foster care, those requirements are meaningful to other children receiving assistance under Title IV-E because nearly all children who receive Title IV-E adoption assistance, and all of those who receive Title IV-E kinship guardianship assistance, were previously in foster care. Additionally, the Preventing Sex Trafficking and Strengthening Families Act ( P.L. 113-183 ) mandates that states, under the Title IV-E plan, develop and implement protocols to identify, document, and determine necessary services for certain child welfare-involved children and youth who are victims of sex trafficking or at risk of being such victims. These protocols are to apply to children for whom the child welfare agency has an open case file (whether or not the child is, or was previously, in foster care), as well as to children who are in foster care, including those who have run away from their foster care placement, and youth formerly in foster care who are receiving services under the Title IV-E Chafee Foster Care Independence (CFCIP) program. P.L. 113-183 requires states to implement these protocols no later than September 29, 2016. A Title IV-E plan must be submitted to HHS, ACF using a "pre-print" (rather than as a narrative description). The "pre-print" is a form that lists each requirement of the plan and provides a space for the Title IV-E agency to fill in the relevant law, regulation, or policy indicating that it is in compliance with the given requirement. A state's Title IV-E plan must be amended and/or updated as necessary to reflect policy compliance with any new requirements included in the law. Significance of Title IV-E Plan Requirements to Federal Title IV-E Funding Funding spent under the Title IV-E program—both federal and state dollars—must be spent on "eligible activities" and on behalf of "eligible children." Eligible activities are, for the most part, described in the Title IV-E plan. In FY2013, state child welfare agencies spent $12.3 billion in federal and state Title IV-E dollars with the second -largest category of Title IV-E spending (25%, $3.1 billion) used to support the kind of Title IV-E "administrative" activities that are the primary focus of the plan requirements described in this report. These include requirements related to case planning and management for eligible children in foster care, pre-placement activities for eligible children at imminent risk of entering foster care; and licensing, recruitment, or background checks for foster care providers of eligible children. The single largest amount of FY2013 Title IV-E spending (28%, $3.5 billion) provided payments to support eligible children in new permanent families (including for adoption assistance and kinship guardianship assistance). Spending for foster care maintenance payments on behalf of eligible children in foster care (20%, $2.5 billion) represented the third-largest Title IV-E program spending category. (See Figure 1 for all Title IV-E spending.) Waivers As of October 2014, 29 states, the District of Columbia, and 1 tribe had approval for, or were already implementing, a Title IV-E waiver project. (Authority for HHS to issue these waivers expired on September 30, 2014.) Under a waiver, formally called a "child welfare demonstration project," states may be permitted to spend Title IV-E funds for activities other than those described in the Title IV-E plan—and for a broader set of individuals—so long as the project meets the overall child welfare goals of Title IV-E and is cost neutral to the federal government. At the same time, the statute prohibits HHS from waiving any requirement that would "impair the entitlement" of any child or family to benefits or services under Title IV-E. Additionally, it prohibits HHS from waiving any of the child protections included in the case planning and case review system. These case planning and review requirements are numerous. They are discussed throughout the report and are shown together in Figure 2 , at the end of the report. Spending related to meeting these requirements is included as part of the foster care case planning and pre-placement activities; licensing, recruitment, and background check category shown in Figure 1 . Federal Oversight of Title IV-E Plan Compliance Compliance with specific Title IV-E plan requirements is subject to periodic federal conformity reviews, the largest of which is the Child and Family Services Review (CFSR). That review assesses outcomes achieved by the state for the children it serves through detailed onsite review of a specified number of case records in a given state and by measuring statewide performance against certain national data indicators. Additionally, stakeholders are interviewed as a part of assessing whether the state has specific "systems" in place that are required by the federal child welfare law and are intended to facilitate the achievement of safety, permanency and well-being for children. States that are found to be out of "substantial conformity" with federal policy must develop and successfully implement a Program Improvement Plan (PIP) to avoid fiscal penalties. The reviews are conducted in each of the 50 states, the District of Columbia and Puerto Rico. A third round of the CFSR is scheduled to begin in FY2015 and will continue through FY2018. In the first two rounds of the CFSR (conducted in 2001-2004 and 2007-2010) no jurisdiction was found in full compliance with federal child welfare policies. Overview of Requirements Related to Children's Safety, Permanence, and Well-Being Apart from providing assistance to eligible children, the state, territorial, or tribal agency operating a Title IV-E program must have an approved Title IV-E plan that provides for policies and procedures to accomplish the following nine purposes: Enable children to be reunited with their families or prevent their entry to foster care (e.g., by making "reasonable efforts"—in nearly all cases—to prevent children's entry into foster care or to reunite children with their families, including by developing a plan for each child that describes services and activities necessary to permit reunification). Promote children's placement with relatives and maintain sibling connections (e.g., by considering placement of a child with a relative rather than a non-relative foster caregiver, making diligent efforts to identify adult relatives of children who enter care and notifying those relatives of their options to be involved in the child's care and placement; and by always placing sibling groups in the same foster, adoptive or kinship home, unless this is contrary to the welfare of one of those siblings). Ensure children's living arrangements are safe and appropriate and permit "normalcy" (e.g., by establishing licensing standards for foster family homes and other group or residential settings where foster children live and requiring them [effective September 29, 2015] to ensure foster caregivers may apply a "reasonable and prudent parenting standard" when determining age and developmentally appropriate activities in which foster children may participate; and by conducting background checks of prospective foster and adoptive parents, and of prospective relative guardians). Provide for regular oversight and review of each child's status in foster care and timely development and implementation of a permanency plan (e.g., by conducting a periodic review of a child's status in care no less often than once every 6 months and by ensuring that a court establishes a permanency goal for a child no later than 12 months from the date a child enters foster care, and every 12 months thereafter while the child remains in care). Ensure timely efforts to find a permanent hom e for children or youth who can not be reunited with their families (e.g., by making concurrent efforts to reunite a child and to find him or her a new adoptive home; and, unless certain exceptions exist, by petitioning the court to terminate the parental rights of any child who has been in care for 15 of the last 22 months, is an abandoned infant, or whose parent has committed certain crimes against the child or his siblings). Ensure the health care and education needs of children are addressed (e.g., by requiring states to establish and update a health and education record for child in foster care; and ensuring an education stability plan for each child in foster care). Help youth make a successful transition from foster care to adulthood (e.g., by engaging older children in care in their own case planning [effective September 29, 2015] and including in the case plan a written description of programs and services necessary to help them transition to successful adulthood; by requiring that within the 90-day period before a youth will leave foster care due to age [rather than placement in a permanent family] that a caseworker help the youth develop a transition plan with specific options related to housing, health insurance coverage, education, employment, mentoring, and other support services; and [effective September 29, 2015], by providing certain critical documents, such as a driver's license to youth aging out of foster care). Respond to c ertain c hild and youth victims of sex trafficking, those who may be at risk of sex trafficking , and those who run away from foster care (e.g., by developing and, as of September 29, 2016, implementing protocols to identify, document, and determine services necessary for these victims or those at risk of being victims; and by establishing protocols to locate and provide appropriate responses for children who run away from their foster family home or group care placement. Ensure program coordination and collaboration and meet certain administrative standards (e.g., by requiring operation of a program under Title IV-B, Subpart 1 of the Social Security Act—known as the Stephanie Tubbs Jones Child Welfare Services Program). Critical to meeting many, but not all, of these Title IV-E plan requirements is the establishment of a case review system that, among other things, includes a set of specific procedures related to case planning and regular review of the child's status and permanency goal while in care. For an overview of case review components, including case planning and permanency planning requirements, see Figure 2 at the end of this report. Title IV-E plan requirements in each of the areas outlined above are discussed in greater detail in the remainder of this report. With limited exceptions, plan requirements are the same whether they are to be carried out by a state, territory, or tribe. In the remainder of this report they are described as applying to the "states," the "state child welfare agency," or the "Title IV-E agency." Those terms are generally used interchangeably here and refer to all 50 states, the District of Columbia, and Puerto Rico (each of which has an approved Title IV-E plan), or the "state" child welfare agency in the jurisdiction that administers the Title IV-E plan. Prevent Entry into Care or Reunite Children with Their Parents Under the legal doctrine of parens patriae , government may intervene to remove children from their homes when a child's safety is compromised. At the same time, the U.S. Constitution has long been understood to grant parents a fundamental liberty interest in raising their children as they choose, and a central philosophy of child welfare practice remains that children are best served when they can live safely with their parents. The state child welfare agency is required to make a child's safety and health the paramount concern in all decisions related to preserving or reuniting a family. With limited exceptions (see text box), the Title IV-E program requires states to make "reasonable efforts" to prevent the need for a child's removal from his or her home and, if a child does enter care, to make it possible for him or her to safely return home. Toward this end, children entering or in foster care are to be placed in foster family homes or other living arrangements that are "in close proximity" to the home of their parents, consistent with the best interests and any special needs of the child. Further, for each child in care, the Title IV-E agency must develop a written case plan that addresses services to be provided to the parents, child, and foster parents that will improve conditions in the parents' home, facilitate the return of the child to his or her own safe home (or other permanent placement of the child), and address the needs of the child while in foster care. This case plan must be developed jointly by the Title IV-E agency and the child's parents. As of September 29, 2015, any youth in care at age 14 must also be involved in development of the case plan. (For more about this requirement, see " Help Youth Transition Successfully From Foster Care to Adulthood .") Finally, the Title IV-E agency must have procedures in place to safeguard parental rights pertaining to the child's removal from the home of his/her parent, any change in the child's placement while in foster care, and any determination affecting parents' visiting privileges. (For further information about the contents of the case plan, see Figure 2 at the end of this report.) Planning for and Ensuring Safe, Appropriate Placements and Permitting Normalcy Ensuring a child's safety and well-being during his/her temporary stay in foster care is a critical responsibility of the child welfare agency. Toward this end, the state child welfare agency must include in the written case plan—required for each child in foster care—a description of the home or other setting where the child is placed, and a discussion of its safety and appropriateness for the child. The foster care placement must be the least restrictive (most family-like) and most appropriate setting available and in close proximity to the parents' home, consistent with the best interest and special needs of the child. Changes enacted to the foster home licensing requirements in 2014 (generally effective September 29, 2015) require states to make additional efforts to balance safety considerations with a child's access to, and participation in, age and developmentally appropriate activities. As part of their Title IV-E plan, state agencies must develop and implement standards to ensure that children in foster care placements, whether with public or private agencies, receive quality services that protect their health and safety. Additionally, to ensure safe, quality, and appropriate placements, states must establish licensing requirements for foster family homes and facilities and conduct background checks of prospective foster and adoptive parents and prospective relative guardians. Further, states are required to certify that they will adequately prepare prospective foster parents with knowledge and skills appropriate to meet a child's needs before that child is placed with those foster parents and that this preparation will be continued, as necessary, after the child's placement. Effective September 29, 2015, this preparation must include training related to understanding children's developmental stages and on using a "reasonable and prudent parent standard" to allow children to participate in age or developmentally appropriate activities. Licensing Standards States may determine the particular licensing standards that apply to foster family homes and other settings where children who are placed in foster care live (e.g., group homes, residential institutions). However, those standards must be reasonably in accord with recommendations of national organizations concerned with this kind of licensing, and they must set policies related to safety, sanitation, admissions, and protection of civil rights. Additionally, as of September 29, 2015, they must permit the use of the reasonable and prudent parent standard and include policies related to liability of foster caregivers in applying that standard. Further, as of that same date, the state's foster care licensing standards must ensure that every group facility under contract with the state to provide foster care is required, under that contract, to have, onsite, at least one caregiver who is authorized to apply the reasonable and prudent parent standard. The contract must further provide that the designated caregiver is to use this standard to make decisions about a foster child's participation in age and developmentally appropriate activities and must receive training on use of the standard (in the same manner as training is provided for foster parents). Waiving Non-Safety-Related Standards in Relative Homes Foster care licensing standards must be periodically reviewed to ensure their "continued appropriateness," and, since 2000, they must apply to any foster family home setting (relative or non-relative). However, on a case-by-case basis, a Title IV-E agency may grant waivers of non-safety-related licensing standards to permit placement of children with relatives. A study of state practice regarding licensing relative foster family homes, and the use of waivers in issuing such licenses, found that 15 states did not permit use of licensing waivers to enable relatives to become licensed foster parents in any case. , Among the 37 states that permitted licensing waivers, 26 were able to report on the frequency with which such waivers were issued in FY2009. That frequency varied considerably from 0 (in two states) to 274 (in one state); most of the states reporting on this question issued fewer than 30 relative licensing waivers in FY2009. The most commonly waived non-safety licensing standards for relative homes pertained to a child's sleeping arrangements or the required space in the home (e.g., size of bedroom). Other waivers permitted more children in the home, or children of different ages than would normally be allowed. Relatives also received exemptions from pre-license and ongoing foster parent training requirements, or extensions to complete foster parent training, health evaluations, or First Aid and CPR training. States also reported granting waivers (albeit less frequently) for requirements related to a caregiver having adequate income, the age of the caregiver, testing of well water (if relatives agreed to use bottled water for drinking and cooking), possession of renter's insurance, and home telephone service, among other items. Background Checks Although states may consider background checks as part of their licensing process, the Title IV-E requirement for background checks of prospective foster or adoptive parents and prospective relative guardians is separately established in the law. It may not be waived under the licensing provisions discussed previously. Under current law, Title IV-E agencies must conduct a fingerprint-based check of national crime databases (i.e., a Federal Bureau of Investigation [FBI] check) of a prospective foster or adoptive parent, or a prospective relative guardian before approving the placement of a child with that prospective foster or adoptive parent or guardian. This requirement applies for any state child welfare agency placement of a child in foster care, with an adoptive family or with a relative guardian—without regard to whether the child will be receiving Title IV-E assistance. In addition, if the state agency intends to claim federal support under Title IV-E for direct financial assistance provided to this child, it may not approve the placement of the child in a home where the criminal background check reveals that the prospective foster or adoptive parent committed certain crimes. Many child abuse and/or neglect cases are not the subject of criminal court proceedings. Thus information on the perpetrators in such cases would not appear in a criminal records check but might be included in a state child abuse and neglect registry. Accordingly, Title IV-E agencies are required to check any child abuse and neglect registry that is maintained by the state for information about a prospective foster or adoptive parent, or prospective relative guardian (and any other adult living in the household of a prospective parent or guardian). The check must be made before approving placement of a foster child in the home whether the child is Title IV-E eligible or not. Title IV-E agencies must also request (and all states must comply with such requests) information from the child abuse and neglect registry of any other state where the prospective foster or adoptive parent (or other adult) lived in the previous five years. The law does not stipulate how any information obtained from a registry check must be used by the child welfare agency. Enable Placement with Relatives and Maintain Sibling Connections Placing children with kin—often grandparents, aunts, or uncles—has deep cultural roots and is understood in child welfare practice as a way to preserve important connections for children via extended family. Ensuring that siblings remain together may also be considered a form of preserving family connections. Title IV-E agencies are required to take certain steps to identify relatives with whom a child in foster care may be safely placed, and they must work to maintain sibling relationships for children. Title IV-E agencies are required to "consider giving preference" to an adult relative over a non-related caregiver when determining where a child in foster care should live, provided the adult relative meets all the state's relevant child protection standards. Further, within 30 days after a child's removal from the custody of his or her parent, the state must "exercise due diligence" to identify all adult relatives of the child, notify them that the child has been or is being removed from the custody of the parents(s), and inform them of their options to participate in the child's care and placement. The law does not require a particular method for states to give this notice. HHS encourages states to use more than one method (e.g., in writing and orally). As part of this notice to adult relatives, the Title IV-E agency must describe the state licensing requirements for a foster family home and any additional services and supports that may be available to children in a licensed foster family setting. Although the federal policy requiring the same licensing standards for relatives and non-relatives has been in place since 2000, some states continue to report "differences in practice and philosophy as to whether or not relatives should be licensed." Further, states have also long asserted that some relative foster parents prefer not to have their homes licensed for a variety of reasons, including that the process is too time-consuming and paperwork too overwhelming; relatives wish to entirely avoid the child welfare system; relatives do not want to provide autobiographical information, including family's medical history; relatives already receive financial support from parents or via disability payments from Social Security made on the child's behalf; relatives elect to receive a Temporary Assistance for Needy Families (TANF) child-only payment instead of becoming licensed foster parents; relatives are able to provide financially without a foster care payment; or relatives believe children's status will soon change (e.g., be reunited with their parents or turn 18 years of age). In addition to highlighting placement with adult relatives, federal law requires states to help children maintain connections with their siblings. In September 2014 (and effective immediately), Congress amended Title IV-E plan requirements to stipulate that adult relatives to whom notice of a child's removal from the home must be provided include "all parents of a sibling of the child, where such parent has legal custody of such sibling." And since October 2009, states have been required to place siblings who are removed from their home in the same foster care, adoption, or guardianship living arrangement, or, when this is not possible, to facilitate frequent visitation or permit other ongoing interactions between the siblings. The law provides an exception to this requirement if the state documents that doing so would be contrary to the safety or well-being of any of the siblings. According to HHS, while decisions on the frequency of sibling visitation and contact are expected to occur on a case-by-case basis, this contact must be no less often than once a month. Under the Title IV-E program, states may seek federal reimbursement for a part of the cost of providing transportation necessary to allow siblings to maintain contact. The claim may be made as a Title IV-E program administrative cost or as part of the child's Title IV-E foster care maintenance payment. Provide Regular Oversight of a Child's Status in Foster Care and Timely Development and Implementation of a Permanency Plan A written case plan for a child in foster care must be developed within a "reasonable" time period after a child's removal from his/her home, but not later than 60 days after that removal. The plan must address the safety and appropriateness of the child's placement setting, describe the services to be provided to the child and his/her family to enable a child to return home or to another permanent setting, and, for children who are not returning home, document the steps the Title IV-E agency is taking to find and finalize another permanent home. Additionally, the case plan must include the child's health and education records, and ensure the educational stability of the child entering or in foster care. An administrative or court review of the case plan must occur no less often than once every six months. This review must determine the safety of the child; the continued need or appropriateness of the foster care placement; the extent of compliance with the case plan (e.g., have promised services been provided?); and the extent of progress toward alleviating or improving the circumstances that made placement in foster care necessary. Finally, it must include a projection of the likely date by which the child will be safely returned home or placed for adoption or legal guardianship. A child's case plan should be updated as necessary following each six-month review. As of September 29, 2015, this review may include additional checks specific to any child who has been given a permanency plan of Another Planned Permanent Living Arrangement, or APPLA. (For further description of APPLA and these requirements see " Requirements for Youth in Care with the Permanency Plan "APPLA .") There is no requirement that a court review or approve a child's overall case plan. However, a court must determine and regularly review the permanency plan for each child in foster care. Specifically, an initial permanency hearing must occur within 12 months of a child's entry to foster care or within 30 days of judicial determinations that reasonable efforts to preserve or reunite the family are not necessary (whichever date comes first). Subsequent permanency hearings must occur every 12 months for as long as the child remains in foster care. This hearing must determine the child's permanency plan, addressing whether—and, as applicable, when—a child will be returned to his or her parents; placed for adoption (and a petition for termination of parental rights will be filed by the Title IV-E agency); referred for legal guardianship; or placed in another planned permanent living arrangement. A court may determine that a child's permanency plan is "another planned permanent living arrangement" only if the Title IV-E agency documents for the court a compelling reason why every other permanency goal, including reunification, adoption, guardianship, or placement with a fit and willing relative, is not in the child's best interest. Effective September 29, 2015, a court may not determine another planned permanent living arrangement (APPLA) to be the "permanency plan" for any child younger than 16 years of age. (For further description of APPLA and additional related permanency plan provisions, see " Requirements for Youth in Care with the Permanency Plan "APPLA .") For an overview of all case review system requirements, including what must be included in case plans, periodic (six-month reviews) and permanency hearings, see Figure 2 at the end of this report. Ensure Timely Placement in a New Permanent Family When Appropriate The law permits Title IV-E agencies to make efforts to find an adoptive or guardianship placement for a child even while efforts to reunite a child and his/her family continue. This is called concurrent planning. When the permanency hearing determines that a child cannot be returned home, then the Title IV-E agency must make reasonable efforts to find a new permanent home for the child in a timely manner. Outside of reunification, the law suggests three additional permanent family settings: adoption, legal guardianship, or placement with a fit and willing relative. For purposes of measuring how successful states are in achieving timely reunifications, HHS counts children who are reunited with their parents and those who are formally discharged from care to live with a relative (but not via legal guardianship) as reunited. During FY2013, 59% of children who left care did so to be reunited with their families, including 51% who were reunited with parents (or other caretaker from whom they had been removed) and 8% who left care to live with another relative. Adoption has been considered the best outcome for many children if they cannot be reunited, and a number of Title IV-E plan requirements support timely placement for adoption. Under the laws of most states, termination of parental rights (TPR)—a legal process that strips a parent of any rights or responsibilities to a child—is a prerequisite to adoption. Unless certain exceptions apply, Title IV-E agencies are required to initiate (or join) a petition to initiate TPR proceedings in the case of any child who has been in foster care for a certain length of time, is an abandoned infant, or whose parent has committed certain crimes. (See text box for details.) Simultaneous with filing for TPR, the Title IV-E agency must begin the work of identifying, preparing, and approving a qualified adoptive family for the child. While federal law spells out specific instances when a Title IV-E agency must initiate efforts to achieve TPR, it does not dictate that TPR be accomplished in any given case. The TPR process, like family law matters generally, is governed by state laws, and all states have established standards to determine when parental rights may be involuntarily severed. Additionally, Title IV-E agencies must follow other policies or procedures to ensure availability of adoptive homes without regard to race or geography and to notify prospective adoptive parents of potential tax benefits. Specifically, under the Title IV-E plan, state child welfare agencies may not delay or deny an adoption (or foster care placement) due to the race, color, or national origin of a prospective foster or adoptive parent of a child. may not deny or delay placement of a child for adoption if the placement is outside the jurisdiction of that agency (e.g., across state or county lines). must have procedures for "timely and orderly" placement of children across state lines, including procedures to process and return an out-of-state home study request within 60 days of its receipt from another Title IV-E agency. must inform any individual who is adopting a child from foster care (or any individual that the state learns is considering such an adoption) of their potential eligibility for the federal adoption tax credit. As an alternative placement for children who cannot return home and for whom adoption is not appropriate, states may elect to enter into a kinship guardianship assistance agreement with a relative caregiver of a child who formerly served as the child's foster parent, who has committed to permanently care for the child, and who has assumed legal guardianship of the child. Unlike adoption, establishment of legal guardianship does not require termination of parental rights (TPR) of the child's parents. States that elect to offer Title IV-E kinship guardianship must amend their Title IV-E plan to say they will enter into these agreements. (As of September 2014, 30 states and one tribe had an approved Title IV-E plan that included provision of kinship guardianship, and an additional state had submitted a plan amendment seeking to provide this assistance.) Further, for each child whom the state determines that the permanency plan is kinship guardianship, the state must include certain findings in the child's written case plan regarding the appropriateness of guardianship (instead of reunification or adoption), efforts to discuss the guardianship with the child's parent, reasons for any separation of siblings during the placement, and the child's eligibility for Title IV-E kinship guardianship assistance. Ensure the Health Care and Education Needs of Children in Foster Care Are Addressed The Title IV-E agency may not expend Title IV-E program funds to provide education or meet the medical needs of a child. However, it is required to maintain a child's health and education record, ensure a school-age child's enrollment in elementary or secondary education, and plan for the educational stability of each child in foster care. Separately, under the Title IV-B, Subpart 1 program (Stephanie Tubbs Jones Child Welfare Services), a state must ensure that the state child welfare agency and the agency that administers Medicaid in the state develop a health oversight plan for each child in foster care. This requirement is not a part of the Title IV-E plan and so is not discussed further here. However, it effectively applies to all Title IV-E agencies because in order for a state child welfare agency to receive the approval of HHS to operate a Title IV-E plan, it must also have an approved Child Welfare Services plan under Title IV-B, Subpart 1. Health and Education Record The state must have procedures to regularly review and update the health and education record of a child in foster care, and it must provide a copy of this health and education record to the foster parent, or other foster care provider, of each child in foster care at the time the child is with that foster parent or provider. Some information available suggests that states do not always compile these records, or do not compile them completely and, further, that the record is not always supplied to a foster parent. Ensuring that necessary information is available to the child welfare agency in a manner consistent with federal privacy laws related to sharing medical and educational information may require planning, cross-agency communication and cooperation, court facilitation, and/or clarifying state laws and regulations. The Uninterrupted Scholars Act ( P.L. 112-278 ), enacted in January 2013, addressed this concern with regard to education records. Specifically, it amended the federal education privacy law (known as the Family Educational Rights and Privacy Act, or FERPA) to permit educational agencies to share education records of children in foster care with an agency caseworker or other representative of a state or tribal child welfare agency (that is legally responsible for the child without first securing the consent of the child's parent). The law also permits educational release of these records (without additional notice to the child's parent) if a judge orders the information released as part of a child abuse and neglect or dependency hearing to which the child's parent is a party. The education information received must only be used by the child welfare agency to address the educational needs of the child in foster care. Education Attendance and Stability A state must provide assurance to HHS that school-age children who are receiving Title IV-E assistance and are without a high school diploma or equivalent certification are enrolled in elementary or secondary school. They must also take certain steps to ensure the educational stability of each child who is entering foster care or who is moving to a new home or group placement setting while in foster care. Federal law provides that state child welfare agencies must assure coordination with local educational agencies (LEAs), but there is no comparable requirement for LEAs (or state educational agencies) to coordinate with child welfare agencies on these issues. However, HHS and the U.S. Department of Education (ED) have sought to engage both agencies to meet the educational needs of children in foster care, alerting state education and child welfare leaders to the education planning and stability requirements in an August 2011 letter; co-hosting a foster care and education summit in November 2011 to bring together representatives of state child welfare, education, and court systems to plan for cross-system collaboration to meet the educational needs of children in foster care; and issuing a new joint letter in May 2014. That most recent letter noted that while the "educational stability requirements of the Fostering Connections Act apply most directly" to state child welfare agencies, "compliance is contingent on routine coordination" between those agencies and local educational agencies (LEAs). Under the Title IV-E program, states may claim federal reimbursement for a part of the cost of transportation necessary to enable a Title IV-E eligible child to remain in the school he/she attended prior to entering foster care or moving to a new placement in foster care. States may seek reimbursement of these transportation costs as part of the Title IV-E program administrative costs they submit to HHS, or, since the enactment of the Fostering Connections to Success and Increasing Adoptions Act ( P.L. 110-351 ), as a part of the child's foster care maintenance payment. Among 50 state child welfare agencies that responded to a recent survey, 40 reported that their agency "typically" pays transportation costs to enable a child to remain in his/her school of origin (when this is in the child's best interest). Nearly all of these (37) reported that the agency sought federal Title IV-E funding (reimbursement) for these transportation costs. States may not claim Title IV-E reimbursement for these school transportation costs on behalf of children in foster care who do not meet the Title IV-E foster care eligibility requirements. State child welfare agencies have long been required to take into account the proximity of a child's education setting when placing a child in foster care. The additional requirements related to considering the appropriateness of the setting and assuring coordination with LEAs were added to the law in 2008 (as amended in 2011). The performance outcome: "Children receive appropriate services to meet their educational needs," was determined achieved in 87% of all child welfare cases reviewed (across all states) as part of the 2007-2010 federal Child and Family Services Review (CFSR). The review found that states were more successful at achieving this outcome for children who were in foster care (91%) than for children served in their own homes (72%). Common challenges to achieving this education outcome were reported as failure to assess a child's educational needs (identified in 30 states); failure to address a child's educational needs (identified in 23 states); and "challenges in maintaining or coordinating educational services for children in foster care, due in part to a lack of communication among schools and with the [child welfare] agency, delays in transferring Individual Educational Plans and credits, and delays in enrollment" (identified in 24 states). Help Youth Transition Successfully From Foster Care to Adulthood Youth who are discharged from foster care when they reach the age of majority, and without reunification or placement in a new permanent family, are said to have "aged-out" or been "emancipated" from care. These youth have lower educational attainment and less positive employment and other life outcomes than youth generally. Most Title IV-E plan requirements apply to all children in foster care, but some are linked to a child's age. These requirements seek to ensure older children are prepared to be successful when they leave foster care and apply when a youth in care reaches his or her 16 th birthday or ages-out of care. The Preventing Sex Trafficking and Strengthening Families Act ( P.L. 113-183 ) expands the set of Title IV-E plan requirements addressed specifically to older children in care by lowering the age at which they apply to 14 and by adding new requirements that must be met with regard to those youth and to youth who age-out of care. Further, the law changes the language of current policy to indicate these services (as well as those previously provided for in the law) are intended to ensure a youth may make a successful transition from foster care to adulthood. The effective date for each of these P.L. 113-183 changes is generally September 29, 2015. Among other things, the youth-specific requirements added by P.L. 113-183 focus on youth engagement and empowerment. They require that youth be informed of certain rights they have with regard to education, health, visitation, court participation, access to key documents if aging out, and the "right to stay safe and avoid exploitation." Further, in addition to a prior focus on transition services planning for older youth in care, the new provisions added by P.L. 113-183 explicitly incorporate youth participation in both development and revision of all case and permanency planning done on their behalf, including by allowing the youth to select up to two individuals—who are not the youth's foster parent or caseworker—to be a part of the youth's case planning and permanency planning. (The state may reject an individual so selected if it has good cause to believe the individual would not act in the child's best interest.) The new requirements also focus on getting an earlier start on equipping youth to be successful once they leave foster care (requirements apply at age 14 versus age 16) and enhancing their ability for success when they age out of care. Currently states are required to provide a credit report, annually, to each youth in care who is age 16 or older. This requirement, which will apply to youth in care at age 14 or older as of September 29, 2015, is intended to help identify and correct any errors in the report that result from identity fraud. , Additionally, states are now required to work with each youth who is in foster care and is within 90 days of aging out of that care to develop a transition plan that includes specific options regarding housing, education, mentoring, support services, employment and workforce support services, health insurance, and health care decision making. Further, states are currently required to provide any youth aging out of care a free copy of his or her health and education record. As part of its effort to aid a youth's successful transition to adulthood, P.L. 113-183 also requires states to provide additional key documents. As of September 29, 2015, states must also ensure that no youth who is aging out leaves care without an official or certified copy of his or her U.S. birth certificate, an official Social Security card, and a state-issued driver's license or identification card that meets the standards of the REAL ID Act. States are only required to provide these documents, however, if a youth is eligible for the document and has been in foster care for at least six months. (See text box "Title IV-E Plan Requirements Specific to Youth.") Requirements for Youth in Care with the Permanency Plan "APPLA" P.L. 113-183 further amended federal child welfare policy to provide that no child in foster care may be assigned a permanency plan of "another planned permanent living arrangement" (APPLA) unless they are at least 16 years of age. Further, for youth who are assigned that permanency plan, it adds an additional set of case review procedures. These APPLA provisions are effective on September 29, 2015 (or September 29, 2017, for youth in foster care who are under responsibility of a tribal entity). The APPLA designation was added to the law by the Adoption and Safe Families Act (ASFA, P.L. 105-89 ). In that law, Congress sought to strengthen the permanency planning requirements in child welfare policy and to end "long-term" foster care that resulted from a lack of state effort or planning for permanency. As part of this, the addition of APPLA to the law appears to have been intended to ensure that deliberate thought and reasoning preceded any long-term stay for a child in foster care. Children who are assigned APPLA as a permanency plan may live in any kind of foster care setting (e.g., foster family home, group home, or institution), and they are likely to age out of care. That is because unlike the preferred permanency plans—reunification, adoption, legal guardianship, or placement with a fit and willing relative—the APPLA plan does not include any specific pathway (or goal) for how a child will leave that foster care setting to live with a permanent family. As of the last day of FY2013, states reported a little more than 9% of children in foster care (close to 37,000) had case plan goals that did not include a specific pathway out of foster care to a permanent family. In addition to prohibiting APPLA as the permanency plan for youth age 16 or older, P.L. 113-183 established additional requirements (see text box) that are designed to ensure that the state child welfare agency continues to look for a permanent family for children with an APPLA designation, the court continues to revisit whether APPLA is an appropriate permanency plan for the child, the child is consulted about his/her desired permanency outcome, the youth's foster caregiver applies the reasonable and prudent parent standard, and the youth has regular and ongoing opportunities to engage in age and developmentally appropriate activities. Responding to Sex Trafficking of Child Welfare-Involved Children and Youth and to Youth Who Run Away from Foster Care The Preventing Sex Trafficking and Strengthening Families Act ( P.L. 113-183 ) also requires state child welfare agencies to develop specific protocols and reporting practices related to sex trafficking of children in foster care (or children who are otherwise involved in the child welfare system). It also requires those agencies to develop specific protocols and reporting procedures designed to improve child welfare agencies' response to children who run away from foster care. The experiences of children who enter foster care, including those who run away from foster care, may place them at higher risk to become a victim of sex trafficking. Some state child welfare agencies have begun to craft specific responses to this concern. At the same time, little definitive information on the scope of sex trafficking among children served by the child welfare agency is available. Identifying, Determining Services for, and Reporting on Victims and Those at Risk of Victimization P.L. 113-183 requires state child welfare agencies to develop and implement procedures to identify, document in agency records, and determine appropriate services for certain children or youth who are victims of sex trafficking, or at risk of being such victims. For the purposes of these requirements, a sex trafficking victim is as that term was earlier defined by Congress in the Trafficking Victims Protection Act (TVPA). These new sex trafficking-related procedures must also ensure relevant training for caseworkers and are to be developed by the state child welfare agency in consultation with state and local law enforcement, juvenile justice systems, health care providers, education agencies, and organizations with experience in dealing with at-risk children and youth. P.L. 113-183 provides that these procedures must be developed by September 29, 2015, and implemented no later than September 29, 2016. The law further requires state child welfare agencies to report to law enforcement authorities immediately, or in no case later than 24 hours after they receive information about child or youth victims of sex trafficking. This reporting provision is effective beginning no later than two years after the bill's enactment (September 29, 2016). Additionally, within three years of the law's enactment (September 29, 2017), state child welfare agencies are required to annually report to HHS the total number of children and youth who are sex trafficking victims. Children and Youth to Whom the Procedures Apply The procedures to identify, document in agency records, and determine services for victims of, or those at risk of, sex trafficking must apply to all children in the care, placement, or supervision of the state child welfare agency, including c hildren who are in foster care and under age 18 (or up to any age under 21, if the state has elected to serve such older youth with Title IV-E foster care assistance); children (under age 18) who are not in foster care but for whom the agency has an open case file; youth (up to age 21, or 23 in limited circumstances) who are receiving services under the Chafee Foster Care Independence Program (CFCIP); and children who run away from foster care, provided they have not reached the age at which the state ends Title IV-E assistance (or have not been formally discharged from care). In addition, a state may elect to use these procedures to identify individuals up to the age of 26 who are victims, or at risk of becoming victims, of sex trafficking, without regard to whether the youth was ever in foster care. Locating and Serving Children Who Run Away from Foster Care On a given day, states report several thousand children in foster care are in runaway status—meaning they ran away from their foster care home, group home, or institution. On the last day of FY2013 (September 30, 2013) states reported 4,450 children (1.1% of all children in care on that day) had run away from foster care. Further, they reported that during FY2013 more than 1,000 children who had run away from foster care were formally discharged from the responsibility of the state child welfare agency. The population of children and youth who run away or are missing from care is varied. However, youth who run from care are at increased risk for sexual and criminal victimization; they may engage in risky or criminal behaviors; and because they likely are missing schooling, they hinder their ability for future success. P.L. 113-183 requires each state child welfare agency (as part of its Title IV-E plan) to develop protocols for (1) expeditiously locating any child missing from foster care; (2) determining the primary factors contributing to the child running away (or otherwise going missing from care) and responding to those factors in the current and subsequent placements; (3) learning about the child's experience while away from care, including determining if the child is a possible victim of sex trafficking; and (4) reporting any related information as required by HHS. These protocols are to be developed and implemented as of September 29, 2015. P.L. 113-183 further requires state child welfare agencies to report information it receives on missing and abducted children and youth to the National Center on Missing and Exploited Children (NCMEC) and to law enforcement authorities for inclusion in the FBI's National Crime Information Center (NCIC) database. These reports must be made immediately (and in no case later than 24 hours) after the information is received. Specifically this information must be reported if the information concerns a missing or abducted child or youth who is in foster care (including children who run from care), not in care but being served by the child welfare agency otherwise, or receiving services under the Chafee Foster Care Independence Program. State child welfare agency reporting on missing and abducted children and youth must begin no later than September 29, 2016. Ensure Program Coordination and Collaboration and Meet Other Administrative Requirements The Title IV-E plan requirements include additional provisions related to how the program must be administered by a state Title IV-E agency. Among these, the requirement that the Title IV-E agency must also operate a program under Title IV-B, subpart 1 of the Social Security Act is arguably the most significant. By compelling participation in this program (formally known as the Stephanie Tubbs Jones Child Welfare Services program), federal law effectively requires states to provide nearly all of the same child protections to any child in foster care, regardless of whether the child meets the Title IV-E eligibility criteria. Operation of a Title IV-B, Subpart 1 Program Since the Title IV-E program was established as part of the Adoption Assistance and Child Welfare Act of 1980 ( P.L. 96-272 ), the law has required that the state agency responsible for administering (or supervising the administration of) the Title IV-E program must be the same agency that is responsible for administering the program under what is now Title IV-B, Subpart 1 of Social Security Act. In guidance, HHS has noted that "to give this language effect" a Title IV-E agency must operate a Title IV-B, Subpart 1 program. In practice then, no state may receive approval of its Title IV-E plan without also having a plan approved under Title IV-B, Subpart 1. That plan extends case review protections to all children in foster care (without regard to Title IV-E eligibility), and includes other requirements related to ensuring appropriate services are available to all children in foster care (see text box). Other Administrative and Planning Procedures Other administrative procedures required directly under the Title IV-E plan include provisions or procedures for the Title IV-E agency to do the following: Operate the program on a statewide basis. Establish specific goals for each fiscal year regarding the maximum number of children who at any time in the year will have been in care 25 months or more and describe steps taken to achieve that goal. Report—to an "appropriate" agency or official—known or suspected instances of physical or mental injury, sexual abuse or exploitation, or negligent treatment or maltreatment of a child who is receiving aid under Title IV-B or Title IV-E of the Social Security Act. Protect the confidentiality of child welfare records by limiting their disclosure as specified in the law. Periodically review foster care maintenance payment rates to determine their continued appropriateness. Negotiate in good faith with any Indian tribe, tribal organization, or tribal consortia (within the state) that requests development of an agreement with the state Title IV-E agency to enable the tribal entity to administer some or all of the Title IV-E program on behalf of the children who are under authority of that tribal entity. Allow a fair hearing (before the Title IV-E agency) to any individual whose benefit claim is denied or not acted on promptly. Claim child support payments on behalf of children in foster care (when appropriate) and in doing so, must cooperate with state agencies that administer Child Support Enforcement (Title IV-D of the Social Security Act) and the Temporary Assistance for Needy Families (TANF) block grant (Title IV-A of the Social Security Act). Verify the citizenship or immigration status of any child in foster care. Finally, several Title IV-E plan requirements address coordination of the Title IV-E program with related family assistance, social services, and child welfare-related programs; and establishment and maintenance of merit-based personnel standards. The Title IV-E agency must also ensure it will periodically evaluate activities carried out under the program, arrange for independent audits of the program, and provide reports to HHS as requested.

Under Title IV-E of the Social Security Act, states, territories, and tribes are entitled to claim partial federal reimbursement for the cost of providing foster care, adoption assistance, and kinship guardianship assistance to children who meet federal eligibility criteria. The Title IV-E program, as it is commonly called, provides support for monthly payments on behalf of eligible children, as well as funds for related case management activities, training, data collection, and other costs of program administration. For FY2013, states spent $12.3 billion under the Title IV-E program (both federal and state dollars); at least 25% of this spending (some $3.1 billion) was expended for the types of "administrative" program costs described in this report, including case planning and pre-placement activities related to children in or entering foster care, as well as licensing, recruitment, and background checks and other costs related to foster care providers. As a condition of receiving this funding, states, territories, and tribes must have a Title IV-E plan that is approved by the U.S. Department of Health and Human Services (HHS), Administration for Children and Families. That plan must ensure direct financial assistance is made available to eligible children under the Title IV-E program. Further, it must ensure that the state, territory, or tribe will adhere to federal plan requirements primarily intended to ensure children's safety, permanence, and well-being. The focus of this report is Title IV-E plan requirements other than those related to provision of direct financial assistance to eligible children. Those requirements are intended to (1) enable children to be reunited with their families or prevent their entry to foster care; (2) promote children's placement with relatives and maintain sibling connections; (3) ensure children's living arrangements are safe and appropriate and permit "normalcy"; (4) provide for regular oversight and review of each child's status in foster care and timely development and implementation of a permanency plan; (5) ensure timely efforts to find a permanent home for children or youth who cannot be reunited with their families; (6) ensure the health care and education needs of children in foster care are addressed; (7) help youth make a successful transition from foster care to adulthood; (8) identify, document, and determine services necessary for child welfare-involved children or youth who are victims (or at risk of) of sex trafficking and locate and respond to children or youth who run away or are missing from foster care; and (9) ensure program coordination and collaboration and meet certain administrative standards.

Introduction In 2007, Canada and Brazil initiated separate but similar WTO cases against certain U.S. farm programs as they relate to U.S. commitments made to the World Trade Organization (WTO). Both Canada's (DS357) and Brazil's (DS365) cases make two broad charges. First, they contend that the United States has exceeded the subsidy spending limit it committed to for domestic agricultural support programs. Second, they charge that the United States operates its agricultural export credit guarantee program in such a manner as to provide prohibited subsidies to those exports made under the programs. On December 17, 2007, the WTO's Dispute Settlement Body (DSB) announced the establishment of a single panel to hear both cases against U.S. farm programs. Panel membership is based on mutual agreement of the parties involved—Brazil, Canada, and the United States. However, by late February 2008 the case had stalled due to the inability of the three parties to agree on a panel of arbitrators to preside over the case. Under WTO rules, Brazil is legally entitled to ask the WTO director-general to compose the panel if the parties are unable to agree on the members within 20 days after the establishment of a panel. However, Brazil did not pursue this course of action. Then, in late April 2008, Brazil and Canada informally agreed to postpone proceeding with their case pending the U.S. offer to substantially cut domestic agricultural subsidies as part of the Doha Round of WTO trade negotiations. Presently, no date has been announced for the resumption of the case. If resumed, the first order of business will be the formation of a panel. Should a panel be formed, it would then have six months to rule on this case. Subsequent appeals of any negative ruling and disagreement over appropriate retaliatory levels, etc., could push resolution of the dispute well into the future. However, the importance of the case is not diminished to the U.S. agricultural community. U.S. agriculture depends heavily on international markets to sell its surpluses. In FY2008, U.S. agricultural exports were a record $115.5 billion and represented 30% of gross farm income. This report begins with background on the evolution of the Canadian and Brazilian WTO cases. This is followed by a section that describes in detail the nature of the two major charges made against U.S. farm programs in the two cases and the U.S. response to those charges. Finally, the report briefly discusses the implications of the case and the potential role of Congress. Each of these sections may be read independent of the other; thus, readers only interested in the specific charges and their implications may proceed directly to those sections of the report. Background on the Evolution of the Two Cases This section provides a historical record of the evolution of both Canada's and Brazil's WTO cases against U.S. farm programs. It includes a timeline ( Table 1 ) of the official events as well as a descriptive narrative of the likely motivations and circumstances behind each country's case. Origins of Canada's WTO Case Canada and the United States have a history of commodity trade disputes, traditionally focused on various wheat support programs and trade practices. In 2005, after several years of wrangling over wheat trade issues, Canada extended its disagreement with U.S. farm programs to the corn sector when Canadian corn producers sought legal action for alleged unfair subsidization and dumping of U.S. corn in Canadian markets. Canada's International Trade Tribunal (CITT) ultimately ruled on the 2005 anti-dumping and countervailing (AD/CV) duty case in favor of the United States. However, Canadian corn producers continued to press their concerns upon the Canadian government about perceived unfair subsidization of U.S. corn. In January 2007, Canada requested consultations with the United States to discuss three specific charges against U.S. farm programs: (1) U.S. farm support resulted in serious prejudice against Canadian corn producers, (2) U.S. domestic support exceeded its WTO commitments; and (3) U.S. export credit guarantee programs contained implicit WTO-illegal subsidies. Canada's first allegation in its WTO case built upon previous trade complaints against the United States initiated by Canadian corn producers starting in 2005, while the latter two allegations were based on a previous WTO ruling in a case (WTO case DS267) brought by Brazil against the U.S. cotton program. Another potential factor motivating Canada to bring its case against U.S. farm subsidies was Canadian domestic political concerns emanating from a weak coalition government responding to pressure from corn-producing interests following the unfavorable CITT AD/CV corn duty ruling. In addition, Canada had a general interest in influencing the 2007 U.S. farm bill debate in favor of lower amber-box-type support. A news report suggested that two additional factors motivating Canada's case included the temporary suspension of Doha Round negotiations (July 24, 2006), which indefinitely postponed the possibility of U.S. farm program reforms under multilateral trade negotiations, and the settlement of a softwood lumber dispute between Canada and the United States, which freed up Canadian government trade attorneys to refocus on the WTO litigation against U.S. farm programs. The request for consultations represented the first step in instituting a WTO dispute settlement case against the United States—the assigning of an official dispute settlement case number (DS357)—thus setting in motion the explicit rules and timetables of the WTO DSU process. Following Canada's request for consultations, several other WTO members—Argentina, Australia, Brazil, the European Communities, Guatemala, Nicaragua, Thailand, and Uruguay—officially requested to join the consultations as interested third parties. On February 7, 2007, Canada and the United States held consultations concerning the three charges raised by Canada. Under WTO rules, for subsidy complaints alleging adverse effects, a minimum 60-day consultation period is required before a country can ask the WTO to establish a dispute settlement panel. Although the consultations failed to resolve the dispute, the Canadian International Trade Minister, David Emerson, announced on May 2, 2007, that the Canadian government would temporarily hold off on taking any further action in its WTO dispute settlement proceeding (DS357) against U.S. corn subsidies until at least the end of the year, pending the outcome of Doha Round trade negotiations. However, in June 2007, Canada requested that the establishment of a WTO dispute settlement panel to hear its case against U.S. farm programs be included on the agenda of the next meeting of the WTO's Dispute Settlement Body (DSB). In its panel request, Canada dropped the serious prejudice charge against U.S. corn subsidies, probably in large part because corn market prices had risen so dramatically since mid-2006 and were projected to remain high for at least the next ten years. The United States blocked Canada's request at the June 21, 2007, DSB meeting. According to WTO rules, a panel can be blocked only once, implying that a second request by Canada, if made at one of the subsequent DSB meetings, would have to be honored. However, Canada refrained from pursuing the establishment of a panel to hear the case at the next several DSB meetings. Origins of Brazil's WTO Case Brazil—which has already won a series of WTO dispute settlement rulings against U.S. cotton programs —introduced its new challenge against U.S. farm programs on July 11, 2007, when it requested consultations with the United States to discuss the same two charges against U.S. farm programs as in Canada's case (DS357). The context for Brazil's new challenge of U.S. farm programs is significant. First, the new challenge builds on panel rulings from Brazil's successful case (DS267) against certain aspects of the U.S. cotton program. Previous findings in the case, although not part of the final recommendations, appear to have set legal precedent and could facilitate Brazil's new claims. Second, the Doha Round of WTO trade negotiations continues to make very little apparent progress after having resumed in September 2007, possibly providing further incentive to seek legal recourse under WTO's dispute settlement process rather than via negotiation. Third, the U.S. Congress is presently revisiting omnibus farm legislation. Brazil has a general interest in influencing the U.S. farm bill debate in favor of lower amber-box-type support. Fourth, Canada had already initiated a similar case. Brazil initially joined Canada's case as an "interested third party"; however, Brazil has since chosen to pursue its own separate but similar case. News sources speculate that Brazil did this in order to have a "greater voice" in the WTO dispute settlement process. Furthermore, Brazil's case appears to be more comprehensive than Canada's WTO case in terms of the level of detail of program support activity that is alleged to have been incorrectly notified as exempt or excluded from the AMS spending limit. Following Brazil's request for consultations, several other WTO members—Canada, Guatemala, Costa Rica, the European Communities (EC), Mexico, Australia, Argentina, Thailand, India, and Nicaragua—officially requested to join the consultations as interested third parties. As with Canada's case, Brazil was assigned an official dispute settlement case number (DS365)—thus setting in motion the explicit rules and timetables of the WTO dispute settlement process. Consultations between Brazil and the United States were held on August 22, 2007, but failed to resolve the dispute. Status of the Two Cases By late 2007, Canada and Brazil appear to have coordinated their efforts as both countries submitted official requests on November 8, 2007, for the DSB to add the establishment of a panel to its next meeting agenda. Again, according to the WTO rules, the United States blocked this new panel request at the November 27, 2007, DSB meeting. However, at its next meeting on December 17, the DSB announced the establishment of a single panel to jointly hear both cases brought by Canada (DS357) and Brazil (DS365) against U.S. farm programs. In their requests, Brazil and Canada asked for a single panel to be established to consider both cases jointly. The United States did not object to this proposal. All three countries involved—the United States, Canada, and Brazil—have agreed that the meeting of the panel would be open to the public. However, by late February 2008 the case had stalled due to the inability of the three parties to agree on a panel of arbitrators to preside over the case. Under WTO rules, Brazil is legally entitled to ask the WTO director-general to compose the panel if the parties are unable to agree on the members within 20 days after the establishment of a panel. However, Brazil did not pursue this course of action. Then, in late April 2008, Brazil and Canada informally agreed to postpone proceeding with their case. The postponement was thought to be provisional and based on success in achieving further disciplines on domestic support measures in the current Doha Round of WTO trade negotiations. As part of the Doha trade negotiations, U.S. officials had offered to substantially cut domestic agricultural subsidies. It is not clear how long the postponement will persist. If resumed, the first order of business will be the formation of a panel. In accordance with the DSU, once the establishment of a panel has been announced the DSB has up to 45 days for a panel to be appointed, plus six months for the panel to conclude its work. Major Charges Against U.S. Farm Programs Both the Canadian (DS357) and Brazilian (DS365) cases raise two principal charges against U.S. farm programs. Each of these is discussed below. First Allegation: U.S. Total Domestic Agricultural Support Exceeds Its WTO Limit In accordance with WTO commitments, all WTO members have agreed to submit annual notifications of their farm program outlays to the WTO, and these outlays are subject to specific limits. For the United States, its total spending limit for "amber box" programs (i.e., programs that are trade- and market-distorting) was $19.9 billion in 1999 and $19.1 billion in all subsequent years. To date, the United States has notified details of its farm program outlays through 2005. According to U.S. farm program spending notifications to the WTO, U.S. domestic support outlays have remained well within U.S. WTO spending commitments. However, Canada and Brazil argue that several U.S. program payments were either omitted from the notification data, or incorrectly notified either as green box or as non-product-specific AMS (where they would more easily qualify for exclusion from amber box limits under the non-product-specific de minimis exemption). Canada and Brazil contend that when all of the disputed payments and other subsidies are included in the U.S. AMS calculation, then the total outlays would exceed the spending commitment in each of 1999, 2000, 2001, 2002, 2004, and 2005. The claim that the United States has exceeded its total spending limits hinges largely on a previous ruling from the U.S.-Brazil cotton case in which a WTO panel found that U.S. payments made under the Production Flexibility Contract (PFC) and Direct Payment (DP) programs do not qualify for the WTO's green box exemption category because of their prohibition on planting fruits, vegetables, and wild rice on covered program acreage. However, the panel did not make the extension that PFC and DP payments should therefore be counted as amber box programs, but instead was mute on this point. In its WTO notifications, the United States has notified its PFC payments as fully decoupled and green box compliant. This is an important distinction because the green box contains only non-distorting program payments and is not subject to any limit. Canada and Brazil argue that, because of the previous panel ruling, PFC and DP payments do not conform with WTO green-box rules and should be included with U.S. amber box payments. Furthermore, Canada and Brazil argue that several other U.S. program payments were incorrectly notified as exempt from the U.S. AMS limit. These include: Production Flexibility Contract (PFC) and Direct Payment (DP) programs whose payments were notified as green box under "decoupled income" payments; Non-insured Crop Disaster Assistance Program (NAP) payments, Crop Disaster Assistance, Emergency Feed, Livestock Indemnity, and Tree Assistance programs that were notified as green box under "payments for relief from natural disasters;" and emergency "crop market loss assistance" payments from the early 2000s that were notified as non-product-specific AMS, but which Brazil and Canada contend would be more correctly notified as product-specific AMS outlays. In addition, both Canada and Brazil argue that CCP payments (established under the 2002 Farm Act [ P.L. 107-171 ]) should similarly be counted against the U.S. amber box spending limit of $19.1 billion. In contrast, the United States has notified CCP payments as exempt from AMS limits under the non-product specific de minimis exemption. In addition, as part of its Doha policy reform proposal the United States recommends that CCP payments be eligible for the blue box, where they would be subject to a different limit than the amber box. Unlike Canada's case, Brazil cited several additional U.S. farm support programs that it claims were simply not notified (i.e., they were omitted from inclusion in the U.S. AMS total). These include: both direct and guaranteed loans, and USDA farm loan programs; programs exempting on-farm use of gasoline and diesel fuel from payment of various excise and sales taxes; programs exempting U.S. farmers from taxes based on overall farm income—e.g., deductions from taxable income from farming; farm marketing and purchasing cooperatives; and export transactions of agricultural commodities; and subsidies related to the operation and maintenance of irrigation works by the U.S. Department of the Interior. Canada and Brazil charge that, when PFC, DP, and CCP payments for all covered crops—wheat, corn, grain sorghum, barley, oats, upland cotton, rice, soybeans, and other oilseeds—as well as the additional program outlays that were excluded from U.S. notifications are included in the U.S.'s amber box, then the total outlays would exceed the spending commitment in each of 1999, 2000, 2001, 2002, 2004, and 2005. However, neither Canada nor Brazil provide the specific details on its year-by-year determinations, so direct comparisons are not possible. CRS calculations based on U.S. notifications and available USDA data suggest that, with the inclusion of the otherwise excluded PFC and DP payments, the U.S. AMS total would exceed the spending limit in two of the years indicated ( Figure 1 ). The further inclusion of both market loss assistance and CCP payments as product specific amber box payments to the U.S. AMS total suggests that the spending limit would be exceeded in five of the years indicated ( Figure 2 ). Second Allegation: U.S. Export Credit Guarantees Are WTO-Illegal Export Subsidies Canada and Brazil argue that the U.S. export credit guarantee program operates as a WTO-illegal export subsidy. In the U.S.-Brazil cotton case (DS267), a WTO panel found that U.S. export credit guarantees effectively function as export subsidies because the financial benefits returned by these programs failed to cover their long-run operating costs. Furthermore, the panel found that this applies not just to cotton, but to all commodities that benefit from U.S. commodity support programs and receive export credit guarantees. As a result, export credit guarantees for any recipient commodity are subject to previously scheduled WTO spending limits. The panel recommended (and was upheld on appeal) that these prohibited subsidies be removed by July 1, 2005. On December 18, 2007, a compliance panel found that the United States had not yet fully complied with the panel ruling. U.S. Response In response to Canada's request for consultations on U.S. subsidies, then-U.S. Secretary of Agriculture Mike Johanns declared in early 2007 that the United States would vigorously defend U.S. farm programs against any possible WTO challenge by Canada. A spokesman for the U.S. Trade Representative (USTR) declared that this dispute was an unnecessary diversion of resources and time from the Doha Round negotiations. The official also stated that U.S. farm programs were designed to be in compliance with its WTO obligations and believed that the panel would agree. The official also added that some measures identified by Canada and Brazil had ceased to exist prior to the 2002 farm bill, and that others were not part of the consultations with Canada. With respect to the ruling that export credit guarantees operate like illegal export subsidies, provisions in the 2008 farm bill ( P.L. 110-246 ; Section 3101(a)), enacted into law on June 18, 2008, would appear to have brought the export credit guarantee program into compliance with WTO rules by eliminating the "subsidy" component of export credit guarantees. This includes repeal of authority for both the GSM-103 program (which guaranteed longer-term—3-10 years—financing) and the Supplier Credit Guarantee Program (which guaranteed very short-term—up to 1 year—financing of exports), as well as repeal of the 1% cap on loan origination fees for the GSM-102 program (which guaranteed intermediate-term—up to 3 years—financing). The 1% fee cap had prevented charging market-based fees and had contributed to the export credit program operating as a WTO-illegal export subsidy. The new farm bill (Sec. 3101(b)) also caps the credit subsidy for the program at $40 million annually. However, the 2008 farm bill did not address the issue surrounding the disqualification of direct payments from the WTO's green box AMS exclusion due to the planting restriction on fruits, vegetables, and wild rice on program base acres. Instead, direct payments are extended (Sec. 1103) with no change to the current planting restriction, except for 84,000 acres of pilot programs in seven states (Sec. 1107(d)). This retention of the status quo in the face of the cotton panel's ruling and recommendation has important WTO implications, as it would appear to favor the charge that the United States has exceeded its total AMS limit in at least two years (1999 and 2000) if direct payments are included in the AMS calculation ( Figure 1 ). Potential Implications and Role of Congress Many market analysts suggest that these two cases brought by Brazil and Canada are harbingers of future challenges to U.S. commodity programs. If either country were to successfully pursue its case, it could affect most U.S. program commodities, since the charges against the U.S. export credit guarantee program and AMS limit extend to all major program crops. Should any eventual changes in U.S. farm policy be needed to comply with a WTO ruling, Congress likely would be called upon to address this issue (including adjustment, if not full removal, of the planting restriction on base acres receiving direct payments). Ultimately, Congress is responsible for passing farm program legislation that complies with U.S. commitments in international trade agreements. When confronted with a negative WTO dispute settlement ruling, a country has essentially five options to choose from: eliminate the subsidy; reduce the subsidy to diminish its adverse effect; revise the program function to reduce the linkage between the subsidy and the adverse effect (referred to as decoupling); pay a mutually acceptable compensatory payment to offset the adverse effects of the subsidy; or suffer the consequences of trade retaliation. While a WTO case can result in punitive sanctions being authorized, the proceedings of a formal case can take many months, and sometimes years, to reach a conclusion. For example, the U.S.-Brazil cotton case was initiated by Brazil's request for WTO consultations on September 27, 2002. A panel was established nearly six months later on March 18, 2003. The panel's final report was delivered to the DSB on September 8, 2004. The case was appealed and the Appellate Body's final report was adopted by the DSB on March 21, 2005, nearly 30 months after the initial request for consultations. Subsequently, Brazil requested a WTO compliance panel to review whether the United States had fully complied with the panel's rulings. The WTO compliance panel issued its final ruling on December 18, 2007, thus extending the length of the U.S.-Brazil cotton case to over five years. Many market watchers question the relevance of expending legal resources to establish an historical AMS violation in light of the high commodity prices that have persisted since mid-2007. U.S. farm program payments made under the marketing loan provisions and CCP program have to be triggered by low commodity prices before payments are made. Most long-run commodity market projections predict high commodity prices and low government program support to persist well into the future, thus, keeping U.S. domestic support outlays well within current AMS limits without any further changes to the programs. Additional uncertainty arises from the ongoing Doha Round of trade negotiations, where a successful conclusion could potentially mitigate or end Canada's and Brazil's interest in continuing its case against the U.S. farm programs. Given the importance of agricultural trade in the U.S. agricultural economy, Congress will likely be monitoring developments in the WTO AMS dispute. The House and Senate Agriculture Committees regularly hold hearings on agricultural trade negotiations. If the ongoing Doha Round of WTO trade negotiations were to successfully conclude with a text for further multilateral trade reform, it is likely that Congress would hold hearings and consult with the Administration concerning the possible renewal of fast-track, or Trade Promotion Authority (TPA), legislation, which expired on July 1, 2007. Such hearings and consultations would be a major vehicle for Members to express their views on the U.S.-Brazil/Canada AMS trade dispute, on the negotiating issues that it raises, and on the potential implications for U.S. farm policy.

In 2007, Brazil and Canada, independently of each other, requested consultations with the United States under the auspices of the World Trade Organization's (WTO's) Dispute Settlement process concerning similar grievances regarding U.S. domestic agricultural support programs and the U.S. export credit guarantee program. After consultations failed to resolve their concerns, both countries (again acting independently) requested the establishment of a WTO panel to rule on their complaints. The WTO's Dispute Settlement Body, on December 17, 2007, established a single panel to consider both cases. In late April 2008, Brazil and Canada informally agreed to postpone proceeding with their joint World Trade Organization (WTO) dispute settlement case challenging certain U.S. agricultural subsidies. At the time of the postponement, the three parties involved in the dispute had been unable to agree on panel membership. The postponement was thought to be provisional based on success in achieving further disciplines on domestic support in the current Doha Round of WTO trade negotiations. However, the Doha Round negotiations failed to complete an agreement in 2009. As of early 2010 there are no prospects for revival of Doha Round negotiations. Nor have Brazil and Canada given any indication that they will revive their pursuit of their joint case. It is not clear how long the postponement will persist. If resumed, the first order of business will be the formation of a panel. The joint case combines two separate but similar cases: DS357, brought by Canada, and DS365, brought by Brazil. Both cases make two charges against U.S. farm programs—first, that the United States has exceeded its annual WTO commitment levels for total aggregate measurement of support (AMS) for agriculture in each of the years 1999, 2000, 2001, 2002, 2004, and 2005, and second, that the U.S. export credit guarantee program for agricultural commodities operates as a WTO-illegal export subsidy. Both charges stem, in large part, from a previous negative ruling against U.S. farm programs in a case (DS267) brought by Brazil against the U.S. cotton program. In that case, a WTO panel ruled (the ruling subsequently was upheld by a WTO Appellate Body), first, that direct payments made under U.S. farm programs do not qualify for green box exemption status because of a restriction prohibiting the planting of fruits, vegetables, or wild rice on payment acres; and second, that the U.S. export credit guarantee program operates as a prohibited export subsidy program because the financial benefits returned by these programs failed to cover their long-run operating costs. As a result of the ruling, U.S. export credit guarantees became subject to previously scheduled export subsidy commitments. For more information, see CRS Report RL32571, Brazil's WTO Case Against the U.S. Cotton Program, by [author name scrubbed]. Canada and Brazil claim that, since they fail to qualify for inclusion in the green box, U.S. direct payments should be added to its AMS when calculating total domestic support. In addition, they also charge that the United States has improperly notified several of its farm support programs as exempt from the AMS limit, while several other programs were improperly excluded from U.S. notifications. Canada and Brazil claim that when all of the outlays from these allegedly misnotified programs are included, then the U.S. AMS total exceeds its WTO commitment level. Should a panel be formed and eventually rule on this case, any changes in U.S. farm policy needed to comply with a WTO ruling against the United States would likely involve action by Congress to produce new legislation.This report provides background and details, as well as the current status of the two WTO dispute settlement cases. In addition, it discusses the role of Congress in responding to developments.

Introduction Many state and local governments face difficult economic challenges with limited resources and financial capability to meet their water quality goals and compliance obligations. According to the most recent estimate by the Environmental Protection Agency (EPA) and the states, the nation's wastewater treatment facilities will need $271 billion over the next 20 years to meet the water quality objectives of the Clean Water Act (CWA). For several years, EPA has been working with states and cities to develop and implement new approaches that will achieve water quality goals cost-effectively and in a manner that "addresses the most pressing public health and environmental protection issues first." As funding for water infrastructure projects remains a perennial topic of congressional interest, EPA's recent initiatives have garnered attention from policymakers and led to legislative proposals in the 115 th Congress and prior Congresses. The first two sections of this report examine two recent initiatives by EPA: (1) an integrated planning policy and (2) a framework policy for assessing a community's financial capability to meet objectives and requirements of CWA. The third section of this report discusses congressional interest and activity. The fourth section provides some concluding observations. EPA's Integrated Planning Policy Local communities face challenges to fund wastewater infrastructure improvements that are needed to comply with CWA requirements. EPA's integrated planning approach is a voluntary tool that allows municipalities to propose to meet multiple CWA requirements by identifying efficiencies and sequencing investments so that the highest priority projects come first. The prominence of these issues is due in part to EPA's use of governmental enforcement to achieve compliance by the municipal sector with CWA requirements. Since 1998, and more intensely since 2008, EPA has focused national enforcement actions on keeping raw sewage and contaminated stormwater discharges out of the nation's waters as part of the agency's National Enforcement Initiatives. A number of communities are under federal consent decrees or administrative orders, and many others are under state consent decrees or orders requiring them to address uncontrolled discharges from combined sewer systems (combined sewer overflows, or CSOs) and separate sewer systems (separate sewer overflows, or SSOs). Consent decrees typically specify deadlines for complying with the CWA and involve significant investments from ratepayers to bring about compliance and to achieve associated improvements in water quality infrastructure. Construction associated with consent decrees frequently involves long time frames—more than a decade in many cases, according to EPA. Other communities are not specifically subject to court-approved enforcement schedules, but are required by CWA permits to take actions, including infrastructure upgrades, to maintain their compliance status. For some time, municipalities have pressed EPA for greater flexibility to meet the financial and compliance challenges that they face for wastewater, stormwater, and other CWA infrastructure improvements. Correcting CSO problems typically represents one of the most expensive CWA compliance issues. Cities and towns have urged regulators to recognize how difficult and expensive it can be for them to implement wastewater upgrades, stormwater improvements, and related infrastructure projects, while also providing a range of other necessary municipal services on a day-to-day basis. In response to such concerns, EPA officials in 2011 issued a memorandum describing the agency's support for an integrated approach to wastewater and stormwater management. Such an approach, the memorandum said, would allow communities to "maximize their infrastructure improvement dollars through appropriate sequencing of work." Implementing the integrated approach would require coordination between permit and enforcement actions and complementary state actions. EPA also began a round of talks with municipal officials about the costs of CWA requirements facing local governments. The talks resulted in a framework policy issued in 2012 for communities to pursue integrated planning to manage wastewater and stormwater and thus implement the approach outlined in the 2011 EPA memorandum. The policy's intention is to reduce overall a community's compliance costs by considering all wastewater and stormwater management obligations in an integrated fashion. It allows communities to prioritize water management goals—such as water conservation or lower wastewater treatment costs—so that limited public dollars can be invested in ways that each city finds most valuable. The policy allows cities and towns to voluntarily seek modification of consent decrees and the terms of CWA discharge permits, and to gain the flexibility to prioritize water quality and infrastructure projects based on affordability. Under this integrated approach, municipalities can evaluate how best to meet all of their CWA obligations within their financial capability, while maintaining existing regulatory standards that protect public health and water quality, and to sequence wastewater and stormwater projects in a way that allows the highest-priority environmental projects to come first. Each integrated plan will be site-specific, but the policy identifies six elements that an integrated plan must include: Description of the water quality, human health, and regulatory issues to be addressed in the plan. Description of existing wastewater and stormwater systems under consideration, including description of current performance. A process for enabling public participation in development and implementation of the plan. A process for identifying, evaluating, and selecting alternative means of compliance, such as use of green infrastructure. A process for evaluating performance and measuring success. A process for identifying, evaluating, and selecting proposed new projects or modifications to ongoing or planned projects and implementation schedules based on changing circumstances. A major point of contention between EPA and local government stakeholders has been the agency's reliance on administrative orders or judicially approved consent decrees to codify pollution reduction plans, including plans approved under the integrated planning policy, rather than through modification of CWA permits. Mayors, represented by the U.S. Conference of Mayors, have stated that they would prefer that EPA authorize compliance flexibility through permits, rather than subjecting cities and towns to legally binding consent decrees with penalties and fines for noncompliance. EPA typically uses a consent decree after periods of permit noncompliance. The agency takes the position that both enforcement and permits are necessary, depending on individual circumstances. The 2012 policy provides that all or part of an integrated plan can be incorporated into a CWA discharge permit. For example, innovative practices for managing stormwater as a resource—green infrastructure practices and technologies—can be considered and incorporated into permits where such practices provide sustainable solutions for municipal wet weather control. The policy further provides that all or part of an integrated plan may be incorporated into the remedy of a federal or state enforcement action to address noncompliance with the CWA. EPA initially focused the policy on new enforcement, meaning that cities already subject to consent decrees were unable to take advantage of flexibility to modify existing plans to resolve enforcement actions. However, in 2012, EPA, the Department of Justice, and officials of one city, the District of Columbia, agreed to consider extending compliance deadlines in that city's 2005 consent decree in order to allow the city to test green infrastructure technologies. To address sewer overflows, the original consent decree called for the city to construct by 2025 three large tunnels capable of holding 31 million gallons of diluted sewage at any one time, allowing the city's wastewater treatment plant to process the effluent after storms. The 2012 agreement contemplated extending deadlines for some of the new construction required by the consent decree. Further, it potentially would allow the city to avoid some construction project elements (constructing one tunnel as planned, but reducing a second tunnel's size and eliminating the third tunnel), if implementation of a green infrastructure program can reasonably be expected to lead to CSO reductions required by the consent decree, while also satisfying the city's responsibility to mitigate stormwater runoff. The DC plan illustrates integrated planning because it allowed the city to compare the effectiveness of alternatives—green infrastructure and constructed tunnels—to reduce rainwater flows into storm drains enough to stop overflows into nearby waterways. Under terms of the 2012 agreement, EPA indicated that it would support reopening the consent decree only if it were convinced that green infrastructure would perform as well as construction of tunnels that are designed to capture combined stormwater and wastewater and hold it until it can be processed by the city's wastewater treatment plant. EPA agreed to support DC's research into whether the extensive use of green infrastructure could reduce rainwater runoff into sewers enough to eliminate the need for the planned tunnel projects. In May 2015, EPA, the Department of Justice, and the DC government revised the 2005 consent decree with the modifications outlined in the 2012 agreement. The revised consent decree also extends the deadline for compliance by five years, to 2030. Officials in other cities have hoped that the EPA-DC agreement could provide a model to be applied elsewhere. Some environmental groups criticized EPA for granting DC additional compliance time for green infrastructure projects that the city could already have pursued, under the existing consent decree. Utilities and municipalities have welcomed the opportunity for flexibility under the integrated planning policy. But they sought clarification on a number of issues, such as how communities can proactively ensure that the plan they develop will be acceptable to regulators; who determines a community's most pressing water quality needs; and whether a municipality can include ongoing needs for infrastructure rehabilitation under an integrated planning approach. Some stakeholders believe that clarification is needed regarding state and EPA roles. The agency's position is that it is the responsibility of cities to work and coordinate with state permitting agencies to develop integrated plans. However, some states are uncertain what EPA's oversight role would be if the agency disagrees with a plan that a state and municipality have developed. Some states believe that examples of integrated stormwater and wastewater plans are needed, in part to serve as models for states and communities. To do so, in October 2014, EPA awarded grants to five communities to assist them in developing integrated plans, as well as to provide transferable tools for other interested communities. Funding was awarded to Burlington, VT; Durham, NH; Santa Maria, CA; Springfield, MO; and Onondaga County, NY. The five were selected from 28 communities that had expressed interest in technical assistance from EPA. With the planning policy in place, a number of communities have developed plans pursuant to it (e.g., Kansas City, KS; Seattle and King County, WA; and Cincinnati, OH). EPA officials have had discussions with other cities about writing and implementing integrated plans to manage stormwater and wastewater. But nearly five years after the framework policy was announced, one concern is that, so far, integrated plans have been incorporated only into new or amended consent decrees, not in CWA permits. Determining Community Affordability A long-standing concern for local governments is EPA's process for evaluating how much communities can afford for CWA-mandated and other water infrastructure improvements. Affordability considerations can influence schedules established by EPA and states for communities to meet CWA requirements. In assessing municipalities' capability to finance infrastructure upgrades, EPA relies significantly on guidance issued in 1997. This guidance is intended to provide general boundaries to aid EPA, states, and cities in negotiating reasonable and effective schedules for implementing infrastructure upgrades. It uses a two-phase approach to assess financial capability. First, EPA identifies the combined impact of wastewater and CSO control costs on individual households, calculating average costs per household as a percentage of the local median household income (MHI). This phase analyzes the residential share of current and planned controls needed to meet CWA requirements using a value range of whether the costs impose a "low" (less than 1% of MHI), "mid-range" (1%-2% of MHI), or "high" (more than 2% of MHI) financial impact on residential users, yielding a Residential Indicator. Second, EPA develops Financial Indicators to evaluate the debt, socioeconomic, and financial conditions that affect the community's financial capability as "weak," "mid-range," or "strong." The combined indicators measure a community's ability to afford compliance with CWA regulations. Many local government officials contend that EPA regions use the 2% of MHI measure as an absolute benchmark, or minimum threshold for determining that affordability is an issue for a given community. For several years, municipal officials have urged EPA to revise the guidance, arguing that it should take into consideration a larger set of factors and that MHI is a misleading indicator of a community's ability to pay. In some cases, they say, cost impacts for an entire community may be in EPA's "mid-range," although impacts in portions of the community (e.g., low-income neighborhoods) are more than 2% of MHI. Alternative household affordability metrics could include average water rates as a percentage of income for potentially vulnerable populations, or expected future water rate increases, or using other indicators of economic need such as the unemployment rate or poverty rate, or percentage of households receiving public assistance. Further, they say that affordability should be tailored to each local government. Municipal officials also favor having EPA look at the overall financial impacts of both CWA and drinking water projects (which are not addressed in the 1997 guidance), rather than considering them separately. In 2013, local government officials issued a report with recommendations on alternative analyses that cities can present to federal and state regulators with data and information that demonstrate a range of additional factors relevant to evaluating affordability. Further, a 2013 white paper issued by municipal water officials recommended that EPA assess financial capability to meet CWA obligations through an integrated planning framework that allows EPA to go beyond taking a "snapshot" of current financial indicators to also consider past or emerging trends that affect current conditions. EPA repeatedly insisted that it is not necessary to revise the guidance, which the agency believes already provides flexibility for financially disadvantaged municipalities, including allowing a phased approach for implementing wastewater management controls. As noted above, EPA already has the flexibility and discretion to reopen consent decrees. Officials also point out that as a result of the integrated planning framework, in determining affordability, municipalities now can factor in the costs to manage stormwater flows, along with combined sewer overflows and wastewater treatment. The 1997 guidance did not include consideration of stormwater. To some extent, it appears that EPA and municipal officials fundamentally disagree on this point, with mayors and others contending that the 2% MHI metric is strictly enforced and is EPA's primary determinant, and EPA responding that it is one of many financial factors that should be evaluated to assess overall burden on a community. Nevertheless, EPA committed to further dialogue with cities and states and to clarifying guidelines on how it considers financial capability. Based on those discussions and in consultation with its Environmental Financial Advisory Board, in November 2014, the agency released a Financial Capability Assessment Framework. The document identifies additional information that may help some communities provide a more complete picture of their financial capability than under the 1997 guidance alone. The new framework includes two sets of examples meant to supplement—but not revise—the existing guidance. One set of examples concerns residential impacts, such as service area poverty rates and trends, or the percent of households that own versus rent. The second set of examples concerns the financial strength of the community, such as unemployment data; state or local legal limitations on property taxes, other revenue streams, or debt levels; or other financial obligations, such as drinking water infrastructure, that significantly affect a city's ability to raise revenue. As mentioned above, communities' investment needs for clean water infrastructure are substantial. Funding needs for drinking water projects also are substantial; projects needs were estimated in 2011 to total $385 billion nationwide through 2031. The 2014 Financial Capability Assessment Framework does allow for consideration of Safe Drinking Water Act (SDWA) obligations as relevant information about a community's overall financial capability. For example, a city's bond rating can be affected by both wastewater and drinking water obligations. The purpose of the assessment is to aid in establishing schedules for developing and implementing integrated plans and permit and consent decree implementation to meet CWA requirements. EPA's policies do not similarly address or integrate planning for communities' additional water infrastructure challenges of meeting SDWA requirements. Using a wider range or more nuanced factors to assess financial capability would in all likelihood lead to additional determinations that affordability is a challenge for many U.S. communities. Still, what response regulators and policymakers should make to such information is unclear. Some stakeholders would likely be satisfied with additional time to achieve compliance with applicable requirements, while others undoubtedly would prefer more time and relaxation of the requirements themselves. Many stakeholders seek flexibility in meeting regulatory requirements, as well as increased federal spending on local water and wastewater infrastructure projects. Federal and state regulators have considerable, but not unlimited, discretion to provide extended compliance time, but much less flexibility to alter standards or provide additional funds. Congressional Interest EPA's integrated planning process and community affordability are issues of interest to legislators, because they relate to policymakers' overall concern with funding needs for water infrastructure projects and the federal role in assisting communities. Both issues have been addressed in legislation and through congressional oversight. In recent years, Members have offered bills that would address these issues in different ways. Some bills sought to codify EPA's integrated planning approach—as written in the 2012 framework—into the CWA. This approach might be considered largely symbolic: The 2012 framework did not provide new authority; it highlighted existing authority and opportunities within the CWA. Other proposals would go beyond codifying the integrated planning approach by including other provisions that alter the CWA's existing framework to varying degrees. In general, some environmental groups have opposed such changes proposed in bills from prior Congresses. In the 115 th Congress, H.R. 465 , the Water Quality Improvement Act of 2017, would codify an integrated plan and permit approach into the CWA; direct EPA to carry out a pilot program to work with at least 15 communities desiring to implement an integrated plan, and require EPA to update the 1997 CSO affordability guidance document, which has been criticized by some stakeholders. The proposal also includes provisions that may alter the existing CWA framework. For example, the bill states that a "schedule of [permit] compliance would provide for reasonable progress " (emphasis added). This phrase may conflict with the regulatory requirement that permit schedules "shall require compliance as soon as possible " (40 C.F.R. 122.47(a)(1)). It is uncertain how these provisions, if enacted, would be implemented. In the 114 th Congress, H.R. 1093 / S. 2358 , the Clean Water Compliance and Ratepayer Affordability Act of 2015, would have directed EPA to carry out a pilot program to work with communities desiring to implement an integrated stormwater/wastewater management program. The bill would have allowed extended CWA discharge permit terms for such communities, and it would have allowed for modification of consent decrees to reflect terms of an integrated plan. A related proposal in the 114 th Congress, the Clean Water Affordability Act of 2015, would have codified an integrated approach through CWA permits. This legislation also would have required EPA to update the 1997 CSO affordability guidance document. Bills in the 114 th Congress that included these provisions are H.R. 1705 , S. 2768 , and S. 2848 , which the Senate passed on September 15, 2016. As described previously, communities generally support the financial capability framework issued by EPA in 2014, but some also support legislation that would further expand the criteria for determining affordability. In report language accompanying FY2016 appropriations legislation for EPA, the Senate Appropriations Committee directed EPA to contract with the National Academy of Public Administration to conduct an independent study to create a definition and framework for community affordability and report to Congress within one year. Some in Congress have sought financial support to test EPA's integrated planning policy. In 2014, Republican and Democratic leaders of the House Transportation and Infrastructure Committee's Water Resources Subcommittee wrote to House appropriators to request funds for a limited number of pilot projects. The letter requested $5 million in FY2015 appropriations for three to five projects per EPA region (30 to 50 projects in all) to assist communities in developing and implementing integrated plans. If successfully implemented, the letter said, EPA's framework "could help communities more affordably manage their clean water obligations while ensuring continuous progress toward water quality goals." Some utility and municipal groups also have been seeking funding for pilot projects, and, as noted above, in October 2014, EPA awarded grants to five communities to assist them in developing integrated plans. In the report accompanying FY2016 appropriations legislation for EPA, the House Appropriations Committee said that it supports EPA's efforts to expand technical assistance for communities seeking to develop and implement an integrated planning approach, but the committee did not recommend specific funding for such assistance. In July 2014, the Water Resources Subcommittee held a hearing to review EPA's 2012 integrated planning policy. The subcommittee heard from witnesses who contended that EPA has not provided enough regulatory flexibility in implementing the policy. Some witnesses urged Congress to pass legislation that would require EPA to speed its approval of integrated plans, and some urged EPA to develop "model permits" to serve as templates for integrated plans. The Senate Environment and Public Works Committee held a hearing on April 7, 2016, that addressed issues of water infrastructure affordability. The House Water Resources Subcommittee also held two hearings in the 112 th Congress on EPA's efforts to provide flexibility to communities in addressing wastewater and stormwater project needs. The first hearing, in December 2011, examined EPA's integrated planning policy, then still in draft form, and the second hearing invited witnesses to discuss the policy document, which EPA had issued in June. Particularly at the second hearing, in July 2012, witnesses addressed concerns with EPA's approach to determining a community's ability to afford water infrastructure projects. Conclusion Local government stakeholders generally support EPA's efforts to encourage ways for communities to prioritize their investments in CWA infrastructure and to consider a wide range of factors that affect affordability of such investments. As described in this report, cities and states have some continuing concerns with aspects of both the integrated planning policy and the financial capability assessment framework. For example, EPA's 2014 Financial Capability Assessment Framework is focused on plans and implementation to meet CWA requirements. While it might be beneficial to municipalities if EPA's policies encompassed priorities, plans, and schedules for all of a community's water infrastructure obligations—including for drinking water projects, as the U.S Conference of Mayors has advocated—currently that is not the case. Nevertheless, these recent policies may partially help local governments address the economic challenges of meeting their CWA water infrastructure obligations. The 2012 integrated planning framework highlighted existing authority and opportunities within the CWA without providing new authority or flexibility. Thus, legislative efforts to codify the framework into the CWA may be considered largely symbolic. However, some of the recent proposals would not only codify the integrated planning approach but also include provisions that would alter the CWA's existing framework to varying degrees. In general, these provisions have raised concerns from environmental groups but received support from municipalities seeking additional flexibility.

For several years, the U.S. Environmental Protection Agency (EPA) has been working with states and cities to develop and implement new approaches that will achieve water quality goals cost-effectively and in a manner that "addresses the most pressing public health and environmental protection issues first." Two recent EPA initiatives are an integrated planning policy and a framework policy for assessing a community's financial capability to meet objectives and requirements of the Clean Water Act (CWA). Pressed by municipalities about the financial challenges that they face in addressing needs for wastewater and stormwater control projects, in 2012 EPA issued an integrated permitting and planning policy. The intention of the policy is to provide communities with flexibility to prioritize and sequence needed water infrastructure investments so that limited public dollars can be invested in ways that each municipality finds most valuable. Water utilities and municipalities have welcomed the opportunity for flexibility under the integrated planning policy. But they have sought clarification of a number of issues, including EPA and state roles in developing integrated plans. A major point of contention between EPA and local government stakeholders has been the agency's reliance on administrative orders or judicially approved consent decrees to codify integrated pollution reduction plans, rather than through modification of CWA permits. City and town officials say that they would prefer that EPA allow compliance flexibility through permits, rather than subjecting cities and towns to legally binding consent decrees with penalties and fines for noncompliance. The agency takes the position that both enforcement and permits are necessary, depending on individual circumstances. EPA typically uses a consent decree after periods of permit noncompliance. While integrated planning may be helpful in identifying communities' relative priorities, a long-standing concern for local governments is EPA's process for evaluating how much communities can afford for CWA-mandated and other water infrastructure improvements. EPA has worked with communities to refine how the agency determines when a project is affordable for individual communities, because affordability considerations can influence schedules established for a community to meet CWA requirements. In 2014, EPA released a Financial Capability Assessment Framework that identifies a range of information related to a community's financial strength that may help provide a complete picture of cities' financial capabilities in relation to water infrastructure investments. State and local governments generally support EPA's efforts to encourage ways for communities to prioritize their CWA infrastructure investments and to consider a wide range of factors that affect affordability. Nevertheless, cities and states have continuing concerns with aspects of both policies. For example, some criticize EPA for relying in part on Median Household Income (MHI) as a measure of community affordability. Further, cities are critical that integrated plans that have been approved so far have been incorporated only into new or amended consent decrees, not CWA permits. EPA's integrated planning process and water infrastructure affordability are issues of interest to legislators. In recent years, Members have offered bills that would address these issues in different ways. Some bills have sought to codify EPA's integrated planning approach—as written in the 2012 framework—into the CWA. Other proposals would go beyond codifying the integrated planning approach by including other provisions that alter the CWA's existing framework to varying degrees (e.g., H.R. 465 in the 115th Congress). In general, some environmental groups have opposed such changes proposed in bills from prior Congresses, but municipalities have generally supported the additional flexibility.

Introduction Civil society organizations (CSOs), which are often viewed as an important component of sustainable democracy, are confronting growing limitations on their ability to operate around the world. This phenomenon is referred to by researchers and advocates as "closing space" for civil society work. Many experts assess that the closing space trend is likely to continue, which could also impact broader U.S. engagement on democracy promotion or the freedoms of assembly, association, and expression and, in some cases, even conflict with U.S. efforts to promote, development, and security. Congress has taken action to support civil society through a range of activities, including legislation, and may choose to further consider legislation, oversight activities—such as reporting, hearings, or direct engagement—and U.S. funding to respond to growing limitations on civil society around the world. From restrictions on the types of funding they are allowed to receive to draconian registration requirements, the measures targeting nongovernmental organizations (NGOs) and civil society groups are putting ever greater pressure on the entire civil society sector. The restrictions are most commonly imposed by governments seeking to limit the influence of nongovernmental actors. While the problem may be most acute and visible under the repressive regimes in Russia and China, restrictions are also being imposed by a broad range of governments, to include democratic allies such as India and major U.S. foreign assistance recipients such as Egypt. The United States has long supported civil society abroad, though the implications of this support sometimes vary in practice. It is the largest financial supporter of civil society in the world, according to a recent White House fact sheet, with more than $3.2 billion invested to strengthen civil society since 2010 through training, technical assistance, and direct funding for programs. Civil society groups are also in many cases the implementers of U.S. foreign assistance programs managed by the U.S. Agency for International Development (USAID) and groups such as the National Endowment for Democracy, among others. In the face of the rapid geographic and substantive expansion of measures designed to close civil society space, the Obama Administration launched the Stand with Civil Society initiative in 2013 to bolster U.S. support for civil society abroad. The effort saw Presidential attention through speeches and a Presidential Memorandum. While advocates generally praise the Administration for raising the profile of the closing space issue, there is less consensus on whether the Administration's actions have fully matched its rhetoric, or on whether the policies and structures put into place under the initiative are sustainable. This report provides an overview of the "closing space" challenge, including its origins and current manifestations; outlines current Administration programs and initiatives aimed at addressing the problem; and discusses some areas of potential engagement that Congress may choose to further consider. Relevance to U.S. Interests Support for democratic governance abroad has long featured as an element of U.S. foreign policy and has often received significant backing in Congress, although its prominence has varied over time and in specific circumstances. Advocates within and outside of government have argued that the role of civil society is fundamental in a democratic system; according to one expert, A vigorous civil society helps to ensure that governments serve their people. Joining together in civic groups amplifies isolated voices and leverages their ability to influence governments—to ensure that they build schools, secure access to health care, protect the environment, and take countless other steps to pursue a popular vision of the common good. Moreover, civil society can also play an important role in global economic growth and development. According to the United Nations Special Rapporteur on the rights to freedom of peaceful assembly and of association, civil society space often reflects a positive business environment: The Special Rapporteur has found that the presence of a robust, vocal and critical civil society sector guarantees, almost without exception, that a State also possesses a good business environment (the converse does not hold: a good business environment does not guarantee a good civil society environment). The rule of law is stronger, transparency is greater and markets are less tainted by corruption. Indeed, the presence of a critical civil society can be viewed as a barometer of a State's confidence and stability—important factors for businesses looking to invest their money. Congress at times has treated the promotion of vibrant civil societies abroad as a key element of U.S. foreign policy. A December 2006 Senate Foreign Relations Committee staff report declared that "support for democratic, grassroots organizations has become a centerpiece of America's international outreach." Restrictions on civil society not only impact the health of democracies abroad (and U.S. efforts to support them); they also resonate because of their potentially direct impacts on more immediate U.S. interests in crisis situations, as spelled out in an April 2015 report by the Center for Strategic and International Studies: if Liberia or Guinea had adopted laws that made it difficult or impossible for NGOs to function or receive funding from foreign sources, how would these countries have coped with the Ebola virus? If Kenya adopts such laws, how will the country respond to another famine, and what will the next national election cycle there look like if the hundreds of organizations that helped create citizen demand for a nonviolent election in 2013 no longer exist? Crackdowns on civil society groups abroad may also directly impact U.S. government-funded organizations (as in the July 2015 Russia ban on National Endowment for Democracy operations within its borders). In some cases, they can ensnare U.S. citizens who are affiliated with those organizations (for instance, when the Egyptian government cracked down on NGOs in 2011-2012, causing several U.S. citizens working with the National Democratic Institute and International Republican Institute to take shelter at the U.S. Embassy in Cairo; 16 Americans were among 43 workers later convicted in absentia of receiving foreign funding). The Scope of the Closing Space Challenge A senior Amnesty International official lamented the increasing restrictions on civil society work globally in a 2015 news article: There are new pieces of legislation almost every week—on foreign funding, restrictions in registration or association, anti-protest laws, gagging laws. And, unquestionably, this is going to intensify in the coming two to three years. You can visibly watch the space shrinking. Groups tracking the increasingly restrictive environment for nongovernmental organizations (NGOs) have catalogued the problem using a number of different metrics: CIVICUS, an international association of civil society groups, counted "significant attacks on the fundamental civil society rights of free association, free assembly and free expression in 96 countries" in 2014. Freedom House, an NGO focused on expanding democracy and freedom, noted the decline in space for civil society in its 2015 Freedom in the World report, saying, " ... whereas the most successful authoritarian regimes previously tolerated a modest opposition press, some civil society activity, and a comparatively vibrant internet environment, they are now reducing or closing these remaining spaces for dissent and debate. " The International Center for Not-for-Profit Law (ICNL) has pointed out that between January 2012 and August 2014, some 50 countries introduced or enacted laws designed to restrict the activity of civil society organizations or curtail funding for their work. ICNL also asserts that more than 120 laws constraining the freedoms of association or assembly have been proposed or enacted in 60 countries since 2012. Of these measures, those designed to restrict foreign funding to support the work of civil society groups have seen the fastest growth. Such restrictions may include requirements for prior government approval for the use of government-controlled bank accounts, laws demanding "foreign agent" disclosures, or caps on allowable foreign funding. The U.S. Agency for International Development produces a Civil Society Sustainability Index (CSOSI) for several regions of the world, tracking developments in this space on an annual basis. For example, the Agency's 2014 report on Africa found that " ... in many countries in the region, CSOs—particularly those focused on advocacy and human rights — are facing increasing restrictions or threats of restrictions on their work. " In many cases, the restrictions have targeted U.S.-funded organizations; for example, in July 2015, Russia banned the National Endowment for Democracy (NED) from operating within its borders. The NED thus became the first group to be subjected to a May 2015 law against "undesirable" NGOs. The law, which increased Russian authorities' ability to shutter such groups without a court order, followed Russian President Vladimir Putin's assertion to security officials in March that western intelligence agencies use NGOs to "discredit the authorities and destabilize the internal situation in Russia." The impact goes beyond U.S. interests; other international donors, including governments, charities, churches, and private philanthropic groups and foundations also are affected. Nor is Russia alone in taking such actions; the Hungarian government, for example, has targeted NGOs that distributed funding from the Norwegian government, accusing them of serving foreign powers seeking to influence Hungarian internal politics. Measures targeting foreign funding are potentially especially damaging, experts at the Carnegie Endowment suggest: Although such support is rarely, if ever, a determinative factor in the political life of recipient countries, it often does have tangible effects on the institutions and processes that it reaches. This is especially true in the civil society domain, where external funding can be a lifeline for groups working on sensitive topics for which domestic funding is scarce, such as human rights advocacy, anticorruption work, or election monitoring. Limiting these organizations' access to external support weakens their capacity for action and often threatens their very existence. In addition, while crackdowns in authoritarian countries such as Russia or China appear to garner the lion's share of Western media attention, experts suggest that repressive measures are being taken against civil society around the world in a variety of political systems and across cultural and economic lines. Restrictions can target not only groups doing what some would call 'political' or rights-focused work (such as human rights defenders and democracy advocates), but also humanitarian actors, civic coalitions, watchdog groups, economic cooperatives, or service providers, as well as other organizations that may receive foreign funding. Repressive regimes often apply different standards to NGOs based on their activities. For example, organizations working on human or political rights may face more restrictions or penalties than organizations providing humanitarian services. Experts assert that these differences are intended to create divisions that prevent civil society groups from responding collectively, though, in some cases, deep divisions already exist within civil society due to local political and social dynamics. The geographic breadth of the problem is demonstrated by the following, nonexhaustive list of examples. India has increased restrictions on foreign-funded organizations, including the Ford Foundation, Mercy Corps, and especially Greenpeace India; its government also revoked more than 10,000 NGO licenses in the first half of 2015 from civil society groups due to failures to detail foreign funding. Ethiopia adopted a law in 2009 restricting NGOs that receive more than 10% of their funding from foreign sources from engaging in human rights or advocacy activities. Angola 's president issued a decree that took effect in March 2015 that limits foreign funding of NGOs and imposes strict registration requirements. Bangladesh enacted a law in December 2014 that strictly limits foreign financing of NGOs, and the government is considering a Cyber Security Law that could stifle free expression online. Cambodia has placed strict new registration and "neutrality" requirements on NGOs since August 2015, despite an international campaign against the restrictions. The Egyptian government in 2014 mandated that all civil society groups must register with the Ministry of Social Solidarity; the penal code also was amended in the context of counterterrorism to mandate life imprisonment for anyone who receives funds from foreign entities. In 2011, the Egyptian government also brought legal cases against local and international NGOs for allegedly receiving illegal funding from abroad, resulting in the conviction and sentencing of 43 foreign and Egyptian NGO employees to prison terms in 2013. Hungary imposed measures against Norwegian-funded NGOs (including Transparency International Hungary) beginning in the spring of 2015. Uganda adopted a law in January 2016 that more strictly controls NGO registration and activity that is against "the interests of Uganda" or the "dignity of Ugandans"; in addition to limitations on political or human rights work, there is particular concern that the new law could target organizations working on lesbian, gay, bisexual, transgender and intersex (LGBTI) issues. Pakistan expelled Save the Children in June 2015, as part of a broader crackdown on foreign-funded civil society groups, and announced a laborious regulatory policy requiring governmental approval to access foreign funds in October 2015. In Ecuador , a June 2013 decree placed time-consuming new regulations on NGOs, as part of broader restrictions leading to the 2014 cessation of USAID operations in the country. Sudan expelled 13 international NGOs and banned 3 Sudanese relief organizations in 2009 on allegations of collaborating with the International Criminal Court and unnamed "foreign powers" after the ICC issued an arrest warrant for the country's president. Other NGO expulsions occurred in 2012 and 2014. South Sudan adopted a law in February 2016 that mandates NGO registration and government monitoring and criminalizes noncompliance with the law; humanitarian actors have voiced concern that the law will impede aid provision. Other countries considering legislation restricting NGO activities include (but are not limited to) Israel, Jordan, Kazakhstan, Kenya, Kyrgyzstan, Laos, Mexico, Nigeria, Pakistan, Sierra Leone, Tajikistan, and Vietnam. A geographic categorization of repressive measures as tracked by ICNL is provided as Figure 1 . Many experts assess that the closing space trend is likely to continue as authoritarian actors seek to grow their influence both at home and globally. Some experts and advocates warn that, even in already restrictive environments, civil society actors could face new or additional repressive action, particularly when civil society engages in politically charged or sensitive issues. Such actions could include intimidation, arrest and detention, criminal penalties under new NGO laws, physical attacks, extrajudicial killings, and harassment online. Civil society groups in Burundi, for instance, were harassed and jailed for opposing the president's efforts to extend his mandate in 2015, which has led to ongoing unrest and violence in the country. Impunity for acts of violence and repression, either by governmental or nongovernmental actors, may also cause civil society actors to self-censor or leave the country due fears of retaliation. For example, more than 101 environmental activists were killed in Honduras between 2010 and 2014, and some members of civil society engaged on land rights and environment have fled Honduras due concerns for their personal safety. These security concerns may affect the ability of donors—including the United States government, private donors, foundations, and international allies—to s afely work with CSOs abroad. This, in turn, could further impact the United States' ability to engage directly with local organizations and populations on the freedoms of assembly, association, and expression as well as U.S. efforts to work with local actors on security and development. Origins of the Closing Space Phenomenon While the origins of the closing space phenomenon are complex and in many cases country-specific, scholars suggest that several drivers have accelerated the problem. A 2014 publication by the Carnegie Endowment, Closing Space: Democracy and Human Rights Support Under Fire, explores the causes of the phenomenon and the context of democracy promotion writ large, and makes the following observations: As the cold war ended, western governments shifted away from providing humanitarian assistance largely through foreign governments towards funding nongovernmental organizations directly, including those working in more explicitly political areas. A number of events caused semi-authoritarian regimes to view the civil society sector increasingly warily: highly coordinated western support to anti-Milosevic nongovernmental forces in Serbia; the color revolutions in Georgia, Ukraine, and Kyrgyzstan; the "Arab Spring" movements; and others. Russia and China have openly challenged the idea of the universality of liberal democratic political values, offering an alternative conception of the rights and responsibilities of citizens and models of governance. The phenomenon's acceleration has been facilitated by the fact that governments seeking to inhibit civil society groups have learned from each other, for example by copying and implementing nearly identical restrictive legislative measures, analysts suggest. Russia and China maintain a driving role, not only in demonstrating restrictive behavior but also in publicly defending their actions as legitimate. Their example, along with that of India (notably the world's most populous democracy) and Ethiopia, has provided a lead for other countries to follow. Finally, many observers suggest that another development has contributed to the closing of space for civil society: a post 9/11 focus on counterterrorism. Many experts recognize the legitimate threat terrorism poses to states and multilateral actors, and some point to civil society as partners in efforts combat terrorism, noting that the "importance of involving civil society in a comprehensive and multidimensional response to the threat of terrorism has been stressed by various international documents." Nonetheless, according to the Carnegie report, "Governments in Africa, Asia, the Middle East and elsewhere have used the war on terror as an excuse to impose restrictions on freedoms of movement, association, and expression." Some observers point especially to the unique role of the Financial Action Task Force (FATF), an inter-governmental organization created in 1989 to combat money laundering and terrorist financing. While FATF combats illicit funding flows, some experts suggest that its recommendations have been disproportionally hard-hitting on legitimate CSOs and philanthropic organizations. The organization's focus on counter-terrorism, critics argue, led to an uncompromising stance in which some governments that have eliminated civic space altogether are rated highly for preventing illicit funding flows. Notably, more than 120 nonprofit organizations have called on FATF to amend its approach to ensure that civil society doesn't face "over-regulation of the sector," a recommendation supported by a United Nations Special Rapporteur. Obama Administration Responses While the United States government has had programs to engage with and promote civil society abroad for decades, the Obama administration has taken additional actions to address the closing space challenge's recent acceleration. Administration officials point to a broad scope of mutually reinforcing policies, diplomacy, and assistance that seek to advance freedom for all, including civil society, particularly through enhanced collaboration among State, USAID, Justice, Labor, Defense, and other Departments. Initiatives and Reorganizations The challenge of restrictions on civil society abroad has been given high-level attention by the Administration. In 2009, then Secretary of State Clinton announced the Civil Society 2.0 Initiative, which sought to build the capacity of grassroots organizations to use new digital tools and technologies to increase the reach and impact of their work. In 2011, the State Department launched a Strategic Dialogue with Civil Society. Summits were held in 2011 and 2012. The purpose of the Dialogue was to "elevate U.S. engagement with partners beyond foreign governments and to underscore the US Government's commitment to supporting and protecting civil society around the world." The Administration also established an Interagency Policy Committee (IPC) for civil society-related issues in 2013, providing a venue for targeted discussions and decisions on civil society within the interagency. In 2010, for the first time the State Department appointed a Senior Advisor for Civil Society and Emerging Democracies (SACSED). In 2014, Secretary of State John Kerry said the civil society and democracy agendas were "now fully integrated," noting that the Assistant Secretary of the Bureau of Democracy, Human Rights, and Labor and Special Representative for Global Partnerships were "working to ensure that the civil society and democracy agenda ... remain at the forefront of our diplomatic engagement." Stand with Civil Society Initiative In September 2013, the President launched the Stand with Civil Society initiative—a global call to action to support, defend, and sustain civil society. The initiative is as a partnership with other governments, NGOs, the philanthropic community, and multilateral initiatives to focus on three lines of effort: (1) modeling positive engagement between governments and civil society; (2) developing new assistance tools and programs, including regional civil society hubs; and (3) coordinating multilateral and diplomatic pressure to push back against restrictions on civil society. One year later, President Obama issued a Presidential Memorandum on Deepening U.S. Government Efforts to Collaborate with and Strengthen Civil Society. In a corresponding speech, he emphasized the role civil society plays in holding governments accountable and in promoting economic growth, and said, "If you want strong, successful countries, you need strong, vibrant civil societies." The memorandum also made explicit that "partnering and protecting civil society groups around the world is now a mission across the U.S. Government ... this is part of American leadership." President Obama directed that executive departments and agencies consult with civil society representatives; work with CSOs even when local laws are restrictive; oppose undue restrictions on civil society and fundamental freedoms by foreign governments behaving in a manner inconsistent with their international obligations; facilitate exchanges between governments and civil society; and report to the President annually on progress. In 2015, the Deputy National Security Advisor identified a number of key lessons that had been learned since the launch of the Stand with Civil Society initiative, including the need for a long-term effort; taking early action during democratic transitions; identifying civil society champions in government and the legislature; expanding consultations that include civil society and government to develop sound legal frameworks; and supporting civil society efforts at self-regulation, transparency and accountability. Direct Civil Society Support Programs The primary implementers of U.S. support to civil society space abroad are USAID and the State Department's Bureau of Democracy Human Rights, and Labor (DRL), though many other Bureaus in the State Department also work with civil society. DRL's assistance to civil society is largely managed by the Office of Global Programming, which, also coordinates internally and with NED. USAID's Center for Excellence on Democracy, Rights, and Governance (DRG Center) leads many of the Agency's efforts to bolster civil society directly. The DRG Center was launched in 2014 to lead on understanding responses to efforts to integrate democracy, rights, and governance in development. USAID funding to civil society is also provided via USAID's in-country presence (its "Missions"). U.S. programs operate in a range of environments, including countries that are considered "non-permissive." USAID and DRL testified to Congress that they program in states transitioning from crisis or conflict, repressive or authoritarian countries, "'backsliding' states whose governments have become more sophisticated in their repression, specifically targeting civil society," and—at least for DRL—even where the United States has no diplomatic presence. DRL has also testified that while its programs are overt and notified to Congress, the Bureau employs "methods aimed at protecting the identity of our beneficiaries," in an effort to avoid "anything that would help an authoritarian government take repressive actions against or punish our partners." USAID also called their work with civil society in repressive countries "sensitive" and emphasized physical security and protection for partners as a concern. Ongoing Programs and New Tools A number of State Department and USAID programs and funds are specifically designed to support civil society through a range of activities. Some are focused on emergency responses and protection. Others seek to address the root causes of restrictions on civil society, such as legal and regulatory frameworks or other challenges to the enabling environment. A nonexhaustive list of these activities includes The State Department's global Human Rights and Democracy Fund (HRDF), managed by DRL, is a mechanism established in 1998 that provides assistance to promote civil society. HRDF assistance can be used for a range of activities, from "aiding embattled NGOs on the frontlines to countering cyber-attacks on activists and assisting vulnerable populations." Since its creation, the Fund has grown from $8 million in FY1998 to $78.5 million in FY2015. DRL also receives approximately $65 million in Economic Support Funds (ESF) from other bureaus to support activities in eight countries, including Iraq, Cuba, and Pakistan. DRL is providing $138 million in FY2015 funding that benefits civil society and activists around the world and their efforts to advance freedom and inclusion. In 2011, the State Department launched the Lifeline: Embattled Civil Society Organizations Assistance Fund to offer emergency grants to civil society organizations. Lifeline is a consortium of 7 international NGOs supported by a Donor Steering Committee of 18 governments and 2 foundations. Lifeline reports that, as of December 31, 2015, it has supported over 814 CSOs in 98 countries and territories with emergency assistance and rapid response advocacy grants since 2011. The fund is managed by DRL. The fund has received a total of $7.1 million in U.S. assistance, including $2 million dollars through the HRDF in FY2014. Grants from Lifeline typically provide small amounts of emergency grants to CSOs that are threatened for advancing human rights or for advocacy efforts that seek to push back against closure in civic space. These grants can address a range of specific emergency needs such as, security and protection, legal representation, temporary relocation, community mobilization, policy and legal advocacy, civil society coalition building, and strategic litigation. The Legal Enabling Environment Program (LEEP) is a USAID program launched in 2013 that opposes efforts by governments to restrict freedoms of expression, peaceful assembly, and association. Implemented by ICNL, the $3.5 million program offers technical assistance as well as capacity building around legal reform, sometimes for emergency situations. It has been active in El Salvador, Bosnia & Herzegovina, Kenya, Macedonia, Nicaragua, Morocco, Tunisia, Cambodia, Vietnam, and Kyrgyzstan, among others. The U.S. government (through USAID) and its partners are establishing a network of regional Civil Society Innovation Initiative (CSII) Hubs. The Hubs, funded through a Donor Coordination Group that includes the United States, Sweden, and private philanthropic partners, are intended to encourage cooperation, innovation, research, learning, and peer-to-peer exchanges among civil society groups. A September 2014 White House fact sheet suggested that up to six such hubs would be created in the 2014-2016 timeframe. USAID's DRG Center plans to provide approximately $12 million for the Hubs over the next five years; additional or matching funds may also come from other parts of the U.S. government, the Swedish International Development Cooperation Agency and the Aga Khan Foundation. Coordinating Multilateral Efforts The administration has sought to be a vocal advocate for civil society at the United Nations as well as in other organizations, including the Community of Democracies (CD) and the Open Government Partnership (OGP). Established in 2000, the CD is an intergovernmental organization with 106 signatories that seeks to advance democratic principles and drive the global democratic agenda through common action. The United States assumed the Presidency of the CD in July 2015 for a two-year term. U.S. officials and experts have noted that this status may provide the United States with a useful platform to galvanize member attention on protecting space for civil society or to create a specific call to action amongst CD members when governments are considering new laws, regulations, or administrative measures that restrict civil society. The CD also leverages multilateral engagement through its Working Group on Enabling and Protecting Civil Society, which fosters collaboration between states, civil society, and international organizations to counter closing space. In 2014, the United States committed $3 million in core funding to CD over three years to bolster the promotion of civic space and may contribute more in the future. DRL also provided $400,000 to CD so that the organization could provide small grants to assist civil society. OGP is a multilateral initiative aimed at "securing commitments from governments to promote transparency, increase civic participation, fight corruption, and harness new technologies to make government more open, effective, and accountable." OGP was formally launched in September 2011 by the United States and seven other founding governments: Brazil, Indonesia, Mexico, Norway, Philippines, South Africa, and the United Kingdom. As a founding member and part of the Steering Committee, the United States coordinates with government partners and the OGP civil society chairs on international open government priorities. According to the Administration, "The United States is leading by example in OGP by seeking ways to expand U.S. Government engagement with U.S.-based civil society organizations to develop and implement the U.S. Open Government National Action Plan." Since 2011, OGP has expanded to include 69 countries and several hundred civil society organizations. The United States is a significant donor to OGP; USAID has provided approximately $1 million in support to OGP's secretariat since 2014. Some experts also point to the importance of the fact that the United Nations' Sustainable Development Goals (SDGs), which build on the Millennium Development Goals, now include governance issues. U.S. officials privately suggest that this occurred in large part due to U.S. efforts, and the United Nations has said that the SDGs provide an international platform in which civil society can play a role as a key stakeholder. Official Reporting on Closing Space While the State Department's annual Country Reports on Human Rights report on civic and political rights, the reports are not focused specifically on the challenges facing civil society. The reports may include some instances of abuse of civil society organizations and actors and generally include reporting on restrictive laws. USAID periodically publishes the Civil Society Organizations Sustainability Index (CSOSI). The CSOSI seeks to assess the overall strength and viability of civil society by examining and assigning scores to seven interrelated dimensions: legal environment, organizational capacity, financial viability, advocacy, service provision, infrastructure, and public image. It was first published in 1997 with a focus on Europe and Eurasia, and has since expanded to report on some countries in Africa, the Middle East, and Asia, as well as Afghanistan and Pakistan. Reports are not always issued annually, but aim to enable users to track developments and identify trends in the civil society sector. USAID's Bureau for Europe and Eurasia continues to fund and manage the CSOSI for its region. The DRG Center was able to expand the Index to other regions through partnerships with the Africa Bureau, the Middle East Bureau, the Aga Khan Foundation, and a number of USAID Missions, including the Sudan and South Sudan Missions and four Missions in Asia. Modeling Engagement In addition to the other efforts outlined above, the U.S. government has also promoted its own regulation of domestic NGO space as one positive framework that seeks to respect national interests and fundamental freedoms. The State Department produced a factsheet in 2012 that provides an overview of the U.S. government's definition of civil society as well as the U.S. approach to regulating NGOs. The factsheet highlights that U.S. regulations on civil society facilitate and support the formation of NGOs and that "U.S. regulations are designed specifically to avoid making judgments about the value or work of any given NGO." Also, the Department of Treasury has been consulting with the nonprofit sector as part of the Financial Action Task Force (FATF) process in order to address concerns about terrorist abuse of funding to civil society, such as restrictions on NGOs as a result of efforts to counter terrorist group financing. Another measure promoted by the Administration as a model is its effort to facilitate global philanthropy by private U.S. foundations by amending tax rules to increase the cost-effectiveness of tax service expenditures by foundations. Funding Trends74 As illustrated in Figure 2 , since FY2009 the United States has provided more than $3 billion in foreign assistance to promote civil society. Detailed information on specific funding to individual countries is beyond the scope of this report; however, research indicates that relatively large amounts of assistance may be devoted to a small number of countries. For example, out of the 146 countries that were eligible for official development assistance per the Organization for Economic Co-operation and Development (OECD) in 2015, only 12 countries have received U.S. investments of more than $100,000 per year to advance civil society legal reform. Though these figures do not reflect regional or global programs or emergency response assistance, they do represent funding that is used to support the enabling environment (i.e. legal and regulatory frameworks) for civil society. The Administration reports that in FY2015, the most recent year for which complete data is available, $396 million was specifically allocated to promote civil society globally. This amounts to about 20% of the $2 billion allocated for programs under the "Governing Justly and Democratically" (GJD) foreign assistance objective and for the NED (which is not considered foreign assistance). Notably, other funding under NED and the broad GJD objective supports democracy promotion, good governance, human rights, and rule of law, which many experts consider essential for civil society's broader enabling environment. Funding for direct civil society assistance and broader GJD assistance declined between FY2012 and FY2014, and remained relatively flat for FY2015. For FY2016, however, the Administration requested more than $3 billion for these activities, a 46% increase over FY2015 funding. This also included $602 million for civil society, a nearly 65% increase over FY2015 funding. Congress responded by appropriating "no less than" $2.3 billion for "democracy programs," resulting in a funding increase for GJD of at least 11%. It is unclear whether the higher FY2016 democracy funding will result in a higher allocation for civil society programs in FY2016. For FY2017, the Administration has requested $2.8 billion for GJD and NED, of which $652 million is allocated for civil society. Overall, funding for civil society accounted for 1% of U.S. foreign assistance in FY2015; GJD funding accounted for 5%. Perspectives on the Administration's Responses According to many experts, the U.S. record in supporting civil society is mixed. The Obama administration is credited by many experts with having recognized the accelerated closing of civil society space and the need to respond. Practitioners and U.S. officials point to Stand with Civil Society and the Presidential Memorandum as important steps that formalized the Administration's commitments to civil society. They commend the Administration's leadership on rapid response assistance such as Lifeline, which was founded in 2011 to provide emergency assistance to CSOs in partnership with other governments and foundations. For example, an expert on civil society space has called Lifeline an "important increase" to quick-action financial assistance. Experts also recognized a need to balance resources between longer term capacity building, addressing the enabling environment (i.e. legal and regulatory frameworks), and emergency response needs. Nonetheless, given the increase in restrictions on CSOs in recent years, many noted that reaching CSOs under threat with relatively small amounts of funding—sometimes as little as $5,000 to $10,000—could have a significant impact. A comprehensive accounting of U.S. responses is complicated by the fact that some U.S. assistance (either diplomatic or financial), while valuable, may be less publicly visible or even unwanted. In conversations with CRS, Administration officials and practitioners privately underline that the public record of U.S. government support to civil society is necessarily incomplete due to concerns over retaliation and safety. Some interventions in support of persecuted civil society actors are best done quietly, they suggest. In other cases, non-U.S. actors may be the preferred interlocutor, as some CSOs are unwilling to accept U.S. aid—be it financial or diplomatic—due to concerns that it could undermine their credibility at home. While experts generally agree that the United States has demonstrated leadership in understanding and framing the problem of closing space, the policy response has been complicated by a number of factors, including various competing interests in the policy process, such as balancing support for civil society with U.S. willingness to confront important bilateral partners, possible impacts on other programs or objectives, and the availability of suitable tools or sufficient leverage. In conversations with CRS, former and current officials have privately voiced concern that civil society issues do not often rise to high-level decision-making, particularly when contrasted with decision points around traditional national security interests (e.g. foreign military sales or counterterrorism efforts) and/or development goals (e.g. health). Critics suggest that recent reductions in U.S. funding to promote democratic space and good governance—coupled with increases in U.S. support to other sectors such as security—may send a mixed message to host countries about U.S. priorities. Some also point to the decline in U.S. funding for democracy and governance (DG) since FY2012, particularly in countries like Egypt, Ethiopia or Sudan that have placed restrictions on NGO activity, as being perceived as rewarding bad behavior and abandoning civil society. More could be done to institutionalize the Administration's efforts to bolster civil society in U.S. foreign policy in the face of competing policy priorities, some experts suggest. For example, the SACSED position established by then-Secretary of State Hillary Clinton created a direct line to the Secretary and highlighted U.S. engagement with civil society as a key component of U.S. foreign policy and diplomacy. However, in discussions with CRS, many policymakers cautioned against using special envoys alone for this issue. The trade-offs inherent in policy decisions within the interagency process on civil society issues can make it more difficult for a special envoy to engage effectively in policymaking in multiple regions, especially when security threats are also a concern. Advocates suggest that enhanced institutional capacity related to this issue throughout the interagency, particularly through resourcing and staffing, might have a more sustainable impact. Advocates also recommend that all U.S. officials should elevate the focus on civil society, and that officials and programs should be evaluated, in part, on the basis of their engagement with civil society issues; some experts have also suggested the issuance of a Presidential Directive to this effect. Some have also underlined the utility of legislation such as the Brownback amendment (see " Legislative Action " below), in protecting U.S. support for civil society, both within the interagency when faced with competing interests, and in ensuring that foreign governments (including key security partners) cannot undercut U.S. support for civil society in repressive environments. The multilateral tools that the Administration has sought to bolster, including the CD and OGP, present new partnerships and opportunities that some experts hope will lead to concrete outcomes; however, some suggest that multilateral efforts may struggle because they also seek to include countries with mixed or restrictive records on civil society. Others question if these organizations can create good response mechanisms when members repress or restrict civil society. A test case is ongoing in the OGP with member state Azerbaijan, which is under review after international CSOs filed a complaint in March 2015. OGP reviewed and assessed the CSOs complaints to be credible. In an upcoming ministerial meeting in May 2016, OGP will review corrective actions by Azerbaijan and the status of its membership in the organization. Observers suggest this could be an opportunity to assess OGP's effectiveness in helping governments and civil society work cooperatively for transparent governance. Observers have also questioned the effectiveness of the Administration's presentation of U.S. regulation of NGOs as an example for other governments. For example, some suggest that the United States has sent mixed signals about its support to CSOs when it comes to efforts to counter terrorism financing. While the Financial Action Task Force (FATF), of which the United States is a leading member, was created to combat illicit funding flows, activists suggest that its recommendations have had a disproportionate impact on legitimate CSOs and philanthropic organizations, especially when compared to regulation of the private sector. The organization's focus on counter-terrorism, critics argue, has led to an uncompromising stance in which despotic regimes that have eliminated civic space altogether are rated highly for preventing illicit funding flows. They suggest that U.S. policy and models, as well as institutions like the Treasury Department, should address fears that NGOs could be used as fronts for corruption or terrorist financing activities while also working to support civil society space and operations. Experts further caution that, though the United States has raised international attention to the issue, restrictions on civil society also impact other governments and donors—both public and private. Some are calling for civil society and NGOs to develop membership models and/or a culture of philanthropy within their countries as possible alternatives to foreign funding. Experts also assess that the underlying issues, namely free expression, assembly, and association, are not merely a concern for civil society, NGOs, or human rights activists. Rather, they suggest that repressive actors could potentially benefit from separating concern over civil society space from broader attention on fundamental freedoms. Congressional Actions Supporting Civil Society Abroad Congress has demonstrated a strong and sustained interest in the promotion of vibrant civil society abroad as part of U.S. efforts to promote democracy, development, and security. While many such provisions are country- or issue-specific, others are global in scope. A nonexhaustive list of recent key examples follows: Legislative Action Inclusion of numerous provisions in appropriations measures supporting the role of civil society in international programs. For example, the House committee report accompanying the Department of State, Foreign Operations, and Related Programs Appropriations Bill, H.Rept. 114-154 includes the following passage: The Committee notes that during this time of unprecedented political change in many countries around the world, American leadership is critical. It is imperative that assistance is provided to advance democracy worldwide. The Committee is concerned about increased repression of civil society in many countries, which inhibits the ability of citizens to exercise their fundamental freedoms, such as freedom of association, speech, and religion. This disturbing global trend requires new approaches to promote democracy in order to overcome obstacles put in place by increasingly repressive governments. The Committee notes that finding new approaches does not mean retreating from America's role in advancing democracy worldwide. The Committee, therefore, increases funding for the National Endowment for Democracy and the Democracy Fund above the fiscal year 2015 enacted level and includes not less than the fiscal year 2015 enacted level for democracy programs. Introduction of legislation that includes mention of the key role of civil society in a broad array of measures. In the 114 th Congress, some examples of such measures include H.R. 1567 , the Global Food Security Act of 2015; S.Res. 388 , a Resolution Supporting the Goals of International Women's Day; S. 2632 , the Vietnam Human Rights Act of 2015; S. 2551 , the Genocide and Atrocities Prevention Act of 2016; and H.R. 2989 , the South Sudan Peace Promotion and Accountability Act of 2015, to name a few examples. In what is generally referred to as the "Brownback amendment," the 2005 enactment of a provision in the annual appropriations legislation stating that "democracy and governance activities shall not be subject to the prior approval by the government of any foreign country." The legislative language originally pertained to Egypt, and was expanded in FY2008 to include "any foreign country." Fact Finding and Awareness Raising Fact-finding missions and publications such as a December 2006 Senate Foreign Relations Committee staff report on "Nongovernmental Organizations and Democracy Promotion: "Giving Voice to the People," based on research conducted by staff in selected countries in Africa, Asia, Central Europe, and Latin America. Members and staff regularly meet with civil society groups when traveling abroad, both to gather information and to signal support for such groups. Hearings such as "Threats to Civil Society and Human Rights Defenders Worldwide," held by the Tom Lantos Human Rights Commission on May 17, 2012, and a broader 2015 "Briefing Series on the Shrinking Space for Civil Society" by the Commission featuring discussions on Kenya, Bangladesh, and with Press Freedom Awardees from Ethiopia, Paraguay, Malaysia, and Syria. Participation in organizations such as the Commission on Security & Cooperation in Europe, also known as the U.S. Helsinki Commission. The Commission is an independent agency of the Federal Government which monitors compliance with the Helsinki Accords and seeks to advance comprehensive security through promotion of human rights, democracy, and economic, environmental and military cooperation in the OSCE region. The Commission holds hearings, and its Congressional Co-Chairs issue statements, highlighting specific challenges to civil society in the Eurasian space. Potential Areas for Congressional Engagement Congress will likely continue to provide oversight of democracy assistance programs and, given the recent history of congressional action described above, it appears likely that at least some in Congress may to seek to continue to promote and protect the role of civil society abroad in particular. Among the actions that Congress may consider on this issue, several potential avenues emerge, any of which could potentially be addressed through legislation. Raising the Profile of the Closing Space Phenomenon Congress has used a variety of means to call attention to specific cases of repression of civil society groups abroad. These have included, for example: hearings, legislation, communications with administration officials or with foreign governments, public statements, fact-finding missions abroad, and funding directives. Members will likely continue to use these tools to highlight the role of civil society and the challenges CSOs face in various countries. Congress could also mandate high-profile reporting from the executive branch on this issue. For example, Congress could require dedicated, public reporting on civil society challenges in existing executive branch reports to Congress. Congress could also mandate that the reporting include a public rating or ranking system for political and civil rights. Such ratings could be based on diplomatic assessments as well as NGO reports and ratings. Such rankings could, of course, also be tied to restrictions, conditions, and/or increases in engagement, assistance, or Congressional oversight. Some advocates have argued that the Congressionally-mandated ranking approach in the State Department's Trafficking in Persons Reports, which reports on human trafficking and ranks governments on their efforts to address the problem, has been useful as a tool to encourage improved behavior by otherwise unresponsive governments; other examples have included reporting and restrictions on issues ranging from child soldiers to international religious freedom. Conducting Oversight of USG Civil Society Support In providing oversight of U.S. government programs assisting civil society abroad, Congress may wish to examine a broad range of issues related to the design, effectiveness and execution of such programs, including provisions relating to their monitoring and evaluation. The efficacy of current programs is a broad category that Congress may seek to investigate. Questions could range from the most detailed examination of specific country cases, to how the challenge is being addressed on a global scale, or how to identify or develop metrics to measure efficacy. Congress could explore at the broadest level additional measures the U.S. government might undertake to limit or reverse the increasing tide of measures restricting civil society globally. Congress might also examine the appropriate mix and relative efficacy of smaller, targeted, often discretely executed programs designed to assist specific individuals or groups, with broader, systemic approaches seeking to improve the climate for civil society activity. While the former approach is often executed using funding in the low thousands of dollars, broader approaches (such as the Civil Society Hubs under development using USAID and other funding) can require millions of dollars over a longer term. The effectiveness and durability of the institutional organization of U.S. government programs supporting civil society may also be an avenue of Congressional interest. Congress could explore, for example, the effectiveness of the National Security Council-led interagency process designed to ensure that all relevant policy dimensions, including civil society support, are taken into account. Among the key questions in this respect, observers suggest, is the extent to which counter-terrorism imperatives—including the need to address foreign financing of terrorist organizations through mechanisms such as FATF—are balanced with other concerns in the broader policy discussion. Congress might also wish to assess the extent to which the priority given to this issue under the Obama administration has been tied to specific individuals, and how it has or might be affected by changes in key foreign policy and national security personnel – or a change of administration. Congress may wish to examine the various funding streams dedicated to civil society support. In reviewing this area, Congress could consider not only trends and levels of funding, but how U.S. funding is best provided—whether directly, or through multilateral efforts, for example. Congress may also review a number of additional issues, such as the role and effectiveness of cross-border funding of CSOs by private sources such as foundations; ongoing debates among CSO analysts regarding whether foreign support to CSOs has the potential to divorce foreign CSO representatives from accountability to those they serve directly; the extent to which U.S. support could lead civil society groups to be labeled as foreign or American entities, further feeding into narratives painting civil society as foreign organizations that require strict regulation; and best practices for how the United States works with civil society as a donor, including efforts to provide operational support to embattled organizations or programs that instead fund CSOs to provide services or implement U.S.-funded programs. Also of interest could be an examination of the coordination and overlap between multilateral efforts such as the Open Government Partnership, the Community of Democracies, and even industry-focused civil society partnerships like the Extractive Industries Transparency Initiative (EITI). The United States assumption of the Presidency of the Community of Democracies in July 2015 for a two-year term might also be an opportunity for additional scrutiny of U.S. and multilateral efforts to address restrictions on civil society. Appropriations and Funding Through the appropriations process, Congress could direct increased funding levels for programs that directly support civil society through a range of activities, including capacity building, legal aid, and public diplomacy. Congress could also explore minimum funding levels for civil society, which could address rapid response efforts as well as efforts to improve the operational environment. Flexible funding for multilateral coalitions or U.S. programs that provide emergency assistance to civil society (such as emergency response programs like Lifeline and programs focused on the enabling environment like LEEP, described above) could be a particular focus. Multilateral funding coalitions could be an additional avenue of support for organizations that cannot accept or do not want U.S. funding. Congress could also bolster funding for Governing Justly and Democratically (GJD) and the National Endowment for Democracy, as broader efforts to promote democracy and governance may lead to an enabling environment for civil society. In addition, Congress could direct portions of bilateral and regional funds (such as Development Assistance or Economic Support Funds) towards civil society support. Congress could also explore the extent to which such funds, when appropriated, have been transferred by agencies towards other purposes. Members could also seek to expand legislative restrictions or conditions relating to foreign assistance and civil society, such as the Brownback amendment. This could include a review of foreign aid to countries that repress civil society. Congress may wish to assess if U.S. assistance, including security assistance (equipment or arms sales, etc.), could be used by foreign governments to undermine the enabling environment for civil society and explore legislative restrictions or conditions that restrict some assistance if/when civil society is restricted by foreign governments. Congress might also explore whether additional restrictions or authorities might be usefully leveraged by U.S. assistance implementers to the benefit of civil society groups abroad. Examining Policy Trade-Offs in Specific Cases Many experts and former U.S. officials acknowledge that the Administration's rhetorical support for civil society abroad has not always matched its publicly visible actions. For example, President Obama's 2015 visit to Kenya and Ethiopia appeared to highlight differences in the U.S. approach to standing with civil society. In Kenya, President Obama was seen publicly with numerous civil society activists—including some groups that the Kenyan government considers problematic—and participated in a specific event with NGOs. In Ethiopia, in contrast, U.S. concern about strict government control over NGOs and civil society space was largely addressed behind closed doors. Though many observers recognize the uniqueness of each country's context, some contend that Obama's visit to Ethiopia—which is a key counterterrorism partner, a regional power, and a top troop contributing country for peacekeeping operations—did not send a strong signal of support for civil society or countering repression. Congress could explore these and other kinds of cases with senior Administration officials in hearings or private briefings. Direct Engagement with Counterpart Legislatures Congress could, some advocates suggest, engage directly with legislatures considering potentially repressive CSO legislation. Such engagement could be pursued bilaterally, in coordination with other like-minded legislators or legislatures, or through multilateral interparliamentary groups such as the Inter-Parliamentary Union or the OSCE Parliamentary Assembly. In addition to issuing statements of concern, Members could invite foreign legislators to the United States for dialogue and to share best practices. Congressional travel may be another avenue for engagement with legislative counterparts and at-risk CSOs. Outlook The repression of civil society in many countries around the world may represent a "new normal," many experts fear, a dynamic which poses significant challenges to the promotion of democratic governance abroad. In the face of what some have called a democratic roll-back, U.S. policymakers, and Congress in particular, may consider options to include how best to support civil society abroad, in particular when weighing such support against the desired cooperation of a foreign government on other issues of critical interest to the United States. U.S. leadership on this issue, including in the context of multilateral organizations, may be received quite differently depending on the specific circumstance, requiring sophisticated understanding of local conditions as well as effective coordination with other actors ranging from private foundations to international partners. Advocates of support to civil society abroad are concerned that the Administration's elevation of the issue, manifested in the Stand with Civil Society initiative, while laudable in principle, may not have sufficiently mobilized resources in support of the enabling environment for civil society abroad to date. Some also express concern that despite its shortcomings, the priority given to the issue under President Obama may not be sustainable once he leaves office. Given these trends, it appears all but certain that Congress will continue to examine civil society developments and may seek ways in which to support civil society abroad, even as it grapples with the difficult choices inherent in overseeing foreign relations and assistance.

Civil society organizations (CSOs) around the world are confronting ever stricter limitations on their ability to operate, a phenomenon often referred to "closing space" for civil society work. From restrictions on the types of funding they are allowed to receive to draconian registration requirements, the measures targeting CSOs are increasingly putting pressure on the entire civil society sector in certain countries. These restrictions are most commonly imposed by governments seeking to limit the influence of nongovernmental actors, though restrictions are also being imposed by a broad range of governments, including democratic allies. Increasing awareness of this phenomenon has elevated concerns among civil society advocates and some policymakers, including in Congress. Congress has also shaped U.S. policy toward civil society through funding, legislation, hearings, and oversight activities. Many experts assess that the closure of civil society space is likely to continue. Some experts and advocates warn that, even in already restrictive environments, civil society actors could face new or additional repressive action, particularly when civil society engages in politically charged or sensitive issues. This will likely impact the ability of donors'—including the United States government, private donors, foundations, and international partners—to work with nongovernmental organizations (NGOs) abroad. Closing space for civil society could also impact broader U.S. engagement on the freedoms of assembly, association, and expression. The United States has long supported civil society abroad, which is often viewed as an important component of sustainable democracy and economic growth. The United States is the largest financial supporter of civil society in the world, according to a recent White House fact sheet, with more than $3.2 billion invested to strengthen civil society since 2010. Civil society groups are also in many cases the implementers of U.S. foreign assistance programs. Many experts view the results of the United States' efforts to support civil society as mixed. In the face of the rapid geographic and substantive expansion of measures designed to close civil society space, the Obama Administration is credited for launching the Stand with Civil Society initiative in 2013, a global call to action to support, defend, and sustain civil society. This effort saw Presidential attention to the effort through speeches and a Presidential Memorandum. The Administration has also devoted specific funding and programmatic responses to address the closing space phenomenon. While advocates generally praise the Administration for raising the profile of the closing space issue, some experts question whether the Administration's actions have fully matched its rhetoric, or whether the policies and structures put into place under the initiative are sustainable. Policy responses to the problem of closing space are complicated by a number of factors, including various competing interests in the policy process, such as balancing support for civil society with U.S. willingness to confront important bilateral partners, possible impacts on other programs or objectives, and the availability of suitable tools or sufficient leverage. Congress has at times treated the promotion of vibrant civil societies abroad as a key element of U.S. foreign policy and has taken action to support civil society through a range of activities, including legislation. While many such provisions are country- or issue-specific, others are global in scope. Congress may choose to further consider legislation, oversight activities—such as reporting, hearings, or direct engagement—and U.S. funding on this issue.

Introduction The National Flood Insurance Program (NFIP) is authorized by the National Flood Insurance Act of 1968, and was reauthorized until September 30, 2017, by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12). Congress amended elements of BW-12, but did not extend the NFIP's authorization further in the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA). The NFIP received a short-term reauthorization through December 8, 2017, a second short-reauthorization through December 22, 2017, and a third short-term reauthorization through January 19, 2018. The NFIP lapsed between January 20 and January 22, 2018, and received another short-term reauthorization until February 8, 2017. The NFIP is managed by the Federal Emergency Management Agency (FEMA), through its subcomponent Federal Insurance and Mitigation Administration (FIMA). The NFIP has two main policy goals: (1) to provide access to primary flood insurance, thereby allowing for the transfer of some of the financial risk of property owners to the federal government; and (2) to mitigate and reduce the nation's comprehensive flood risk through the development and implementation of floodplain management standards. A longer-term objective of the NFIP is to reduce federal expenditure on disaster assistance after floods. As of October 2017, the NFIP had 5 million flood insurance policies providing nearly $1.27 trillion in coverage, with over 22,000 communities in 50 states and 6 other jurisdictions participating in the NFIP. As a public insurance program, the goals of the NFIP were originally designed differently from the goals of private-sector companies. As currently authorized, the NFIP also encompasses social goals to provide flood insurance in flood-prone areas to property owners who otherwise would not be able to obtain it, and to reduce government's cost after floods. From the inception of the NFIP, the program has been expected to achieve multiple objectives, some of which may conflict with one another: To ensure reasonable insurance premiums for all. To have risk-based premiums that would make people aware of and bear the cost of their floodplain location choices. To secure widespread community participation in the NFIP and substantial numbers of insurance policy purchases by property owners. To earn premium and fee income that, over time, covers claims paid and program expenses. Congress has authorized FEMA to borrow no more than $30.425 billion from the U.S. Treasury in order to operate the NFIP. At the beginning of the 2017 hurricane season, the NFIP owed $24.6 billion to the Treasury. On September 22, 2017, the NFIP borrowed the remaining $5.825 billion from the Treasury to cover claims from Hurricane Harvey, Hurricane Irma, and Hurricane Maria, reaching the NFIP's authorized borrowing limit of $30.425 billion. On October 26, 2017, Congress cancelled $16 billion of NFIP debt, making it possible for the program to pay claims for Hurricanes Harvey, Irma, and Maria. This represents the first time that NFIP debt has been cancelled, although Congress appropriated funds between 1980 and 1985 to repay NFIP debt. FEMA borrowed another $6.1 billion on November 9, 2017, to fund estimated 2017 losses, including those incurred by Hurricanes Harvey, Irma, and Maria and anticipated programmatic activities, bringing the debt up to $20.525 billion. The NFIP currently has $9.9 billion of remaining borrowing authority. Expiration of Certain NFIP Authorities The statute for the NFIP does not contain a comprehensive expiration, termination, or sunset provision for the whole of the program. Rather, the NFIP has multiple different legal provisions that generally tie to the expiration of key components of the program. Unless reauthorized or amended by Congress, the following will occur after February 8, 2018: The authority to provide new flood insurance contracts will expire. Flood insurance contracts entered into before the expiration would continue until the end of their policy term of one year. The authority for NFIP to borrow funds from the Treasury will be reduced from $30.425 billion to $1 billion. Other activities of the program would technically remain authorized following February 8, 2018, such as the issuance of Flood Mitigation Assistance (FMA) grants. However, the expiration of the key authorities described above would have varied and generally serious effects on these remaining NFIP activities. Legislation in the 115th Congress The House Financial Services Committee completed markup on June 21, 2017, of seven bills to reform and reauthorize the NFIP. The 21 st Century Flood Reform Act ( H.R. 2874 ) came to the House floor under H.Res. 616 , and included provisions from the six other bills. H.R. 2874 passed the House on a vote of 237-189 on November 14, 2017. Three bills have been introduced in the Senate to reauthorize the NFIP: S. 1313 (Flood Insurance Affordability and Sustainability Act of 2017), S. 1368 (Sustainable, Affordable, Fair and Efficient [SAFE] National Flood Insurance Program Reauthorization Act of 2017), and S. 1571 (National Flood Insurance Program Reauthorization Act of 2017). None of these bills have yet been considered by the Senate Committee on Banking, Housing, and Urban Affairs, the committee assigned all three Senate bills. The remainder of this report will summarize relevant background information and proposed changes to selected areas of the NFIP in H.R. 2874 , which would reauthorize the NFIP until September 30, 2022, among other things. The report does not examine every provision in detail, but focuses on selected provisions which would introduce significant changes to the NFIP or where the effect of the provision may not be clear. NFIP Premiums and Surcharges As of October 2017, the written premium on approximately 5 million policies in force was $3.6 billion. Included within NFIP premiums are several fees and surcharges mandated by law on flood insurance policies. First, the Federal Policy Fee was authorized by Congress in 1990 and helps pay for the administrative expenses of the program, including floodplain mapping and some of the insurance operations. The amount of the Federal Policy Fee is set by FEMA and can increase or decrease year to year. As of October 2017, the fee is $50 for Standard Flood Insurance Policies (SFIPs), $25 for Preferred Risk Policies (PRPs), and $25 for contents-only policies. Second, a reserve fund assessment was authorized by Congress in BW-12 to establish and maintain a Reserve Fund to cover future claim and debt expenses, especially those from catastrophic disasters. By law, FEMA is required to maintain a reserve ratio of 1% of the total loss exposure through the reserve fund assessment. However, FEMA is allowed to phase in the reserve fund assessment to obtain the ratio over time, with an intended target of not less than 7.5% of the 1% reserve fund ratio in each fiscal year. From April 2016, using its discretion, FEMA began charging every NFIP policy a reserve fund assessment equal to 15% of the premium charged for both SFIPs and PRPs. The reserve fund assessment has increased from its original status, in October 2013, of 5% on all SFIPs, and 0% on PRPs. In addition to the reserve fund assessment, all NFIP policies are also assessed a surcharge following the passage of HFIAA. The amount of the surcharge is dependent on the type of property being insured. For primary residences, the charge is $25; for all other properties, the charge is $250. Revenues from the surcharge are deposited into the Reserve Fund. Except for certain subsidies, flood insurance rates in the NFIP are directed to be "based on consideration of the risk involved and accepted actuarial principles," meaning that the rate is reflective of the true flood risk to the property. However, Congress has directed FEMA not to charge actuarial rates for certain categories of properties and to offer discounts to other classes of properties in order to achieve the program's objective that owners of existing properties in flood zones could afford flood insurance. There are three main categories of properties which pay less than full risk-based rates: pre-FIRM properties, newly mapped properties, and grandfathered properties. Pre-FIRM Subsidy Structures built or substantially improved before December 31, 1974, or before FEMA published the first FIRM for their community, whichever was later, are referred to as pre-FIRM structures. Policies on such structures are allowed to have lower premiums than what would be expected to cover predicted claims. The availability of this pre-FIRM subsidy was intended to allow preexisting floodplain properties to contribute in some measure to prefunding their recovery from a flood disaster instead of relying solely on federal disaster assistance. In essence, the flood insurance could distribute some the financial burden among those protected by flood insurance and the public. As of March 2017, approximately 16.1% of all NFIP policies received a pre-FIRM subsidy. Historically, the total number of pre-FIRM policies is relatively stable, but the percentage of those policies by comparison to the total policy base has decreased. The pricing subsidy for pre-FIRM policies is progressively being phased out of the NFIP at a rate between 5% and 18% for primary residences and 25% for all other categories, as was initially required under Section 100205 of BW-12, and revised by Sections 3 and 5 of HFIAA. Newly Mapped Subsidy Congress introduced a new form of subsidy in HFIAA for owners of properties newly mapped into a Special Flood Hazard Area (SFHA). The newly mapped procedure applies to properties previously in zones of moderate or minimal flood hazards which are newly mapped into a SFHA on or after April 1, 2015, if the applicant obtains coverage that is effective within 12 months of the map revision date. The newly mapped procedure does not apply to properties mapped into a SFHA by the initial FIRM for a community entering the NFIP, and certain properties may be excluded based on their loss history. The rate for eligible newly mapped properties is equal to the PRP rate, but with a higher Federal Policy Fee (FPF), for the first 12 months following the map revision. After the first year, the newly mapped rate is to begin its transition to a full-risk rate, with annual increases to newly mapped policy premiums calculated using a multiplier that varies by the year of the map change. As of March 2017, about 3.9% of NFIP policies receive a newly mapped subsidy. Grandfathering Using the authority to set rate classes for the NFIP and to offer lower than actuarial premiums, FEMA allows owners of properties that were built in compliance with the FIRM in effect at the time of construction to maintain their old flood insurance rate class if their property is remapped into a new flood rate class. This practice is colloquially referred to as "grandfathering," "administrative grandfathering," or the "grandfather rule" and is separate and distinct from the pre-FIRM subsidy. FEMA does not consider the practice of grandfathering to be a subsidy for the NFIP, per se, because the discount provided to an individual policyholder is cross-subsidized by other policyholders in the NFIP. Thus, while grandfathering does intentionally allow policyholders to pay premiums that are less than their known actuarial rate, the discount is offset by others in the same rate class as the grandfathered policyholder. Congress eliminated the practice of offering grandfathering to policyholders after new maps were issued in BW-12, but then subsequently reinstated the practice in HFIAA. FEMA does not have a definitive estimate on the number of properties that have a grandfathered rate in the NFIP, though data are being collected to fulfill a separate mandate of HFIAA. Unofficial estimates suggest that at least 10%-20% of properties are grandfathered, and these figures may increase with time as newer maps are introduced in high-population areas. Proposed Changes to Premiums and Surcharges in H.R. 2874 Section 102 would phase out the pre-FIRM subsidy for primary residences at a rate of 6.5%-15% (compared to the current rate of 5-18%), except that in the first year after enactment, the minimum rate would be 5%; in the second year after enactment, the rate would be 5.5%; and in the third year of enactment, the rate would be 6%. The phaseout of the pre-FIRM subsidy for other categories of properties (nonprimary residences, nonresidential properties, severe repetitive loss properties, properties with substantial cumulative damage, and properties with substantial damage or improvement after July 6, 2012) would remain at 25%. This section would make it possible for FEMA to raise premiums more rapidly than under current legislation by increasing the minimum rate at which the pre-FIRM subsidy could be removed for primary residences. Section 105 would require FEMA, not later than two years after enactment, to calculate premium rates based on a consideration of the differences in flood risk resulting from coastal flood hazards and riverine, or inland flood hazards. Six months prior to the effective date of risk premium rates, the FEMA Administrator would be required to publish in the Federal Register an explanation of the bases for, and methodology used to determine, the chargeable premium rates to be effective for flood insurance coverage under this title. Certain aspects of coastal flood risk are already incorporated into NFIP rates, notably risk from wave action (known as the "V" zone); how this may change with this possible new requirement is not yet known. Section 109 would require that no new flood insurance coverage may be provided after September 30, 2022, unless an appropriate body (e.g., the local or state government) has imposed, by statute or regulation, a duty on any seller or lessor of improved real estate to provide a property flood hazard disclosure which discloses any actual knowledge of the seller of prior physical damage caused by flood to any building on the property, prior insurance claims for flood losses (NFIP or private flood insurance), any previous notification regarding the designation of the property as a multiple loss property, and any federal legal obligation to obtain and maintain flood insurance running with the property. This disclosure may affect properties that have flood history during real estate transactions by reducing the likelihood of them selling and/or reducing the value of the sale. Section 111 would require FEMA to conduct a study to evaluate insurance industry best practice and develop a feasible implementation plan and projected time line for including replacement cost value in setting NFIP premium rates. The Administrator would be required to begin gradually phasing in the use of replacement cost value in setting NFIP premium rates 12 months after enactment, with replacement cost value to be used in setting all NFIP premium rates by December 31, 2020. If this provision were enacted, it is anticipated that those properties with higher replacement costs than current local or national averages would begin paying more for their NFIP coverage than those properties that are below the average, which would pay less. How much more, or how much less, is uncertain. Section 112 would cap the premiums for 1-4 unit residential properties with elevation data meeting standards of the Administrator at $10,000 per year, adjusted for inflation every five years. There is currently no statutory cap on premiums. This cap could affect 800 properties, or 0.02% of NIFP policies, though that figure is subject to considerable change (likely increasing) as premium rates change going forward. Section 301 would require the Administrator, not later than three years from enactment, to calculate premium rates based on both the risk identified by the applicable FIRMs and by other risk assessment data and tools, including risk assessment models and scores from appropriate sources. This provision would expand on the existing method of determining rates (the FIRM) and allow alternatives, such as a risk score methodology (for example, a scale of 1 to 10 or 1 to 100, where the premiums would increase with the numerical score). Section 502 would increase the HFIAA surcharge from $25 to $40 for primary residences and from $250 to $275 for nonresidential properties and most nonprimary residences. However, the HFIAA surcharge for nonprimary residences which are eligible for a Preferred Risk Policy would drop from $250 to $125. This provision would increase the amount that most policyholders pay for flood insurance; however, FEMA does not include the HFIAA surcharge in their calculation of premium rate increases, so this increase would not affect the cap set out in Section 102. Section 503 would require the Administrator, beginning in fiscal year 2018, to place in the reserve fund an amount equal to not less than 7.5% of the required reserve ratio. If in any given year the Administrator does not do so, for the following fiscal year the Administrator would be required to increase the reserve fund assessment by at least one percentage point over the rate of the annual assessment, and to continue such increases until the fiscal year in which the statutory reserve ratio is achieved. This provision would likely increase premiums for all NFIP policyholders. Affordability Some in Congress have expressed concern related to the perceived affordability of flood insurance premiums and the balance between actuarial soundness and other goals of the NFIP. Particularly following the increase in premiums associated with BW-12 and HFIAA, concerns were raised that risk-based premiums could be unaffordable for some households. Section 100236 of BW-12 called for an affordability study by FEMA and also a study by the National Academy of Sciences (NAS) regarding participation in the NFIP and the affordability of premiums. The NAS completed the Affordability Study report in two parts. In HFIAA Section 9, Congress also required FEMA to develop a Draft Affordability Framework "that proposes to address, via programmatic and regulatory changes, the issues of affordability of flood insurance sold under the National Flood Insurance Program, including issues identified in the affordability study…." The framework was due 18 months following the submission of the Affordability Study which, based on FEMA's stated date of submittal of the Affordability Study, was September 10, 2017. According to FEMA, this report is still in the review stage. Provisions Related to Affordability in H.R. 2874 Section 103 would authorize a state or a consortium of states to create a voluntary flood insurance affordability program for owner-occupants of 1-4 unit residences in communities participating in the NFIP, and for which a Base Flood Elevation (BFE) is identified on a FIRM that is in effect and for which such other information is available as the Administrator considers necessary to determine the flood risk associated with such property. Eligibility would be determined by the state, but the affordability program would not be available to a household with income that exceeds the greater of (i) the amount equal to 150% of the poverty level for each state, or (ii) the amount equal to 60% of the median income of households residing in the state. Assistance could be in the form of either establishing a limit on the amount of chargeable risk premium paid or limiting the rate of increase in the amount of chargeable premiums. The state affordability program would be funded through a state affordability surcharge on each policy within that state for a property that is (A) not a residential property having four or fewer residences, or (B) such a residential property but is owned by a household that is not an eligible household for purposes of such fiscal year. Because this approach to affordability would not be funded by either federal or state taxes, but rather by other NFIP policyholders, it would create a new cross-subsidy within the NFIP for any states that develop an affordability program. Increasing Participation in the NFIP A long-standing objective of the NFIP has been to increase purchases of flood insurance policies, and this objective of widespread NFIP purchase was one motivation for keeping NFIP premiums reasonable and for later introducing the requirement to purchase flood insurance as a condition of receiving a federally backed mortgage for properties in a SFHA, commonly referred to as the mandatory purchase requirement. Early in the program, the federal government found that making insurance available, even at subsidized rates, did not provide sufficient incentive for communities to join the NFIP or for individuals to purchase flood insurance. In response, Congress passed the Flood Disaster Protection Act of 1973, which required the purchase of flood insurance and placed the responsibility for ensuring compliance on lending institutions. This mandatory purchase requirement was later strengthened by the National Flood Insurance Reform Act of 1994. In a community that participates or has participated in the NFIP, owners of properties in the mapped SFHA are required to purchase flood insurance as a condition of receiving a federally backed mortgage. By law and regulation, federal agencies, federally regulated lending institutions, and government-sponsored enterprises (GSE) must require these property owners to purchase flood insurance as a condition of any mortgage that these entities make, guarantee, or purchase. However, there are no official statistics available from the federal mortgage regulators responsible for implementation of the mandate, and no up-to-date data on national compliance rates with the mandatory purchase requirement. A 2006 study commissioned by FEMA found that compliance with this mandatory purchase requirement may be as low as 43% in some areas of the country (the Midwest), and as high as 88% in others (the West). A more recent study of flood insurance in New York City found that compliance with the mandatory purchase requirement by properties in the SFHA with mortgages increased from 61% in 2012 to 73% in 2016. The escrowing of insurance premiums, which began in January 2016, may increase compliance with the mandatory purchase requirement more widely. NFIP policies are not distributed evenly around the country; about 37% of the policies are in Florida, with 11% in Texas and 9% in Louisiana, followed by California with 5% and New Jersey with 4%. These five states account for 66% of all of the policies in the NFIP. NFIP participation rates are higher in coastal locations than in inland locations, and are highest in the most risky areas due to mandatory purchase requirements. The NFIP could potentially be financially improved with a more geographically diverse policy base and, in particular, through finding ways to increase coverage in areas perceived to be at lower risk of flooding than those in the SFHA. The flooding caused by the 2017 hurricanes highlighted the issue of low penetration rates of flood insurance. In the counties in Texas with a FEMA Individual Assistance declaration for Hurricane Harvey, the average penetration rate for all 41 counties was only 10%, with a 21% penetration rate for structures within the SFHA in those counties. The counties with the highest penetration rate were on the coast: Aransas County (72% penetration in SFHA, 43% penetration county-wide), Nueces County (70% in SFHA, 21% county-wide), and Galveston County (64% in SHFA, 47% county-wide). In the counties in Florida with a FEMA Individual Assistance declaration for Hurricane Irma, the average penetration rate for all 48 counties was only 12%, with a 31% penetration rate for structures within the SFHA in those counties. The counties with the highest penetration rate were St. Johns (73% in SFHA, 35% county-wide), Flagler (72% in SFHA, 18% county-wide), Nassau County (62% in SFHA, 25% county-wide), and Palm Beach County (62% in SFHA, 22% county-wide). NFIP Penetration rates were extremely low in Puerto Rico, with only 4436 residential policies at the time Hurricane Maria hit, for an average penetration rate of 0.23%, and in the Virgin Islands, with only 1412 policies, for an average penetration rate of 2.5%. Provisions Related to Increasing Participation in H.R. 2874 Section 508 would increase the civil monetary penalties from $2000 to $5000 on federally regulated lenders for failure to comply with enforcing the mandatory purchase requirement. In addition, the federal entities for lending regulations, in consultation with FEMA, would be required jointly to update and reissue the guidelines on compliance with mandatory purchase. Section 514 would require a report by the Government Accountability Office (GAO) within 18 months of enactment on the implementation and efficacy of the mandatory purchase requirement. The Role of Private Insurance in the NFIP One of the reasons that the NFIP was originally created was because private flood insurance was widely unavailable in the United States. Generally, private companies could not profitably provide flood coverage at a price that consumers could afford, primarily because of the catastrophic nature of flooding and the difficulty of determining accurate rates. Until recently the role of the private market in primary, residential flood insurance has been relatively limited. The main role of private insurance companies at the moment is in the operational aspect of the NFIP. FEMA provides the overarching management and oversight of the NFIP, and retains the actual financial risk of paying claims for the policy (i.e., underwrites the policy). However, the bulk of the day-to-day operation of the NFIP, including the marketing, sale, writing, and claims management of policies, is handled by private companies. The arrangement between the NFIP and private industry is authorized by statute and guided by regulation. There are two different arrangements that FEMA has established with private industry. The first is the Direct Servicing Agent (DSA), which operates as a private contractor on behalf of FEMA for individuals seeking to purchase flood insurance policies directly from the NFIP. The DSA handles the policies of severe repetitive loss properties. The second arrangement is called the Write-Your-Own (WYO) Program, where private insurance companies are paid to directly write and service the policies themselves. Roughly 86% of NFIP policies are sold by the 68 companies participating in the WYO Program. Companies participating in the WYO program are compensated through a variety of methods. Some have argued that the levels of WYO compensation are too generous, while others have argued that reimbursement levels are insufficient to cover all expenses associated with servicing flood policies under the procedures set by FEMA. A GAO study found that FEMA does not systematically consider actual flood expenses and profits when establishing WYO compensation, and has yet to compare WYO companies' actual expenses and compensation. Therefore, FEMA lacks the data to determine how much profit WYO companies make and whether its compensation payments are appropriate. In addition to the WYO program, there is a small private flood insurance market which most commonly provides commercial coverage, coverage above the NFIP maximums, or coverage in the lender-placed market. In general, the private flood market tends to focus on high-value properties, which command higher premiums and therefore the extra expense of flood underwriting can be more readily justified. At the moment very few private insurers compete with the NFIP in the primary voluntary flood insurance market, partly because the noncompete clause—the contractual restriction placed on WYO carriers against offering standalone private flood products that compete with the NFIP—curtails the potential involvement of the WYO companies. Barriers to Private Sector Involvement Private insurer interest in providing flood coverage has increased in recent years. Advances in the analytics and data used to quantify flood risk mean that a number of private insurance companies and insurance industry organizations have expressed interest in private insurers offering primary flood insurance in competition with the NFIP. Private insurance is seen by many as a way of transferring flood risk from the federal government to the private sector. A reformed NFIP rate structure could have the effect of encouraging more private insurers to enter the primary flood market; FEMA's subsidized rates are often seen as the primary barrier to private sector involvement in flood insurance. Even without the subsidies mandated by law, the NFIP's definition of full-risk rates differs from that of private insurers. Whereas the NFIP's full-risk rates must simply incorporate expected losses and operating costs, a private insurer's full-risk rates must also incorporate a return on capital. As a result, even those NFIP policies which are considered to be actuarially sound from the perspective of the NFIP may still be underpriced from the perspective of private insurers. The rules on the acceptance of private insurance for the mandatory purchase requirement have had a significant impact on the market potential for private insurers. In BW-12, Congress explicitly allowed federal agencies to accept private flood insurance to fulfill the mandatory purchase mortgage requirement as long as the private flood insurance "provides flood insurance coverage which is at least as broad as the coverage" of the NFIP, among other conditions. The implementation of this requirement has proved challenging, with the responsible federal agencies issuing two separate Notices of Proposed Rulemaking (NPRM) addressing the issue in October 2013 and November 2016. The crux of the implementation issue may be seen as answering the question of who would judge whether specific policies met the "at least as broad as" standard and what criteria would be used in making this judgment. The uncertainty about whether or not private policies would meet this standard has been viewed as a barrier to private sector participation in the flood insurance market, along with FEMA's policy on continuous coverage. Continuous coverage is required for property owners to retain any subsidies or cross-subsidies in their NFIP premium rates. A borrower may be reluctant to purchase private insurance if doing so means they would lose their subsidy should they later decide to return to NFIP coverage. Many insurers also view the lack of access to NFIP data on flood losses and claims as a barrier to more private companies offering flood insurance. It is argued that increasing access to past NFIP claims data would allow private insurance companies to better estimate future losses and price flood insurance premiums, and ultimately to determine which properties they might be willing to insure. However, FEMA's view is that the agency would need to address privacy concerns in order to provide property level information to insurers, because the Privacy Act of 1974 prohibits FEMA from releasing policy and claims data which contains personally identifiable information. Reinsurance In HFIAA, Congress revised the authority of FEMA to secure reinsurance for the NFIP from the private reinsurance and capital markets. In January 2017, FEMA purchased $1.042 billion of insurance, to cover the period from January 1, 2017, to January 1, 2018, for a reinsurance premium of $150 million. Under this agreement, the reinsurers will cover 26% of losses between $4 billion and $8 billion arising from a single flooding event. Although it is too early to estimate the total costs associated with Hurricane Harvey or Hurricane Irma, FEMA has already paid over $7.3 billion in claims for Hurricane Harvey, triggering the 2017 reinsurance. In mid-November 2017, FEMA began the procurement process for the January 2018 reinsurance renewal. Provisions Related to Private Insurance in H.R. 2874 Section 201 would revise the definition of private flood insurance previously defined in BW-12. For example, in revising the definition, the bill would strike existing statutory language describing how private flood insurance must provide coverage "as broad as the coverage" provided by the NFIP. Instead, the definition would rely on whether the insurance policy and insurance company were in compliance in the individual state (as defined to include certain territories and the District of Columbia). Further, "private flood insurance" would be specifically defined as including surplus lines insurance. Though the majority of regulation of private flood insurance would then rest with individual states, federal regulators would be required to develop and implement requirements relating to the financial strength of private insurance companies from which such entities and agencies will accept private insurance, provided that such requirements shall not affect or conflict with any state law, regulation, or procedure concerning the regulation of the business of insurance. The dollar amount of coverage would still have to meet federal statutory requirements and the GSEs may implement requirements relating to the financial strength of such companies offering flood insurance. The bill would also specify that if a property owner purchases private flood insurance and decides then to return to the NFIP, they would be considered to have maintained continuous coverage. This provision would allow private insurers to offer policies that offer coverage that might differ significantly from NFIP coverage, either by offering greater coverage or potentially offering reduced coverage that could leave policyholders exposed after a flood. Section 202 would apply the mandatory purchase requirement only to residential improved real estate, thereby eliminating the requirement for other types of properties (e.g., all commercial properties) from January 1, 2019. This is likely to affect the policy base of the NFIP by reducing the number of commercial properties covered. However, it is uncertain how many will elect to forgo insurance coverage (public or private) entirely. To the extent that commercial properties no longer choose to carry insurance (or are allowed to do so by the conditions of their mortgages), there may be increased uninsured damages to these properties from floods. Section 203 would eliminate the noncompete requirement in the WYO arrangement with FEMA that currently restricts WYO companies from selling both NFIP and private flood insurance policies. This would allow these WYO companies to offer their own insurance policies while also receiving reimbursement for their participation in the WYO Program to administer the NFIP policies. It is unknown what criteria WYO companies will use to establish their own policies, and how they will choose to offer those policies rather than NFIP policies to potential customers. Section 204 would require the FEMA Administrator to make publicly available all data, models, assessments, analytical tools, and other information that is used to assess flood risk or identify and establish flood elevations and premiums. This section would also require FEMA to develop an open-source data system by which all information required to be made publicly available may be accessed by the public on an immediate basis by electronic means. Within 12 months after enactment, FEMA would be required to establish and maintain a publicly searchable database that provides information about each community participating in the NFIP. Personally identifiable information shall not be made available; the information provided shall be based on data that identify properties at the zip code or census block level. Ultimately, these data could be used to better inform the participation of private insurers in offering private flood insurance, as well as informing future flood mitigation efforts. However, the availability of NFIP data could make it easier for private insurers to identify the "profitable, lower-risk policies" of the NFIP policies that are "overpriced" due to explicit cross-subsidization or imprecise flood insurance rate structures, and adversely select these properties, while the government would likely retain those policies that benefit from those subsidies and imprecisions, potentially increasing the deficit of the NFIP. Section 507 would establish that the allowance paid to WYO companies shall not be greater than 27.9% of the chargeable premium for such coverage. Section 512 would require annual transfer of a portion of the risk of the NFIP to the private reinsurance or capital markets to cover a FEMA-determined probable maximum loss target that is expected to occur in the fiscal year, no later than 18 months after enactment. Properties with Multiple Losses An area of controversy involves NFIP coverage of properties that have suffered multiple flood losses, which are at greater risk than the average property insured by the NFIP. One concern is the cost to the program; another is whether the NFIP should continue to insure properties that are likely to have further losses. The NFIP currently uses more than one definition of repetitive loss. The statutory definition of a repetitive loss structure is used for applications for FMA grants. A slightly different definition is used for Increased Cost of Compliance Coverage, and a third definition is used for internal tracking of insurance data and also for the Community Rating System. The statutory definition of a severe repetitive loss property is a property which has incurred four or more claim payments exceeding $5,000 each, with a cumulative amount of such payments over $20,000; or at least two claims with a cumulative total exceeding the value of the property. The definition of severe repetitive loss property is consistent across program elements in the NFIP. According to FEMA, repetitive loss (RL) and severe repetitive loss properties (SRL) account for approximately $17 billion in claims, or approximately 30% of total claims over the history of the program. As of January 31, 2017, there were 90,000 currently insured repetitive loss properties and 11,000 currently insured severe repetitive loss properties. The currently insured repetitive loss and severe repetitive loss properties (which represent about 2% of the overall policies in the NFIP) have accounted for approximately $9 billion in claims, or approximately 16% of total claims over the history of the program. A study of all of the residential NFIP claims filed between January 1978 and December 2012 showed that the magnitude of claims for repetitive loss structures as a percentage of building value was higher than nonrepetitive loss properties by 5%-20%. Provisions Related to Multiple Loss Properties in H.R. 2874 Section 402 would require certain NFIP communities with a history of flood loss to identify where repeatedly flooded properties are located and assess the continuing risks to such areas and develop a community-specific plan for mitigating flood risks in these areas or face possible sanctions from FEMA. Covered communities include those which participate in the NFIP within which such properties are located: (i) 50 or more repetitive loss structures for each of which, during any 10-year period, two or more claims for payment under flood insurance coverage have been made with a cumulative amount exceeding $1000; (ii) five or more severe repetitive loss structures for which mitigation activities have not been conducted; or (iii) a public facility or a private nonprofit facility that has received assistance for repair, restoration, reconstruction, or replacement under Section 406 of the Stafford Act ( P.L. 93-288 ) in connection with more than one flooding event in the most recent 10-year period. To assist communities in the preparation of plans, FEMA would be required to provide covered communities with appropriate data regarding property addresses and dates of claims associated with insured properties within the community. Before sanctioning a community for not fulfilling the requirements of this section, FEMA would be required to issue notice of noncompliance before sanctions and recommendations for actions to bring the community into compliance. FEMA would also be required to consider the resources available to the community affected, including federal funding, the portion of the community that lies within the SFHA, and other factors that make it difficult for the community to conduct mitigation activities for existing flood-prone structures. FEMA would be required to develop sanctions in future regulations. In making determinations regarding financial assistance for mitigation, the Administrator may consider the extent to which a community has complied with this subsection. Although a community may incorporate plans required under this section into flood mitigation plans or hazard mitigation plans which they may already be required to complete, covered communities may feel that this section imposes significant additional requirements. Section 504 would define a new "multiple-loss property" category, which would include three types of properties: (1) a revised definition of repetitive loss property; (2) a severe repetitive loss property, with the same definition as the existing statutory definition; and (3) a new category of extreme repetitive loss property. The new definition of a repetitive loss property would be a structure that has incurred flood damage for which two or more separate claims of any amount have been made. The new definition of an extreme repetitive loss property would be a structure which has incurred flood damage for which at least two separate claims have been made with the cumulative amount of such claims payments exceeding 150% of the maximum coverage available for the structure. This section also defines the term "qualified loss payment" as a claims payment of any amount made in connection with a flood event that occurred after the date of enactment, but not including any claim that occurred before a structure was made compliant with state and local floodplain management requirements. Any multiple loss properties which are not paying full risk-based rates, and for which two qualified claims payment have been made, would have rates increased at 10% per year until the full risk-based rate is reached. Any multiple loss properties which are not paying full risk-based rates, and for which three qualified claims payment have been made, would have rates increased at 15% per year until the full risk-based rate is reached. Severe repetitive loss properties and extreme repetitive loss properties would be subject to a minimum annual deductible of $5000. Flood insurance would not be available to an extreme repetitive-loss property for which a claim payment for flood loss was made after the date of enactment if the property owner refused an offer of mitigation. The newly mapped subsidy would not be available to multiple loss properties. This section would eliminate grandfathering for multiple loss properties after two future claims. Section 505 would eliminate any new or renewed NFIP coverage for multiple-loss properties with excessive lifetime claims. The section defines such properties as those where aggregate amounts in claims payments that have been made after18 months from enactment exceed three times the amount of the replacement value of the structure. This provision would represent the first time that the NFIP would refuse to cover a property in an SFHA. Noninsurance Functions of the NFIP In the debate about the future of the NFIP, the fact that flood insurance is only one of the functions of the NFIP's key responsibilities is sometimes overlooked. The NFIP is more than just an insurance program. The NFIP also engages in many "noninsurance" activities that may be in the public interest: it disseminates flood-risk information through the creation of flood maps, requires communities to adopt land use and building code standards in order to participate in the program, potentially reduces the need for other post-flood disaster aid, may contribute to community resilience by providing a mechanism to fund rebuilding after a flood, and may help protect lending institutions against mortgage defaults due to uninsured losses. The benefits of such tasks are not directly measured in the NFIP's financial results from underwriting flood insurance. According to FEMA, the program saves the nation an estimated $1.87 billion annually in flood losses avoided because of the NFIP's building and floodplain management regulations. Flood Mitigation Flood insurance can sometimes be seen as if it is the solution to flooding, but, of course, insurance does not prevent flooding, it merely makes it possible to recover financially more rapidly after a flood. Flood mitigation creates safer communities and can save money for individuals and taxpayers. The importance of FEMA's mitigation programs (which include, but are not limited to, FMA programs) is illustrated by research findings that for every dollar invested by FEMA in flood mitigation between 1993 and 2003, society as a whole saved $5 due to reduced future flood losses. The NFIP encourages communities to adopt and enforce floodplain management regulations such as zoning codes, subdivision ordinances, building codes, and rebuilding restrictions. Internal FEMA studies have found that structures built to FEMA standards experience 73% less damage than structures not built to those standards. Mitigation activities, however, form only part of the NFIP activities and are funded entirely by premiums and fees paid by NFIP policyholders. The NFIP manages three programs that help communities reduce flood risk: the Community Rating System, the FMA grant program, and Increased Cost of Compliance coverage (ICC). The NFIP requires most policyholders to purchase ICC coverage, which is in effect a separate insurance policy to offset the expense of complying with more rigorous building code standards when local ordinances require them to do so. This ICC is authorized in law, with rates for the coverage as well as how much can be paid out for claims, set by FEMA. Congress has capped the amount that can be paid for ICC coverage at $75. The ICC policy has a separate rate premium structure: currently ICC premiums vary between $4 and $70. ICC coverage provides an amount up to $30,000 in payments for certain eligible expenses. For example, ICC claims payments may be used toward the costs of elevating, demolishing, relocating, or flood-proofing nonresidential buildings, or any combination of these actions. ICC coverage is in addition to the building coverage provided by the standard flood policy. However, the payment on the building claim plus the ICC claim cannot exceed the statutory maximum payment of $250,000 for residential structures or $500,000 for nonresidential structures. According to ICC data, elevation is the most common form of mitigation. Approximately 61% of all ICC claims closed with payment are single-family residential claims involving compensation for elevation of a structure to or above the BFE. Although the cost of elevating a structure depends on the type of building and elevation requirement, the average cost of elevating an existing property has been estimated at $33,239 to $91,732, and suggestions have been made for years that the amount of ICC coverage should be raised. Selected Provisions Related to Flood Mitigation in H.R. 2874 Section 113 requires the Administrator to offer policyholders a reduction of the risk premium rate for the use of approved actions that mitigate the flood risk of their property, including innovative mitigation techniques that could be deployed on a block or neighborhood scale in dense urban environments and the elevation of mechanical systems such as heating, ventilation, and air conditioning. This would expand on existing authority provided in the law, by specifically requiring the Administrator to provide the premium reduction for approved mitigation methods. Section 403 would authorize the Administrator to supplement the existing ICC coverage with the option of allowing policyholders to purchase additional ICC coverage up to $60,000, for a surcharge priced accordingly by FEMA. This section would also expand the availability of ICC coverage to include properties that FEMA or a community identifies as being at high risk for future flood damages, and properties located in a covered community (as defined in Section 402). This would allow policyholders to claim ICC coverage in certain circumstances to mitigate their property before a flood, rather than waiting until after they had been flooded. Section 504 would give priority under the FMA program to property owners for direct grants for carrying out mitigation activities that reduce flood damage to extreme repetitive-loss properties, with up to 100% cost share subject to availability of funds. This section would also authorize $225 million for each fiscal year for the FMA program, subject to offsetting appropriations. This is a higher amount than currently authorized. Funding for the FMA program could also be provided by penalties collected for violations of the mandatory purchase requirement and grant funds recouped by FEMA from recipients who did not carry out funded mitigation activities. Floodplain Mapping FEMA develops, in coordination with participating communities, flood maps called FIRMs that depict the community's floodplain and flood risk zones. FIRMs provide the basis for setting insurance rates and identifying properties whose owners are required to purchase flood insurance. The FIRMs also provide the basis for establishing floodplain management standards that communities must adopt and enforce as part of their participation in the NFIP. Flood maps adopted across the country vary considerably in age and in quality, and there is no consistent, definitive timetable for when a particular community will have its maps revised and updated. By law, once every five years, FEMA is required to assess the need to revise and update all floodplain areas and flood-risk zones defined, delineated, or established by the mapping program, based on an analysis of all natural hazards affecting flood risks. This requirement does not dictate, however, that the FIRMs actually be updated once every five years. Generally, flood maps may require updating when there have been significant new building developments in or near the flood zone, changes to flood protection systems (e.g., levees and sand dunes), and environmental changes in the community. FEMA maps have been criticized for being out of date, using poor quality data or methods, or not taking account of changed conditions. In addition, the procedure to update maps is time consuming, in large part due to the lengthy statutory consultation and appeals process. In BW-12, Congress reestablished and reauthorized a body called the Technical Mapping Advisory Council (TMAC). The TMAC is a federal advisory committee established to review and make recommendations to FEMA on matters related to the national flood mapping program. The TMAC is broadly authorized to review and recommend improvements to how FEMA produces and disseminates flood hazard, flood risk, and flood map information. Selected Provisions Related to Floodplain Mapping in H.R. 2874 Section 302 would create a new appeal process if FEMA denies a request to update a flood map based on new information regarding BFE or other flood mitigation factors. The initial appeal would be through a FEMA administrative process, with the possibility of a further appeal to the Scientific Resolution Panel. Section 306 would require the TMAC within 12 months after enactment to develop a procedure to use in mapping flood hazards located in communities and states that choose to develop alternative maps to the FIRMs developed by FEMA. The recommended standards and requirements shall include procedures for providing notification and appeal rights to individuals within the communities of the proposed flood elevation determinations. FEMA would be required to approve or disapprove such proposed maps for use in the NFIP within six months of receiving the proposed alternative maps. This provision would therefore allow states and local governments to finance and develop their own FIRMs independent of the existing process and in accordance with the TMAC procedures, subject to final approval by FEMA.

The National Flood Insurance Program (NFIP) was established by the National Flood Insurance Act of 1968 (NFIA, 42 U.S.C. §4001 et seq.), and was reauthorized until February 8, 2018 (H.R. 195). Unless reauthorized or amended by Congress, the following will occur after February 8, 2018: (1) the authority to provide new flood insurance contracts will expire; and (2) the authority for the NFIP to borrow funds from the Treasury will be reduced from $30.425 billion to $1 billion. The House passed H.R. 2874, the 21st Century Flood Reform Act, on November 14, 2017, with a vote of 237-189. H.R. 2874 would authorize the NFIP until September 30, 2022. This report summarizes selected provisions of the bill, concentrating on changes related to premiums and surcharges, affordability, increasing participation, the role of private insurance, treatment of multiple loss properties, and some provisions related to floodplain mapping and mitigation. H.R. 2874 would phase out the subsidy provided for primary residences built before the first Flood Insurance Rate Map (FIRM) was published in their community, at a rate of 6.5%-15% compared to the present rate of 5%-18%. The minimum would be phased in over a four-year period. The phaseout of the pre-FIRM subsidy for other categories of properties would remain at 25%. The Homeowner Flood Insurance Affordability Act of 2014 (HFIAA) surcharge would be increased from $25 to $40 for primary residences and from $250 to $275 for nonresidential properties and most nonprimary residences. The reserve fund assessment would be increased by at least one percentage point per year until the statutory reserve ratio is achieved. The bill would cap the premiums for 1-4 unit residential properties at $10,000 per year. The Federal Emergency Management Agency (FEMA) would be required over time to include additional considerations in the setting of premium rates, including the use of replacement cost value of a property, the difference in flood risk between coastal and inland locations, and the use of risk assessment tools other than FIRMs. H.R. 2874 would authorize a state or a consortium of states to create a voluntary flood insurance affordability program for low-income owner-occupants of 1-4 unit residences, to be funded by a surcharge on other NFIP policyholders in the state(s). The bill would increase the civil penalties from $2,000 to $5,000 on federally regulated lenders for failure to comply with enforcing the mandatory purchase requirement. H.R. 2874 would strike existing statutory language describing how private flood insurance must provide coverage "as broad as the coverage" provided by the NFIP, and would instead require that policies comply with the laws and regulations of the state where the property is located. Federal regulators would be required to develop and implement regulations relating to the financial strength of private insurers, and lenders would have to accept a private insurance policy from a company with adequate financial strength. The mandatory purchase requirement would be eliminated for commercial property from January 1, 2019. The noncompete clause that currently restricts private companies from selling both NFIP and private flood insurance policies would be eliminated. H.R. 2874 would define a new "multiple-loss property" category, which would include a revised definition of repetitive loss properties, severe repetitive loss properties, and a new category of extreme repetitive loss properties. Any multiple-loss property with at least two claims after enactment would have rates increased by 10% per year until the rates reflect current risks. Those with at least three future claims would have their rates increased by 15% per year.

Introduction Social Security Disability Insurance (SSDI) replaces a portion of earnings for an eligible worker whose illness or injury—while not necessarily caused by a work-related incident—results in an inability to work. As an insurance program, workers (including active-duty military) and employers in covered occupations, as well as self-employed individuals, contribute to the program through the Federal Insurance Contributions Act (FICA) payroll tax and the Self-Employment Contributions Act (SECA) tax. Currently, 94% of all workers are covered by Social Security. Conversely, Veterans Disability Compensation (VDC) provides payments to veterans for illnesses and injuries that are caused or aggravated by military service. VDC is a compensation program funded through a mandatory appropriation as part of the Department of Veterans Affairs (VA) annual budget. VDC is not insurance and therefore, neither veterans nor active military personnel contribute directly toward the funding of the program. SSDI and VDC—administered by the Social Security Administration (SSA) and the VA, respectively—are two of the largest federal disability programs. In December 2013, there were more than 8.9 million disabled workers receiving payments through SSDI at a cost of approximately $10.3 billion per month. The number of veterans receiving disability compensation was less than half that amount at the end of FY2012, with more than 3.5 million recipients. Total monthly receipts for VDC were just under $3.7 billion in FY2012. Although SSDI and VDC both serve the goal of providing income security for individuals with disabilities, these programs fundamentally differ in how they define "disability" and determine eligibility for benefits. For example, an individual must be unable to work to be eligible for SSDI benefits, yet employability is not a factor in VDC disability determinations. Indeed, veterans that receive a disability rating from the VA will not necessarily be eligible for SSDI benefits, unless their particular condition prevents them from entering the civilian workforce under specific SSA guidelines. This report seeks to clarify why one group of individuals with disabilities may be eligible for benefits under VDC, but ineligible for benefits under SSDI (and vice versa), through a description and comparison of several distinguishing characteristics of the SSDI and VDC programs. This report concludes with a discussion of the challenges facing the administration of both programs, including processing delays for pending claims and appeals. These issues will be of particular interest to Congress due to the high numbers of SSDI claims resulting from a combination of the recent economic decline, an increase in the number of baby-boomers approaching retirement age and their most disability-prone years. In addition, the extension of presumptive conditions has expanded the pool of veterans eligible for VDC. Social Security Disability Insurance Eligibility Requirements SSDI was established in 1956 as a component of the Old Age, Survivors and Disability Insurance (OASDI) program. Its primary purpose is to replace a portion of an insured worker's earnings, should a medically determinable illness or injury impede his or her ability to work. For SSDI benefits, an individual must have a sufficient work history and must be unable to engage in any employment that brings income in excess of the s ubstantial g ainful a ctivity (SGA) threshold, as a result of one or more medical conditions that is expected to last 12 months or longer, or result in death. SSDI Benefits To ensure that a condition is long-term, a worker only becomes eligible to apply for SSDI five months after the onset of a disability, and the worker is further evaluated to determine if the disability will last longer than 12 months or result in death. Once payments commence, claimants may be eligible for up to 12 months of retroactive benefits for the period between the date of disability-onset and their benefits application date. Monthly payments are determined based on a worker's past earnings and can be supplemented if the claimant has qualifying dependents. Individuals with disabilities become eligible to receive health care benefits through Medicare, 24 months after becoming eligible for SSDI. Benefit payments continue until the individual (1) dies; (2) reaches the retirement age, at which point his or her benefits remain the same, but are paid out of the Old-Age and Survivors Insurance (OASI) trust fund; or (3) experiences an improvement in his or her medical condition, enabling him or her to return to the workforce. In December 2013, over 8.9 million disabled workers were receiving an average of $1,146.43 per month in SSDI cash benefits. SSDI Determination Process Disability determinations for SSDI benefits entail a five-step process (see Figure 1 ). First, an applicant files for benefits with the SSA at the agency's website, a field office, or through a toll-free phone line. The responsibility for adjudicating the application then shifts to medical and vocational experts at state-level Disability Determination Services (DDS) agencies. A disability examiner from the DDS will then determine if the claimant's income falls below the SGA threshold (Step 1), condition is current and expected to last longer than 12 months or result in death (Step 2), and condition meets the SSA medical listings (Step 3), If the first three steps are satisfied, the claimant is deemed eligible to receive SSDI benefits. If the claimant's condition does not meet—or is not equal in severity to—a condition in the SSA medical listings, he or she can be further evaluated for SSDI eligibility by examining whether the claimant's remaining capacities would enable him or her to perform their past work (Step 4), and condition would still enable him or her to work in other jobs that exist within the national economy (Step 5). If a disability examiner decides that an individual meets the requirements for a particular step, the application proceeds to the next step for further review. With the exception of Step 3, if an individual does not meet the requirements at any step in the process, their application is denied. If an SSDI claimant reaches Step 3 of the evaluation process, a DDS official has already determined that the claimant's earnings do not exceed the SGA threshold and that the condition is both long-term and limits the claimant's ability to work. If the claimant's condition meets, or is equal in severity to, the SSA's Medical Listings (at Step 3), the claimant is deemed eligible to receive benefits. If the claimant's condition does not meet SSA's Medical Listings, the claimant can still meet eligibility requirements if he or she is unable to perform past work (Step 4) or other types of work that exist in the national economy (Step 5). The disability determination process can be long and complex and is largely contingent upon receipt of all necessary documents by SSA. Processing time for initial application decisions averaged 107 days at the end of November 2013. If, at any point in the assessment process, a claimant's application is denied by the state DDS, that individual can begin the appeals process. SSDI Four-Step Appeals Process If an application for SSDI benefits is denied at any point in the five-step determination process, a claimant can appeal the ruling up to four possible levels (see Figure 2 ). The appeals process includes three levels of administrative review through SSA before a case can then be appealed to the U.S. court system, in this order: 1. reconsideration of the claimant's application by the state DDS office, 2. a hearing by an Administrative Law Judge (ALJ), 3. a review by Social Security Appeals Council (SSAC), and 4. filing suit against SSA in U.S. district court. If a claimant's initial application or subsequent appeal is denied, he or she must request an appeal to the next level, in writing, within 60 days of receiving the prior decision. Claimants can also present any additional evidence or comments to support their cases at any step in the administrative appeals process. U.S. district court is generally the final level of appeal pursued in SSDI cases. On rare occasions, SSDI cases can be appealed beyond U.S. district court to the U.S. court of appeals and, ultimately, the U.S. Supreme Court. Step 1 in the SSDI Appeals Process (Reconsideration) Upon receipt of the initial appeal request, the state DDS office will "reconsider" the application, which involves a review by a disability examiner who was not involved in the initial application process. To have a case reconsidered, the claimant completes and submits a Request for Reconsideration and an Appeal Disability Report (online or a paper form) to SSA. SSA will then send the case to the state DDS office, although 10 states currently do not conduct the reconsideration step. A DDS official—other than the person who made the first determination—reviews the claimant's medical records along with any additional evidence provided and makes a new determination about the claimant's disability. After a review of the medical records, the claimant is notified in writing of the decision. If the claimant disagrees with the reconsideration decision, he or she may then request a formal hearing with an Administrative Law Judge (ALJ). Step 2 in the SSDI Appeals Process (Administrative Hearing) If a claimant disagrees with the reconsidered judgment, he or she can appeal the decision by completing and submitting a Request for Hearing by an ALJ and an Appeal Disability Report (online or a paper form) to SSA. SSA will then send the request to the Office of Disability Adjudication and Review, where claimants can request a face-to-face meeting with the ALJ assigned to their case. After talking with the claimant and his or her representative, the claimant will be notified in writing of the ALJ's decision on the case. If the ALJ rules against the claimant, the case can be further appealed to the Social Security Appeals Council (SSAC). SSA can also bring a case to the SSAC, even if the ALJ has ruled in the claimant's favor. Step 3 in the SSDI Appeals Process (Social Security Appeals Council) A claimant whose appeal is denied by an ALJ can complete and submit a Request for Review of Decision/Order of Administrative Law Judge (in paper form) to SSA, who forwards the request to the Office of Disability Adjudication and Review. An official from the SSAC will review the claimant's medical records and will either remand the case back to the ALJ for further review, deny the request to review the case, or make a new independent determination. Claimants will be notified in writing of the decision on the case. Step 4 in the SSDI Appeals Process (U.S. District Court) If a claimant disagrees with the decision of the SSAC, or the claimant's request for appeal is denied, he or she can file a civil suit in U.S. district court for further review and judgment. The case will be heard by a district court judge who will notify the claimant in writing of the decision on the case. Veterans Disability Compensation Background in Brief Prior to World War I, disability compensation was part of a pension system based on service during a particular conflict. The current ratings system for disabilities began in the 1940s and, with adjustments, is still in use today. The current system relies on ratings (0% to 100% in 10% increments) for one or more disabling injuries or illnesses resulting from—or aggravated by—military service, with a total percentage rating determining the level of compensation. VDC Eligibility Requirements Eligibility for VDC benefits is determined using a two-step process. First, a claimant must prove that he or she is a veteran, defined as a "… person who served in the active military, naval, or air service, and who was discharged or released there from under conditions other than dishonorable," which is determined largely upon official military service records. Second, claimants must demonstrate that injuries, diseases, or other medical conditions are related to military service. Although veterans must adhere to time restrictions for several other VA benefits and services, there are no time limits on filing claims for compensation related to most disabilities. The VA and Veterans Service Organizations (VSOs) assist veterans in the application process. VDC Determination Process A veteran who suffers from an injury or illness will apply for disability compensation with the VA. The initial VA disability assessment focuses solely on determining whether a condition(s) was caused or aggravated by military service. For VDC evaluations, veterans are given the benefit of the doubt when there is equal evidence that an injury or illness is, or is not, service-connected. If an injury, illness, or combination thereof is determined to be service-connected, the condition(s) are then evaluated based on the Veterans Affairs Schedule for Rating Disabilities (VASRD), a scale that ranges from 0% to 100% in increments of 10%. A "zero percent" rating means that a service-connected disability exists, but is not so disabling that it entitles the veteran to compensation payments, whereas a 100% rating means that the veteran is totally disabled by VDC standards. Claimants must receive at least a 10% rating based on the VASRD to be eligible for any compensation under VDC. Veterans who are severely disabled due to a service-connected condition(s) can also be considered for Special Monthly Compensation (SMC), which provides additional payments for (1) disabilities deriving from the loss of use of certain organs or extremities, and (2) veterans with a 100% disability rating who are so severely disabled that they require aid and attendance or are otherwise housebound. Ratings can be changed over time, as a result of a new condition(s), or if a condition(s) worsens over time. 100% or Total Disability Rating There are two ways for a veteran to receive a total (i.e., 100%) disability rating determination. The first possibility involves receiving a 100% disability rating based solely on the severity of a service-connected condition or combination of conditions. The second possibility is to qualify for an Individual Unemployability (IU) determination, which allows certain veterans to receive compensation at the 100% disabled rate, even if their disabilities (individually or combined) are not rated at that level. To qualify for the IU benefit, a veteran must be unable to work and (1) have one service-connected disability rated at least 60%, or (2) have two or more disabilities with one disability rated at least 40%, and a combined rating of at least 70%. Presumptive Conditions The presumptive conditions policy of the VA entitles certain veterans, and/or survivors and dependents, to a presumption of service-connection for certain diseases or conditions related to certain conflicts or military service situations. Eligibility for presumptive disability benefits varies depending on the circumstances of a veteran's active-duty service and the type of diagnosis. Current groups include former POWs; Vietnam veterans exposed to Agent Orange; Atomic veterans exposed to ionizing radiation; Gulf War veterans with undiagnosed illnesses; veterans diagnosed with certain chronic diseases within one year of release from active duty; and veterans, with 90 days or more of continuous service, diagnosed with Lou Gehrig's disease following discharge from active duty. VDC Benefits Disability compensation pays a monthly cash benefit to disabled veterans who are at least 10% disabled as a result of military service. Benefit payment amounts are contingent upon the claimant's level of disability based on the VASRD as determined by the VA. The claimant's marital status, number of children or other dependents, and certain disabilities (qualifying for SMC) are additional factors that will affect payment. At the end of FY2012, over 3.5 million veterans were receiving VDC benefits. VDC Appeals Process Currently, there are four levels of appeals that a claimant could potentially undergo (see Figure 3 ). Regional VA offices make the first determination to allow or disallow veterans' claims, and claimants can initially appeal unsatisfactory VA office decisions to the Board of Veterans' Appeals (BVA), an internal administrative body to the VA. Appeals usually relate to a disagreement on the service-connectedness of a condition or dispute over a rating determination. If a claimant wishes to appeal the decision of the BVA, the case then moves outside of the VA to the Court of Appeals for Veterans Claims (CAVC), a federal court. CAVC decisions can be appealed to the Court of Appeals for the Federal Circuit and ultimately, the Supreme Court. Distinctions Between SSDI and VDC Programs There are clear differences in the general goals of SSA and VA disability compensation programs that have likely evolved from the SSDI focus on administering benefits primarily for a civilian work population, which contrasts with the VDC focus on compensating individuals for the adverse health conditions connected to military service. Comparison of Recipient Populations As observed in Table 1 , which draws comparisons between the populations of SSDI and VDC recipients, the SSDI program is more than twice as large as the VDC program, in terms of the number of recipients served. An SSDI recipient receives less than half the amount in cash payments as a comparable VDC recipient. Additionally, although the male-to-female ratio of SSDI recipients is relatively even, over 90% of all VDC recipients are men. The most prevalent disabilities for SSDI recipients are mental disorders and impairments related to the musculoskeletal system, whereas the most prevalent conditions among VDC recipients are auditory-related. Both programs tend to serve populations approaching retirement age as the typical VDC and SSDI recipients are all over the age of 55. SSDI and VDC Program Administration A side-by-side comparison of important SSDI and VDC administrative rules is presented in Table 2 . As mentioned earlier in this report, both programs have separate funding sources (FICA and SECA taxes for SSDI vs. mandatory congressional budget appropriations for VDC), differing definitions of a disability, as well as agency-specific tools for determining program qualifications and eligibility. In addition, SSA does not provide benefits for individuals with short-term or partial disabilities, whereas the VDC program is non-contributory with benefits based on the severity of each service-connected condition(s) rather than earnings history. Health Care Benefits for SSDI and VDC Recipients Both SSDI and VDC programs contain a health care component. Recipients of SSDI must wait 24 months from when they become eligible for SSDI to become eligible for Medicare. As stated earlier in this report, individuals must still wait an initial five months from the onset of a disability to become eligible for SSDI, generally resulting in a 29-month total wait-time for Medicare eligibility. Veterans do not pay premiums or enrollment fees for VA health care, and eligibility for VA health care is generally based on a variety of factors including, but not limited to, income, status as a former POW, and the existence of service-connected conditions. Veterans can receive treatment for service-connected conditions without being required to make copayments; however, under current law, most veterans are required to make copayments for the treatment of nonservice-connected conditions. Veterans who have a service-connected rating of 50% or more and are enrolled in the VA health care system do not pay copayments even for nonservice-connected care. Thresholds for Substantial Gainful Activity Under SSDI and Substantially Gainful Employment Under VDC SSDI and VDC apply similar restrictions (and terminology) for the level of earnings that certain beneficiaries are able to attain, while still maintaining eligibility for the programs. Both SGA (under the SSDI program) and s ubstantially g ainful e mployment (under the VDC program) refer to the level of work that a person can perform to be considered a "productive" member of the workforce, and therefore ineligible to receive benefits meant to compensate for an inability to work. In 2014, SSDI recipients who earn $1,070 per month ($1,800 for blind recipients) or less can still maintain eligibility for benefits. Moreover, SGA regulations under SSDI allow recipients to possibly deduct certain impairment-related expenses such as medication, medical supplies, and devices from their monthly earnings. Under the VDC program, gainful employment determinations are only made for recipients of IU compensation; there are no earnings restrictions for other VDC recipients. Gainful employmen t is indexed against the census poverty threshold for a single person, which was $11,945 per year for 2013. Figures for both SGA and gainful employment are adjusted annually to reflect growth in average wages. Differences in the Disability Evaluation Process Differences also exist in the standards for SSDI and VDC disability determinations. For example, a military servicemember will generally undergo a disability evaluation through the DOD and VA before being considered for Social Security benefits. If he or she is determined to have sustained a service-connected condition, such as hearing loss, a rating percentage will be assigned and that servicemember will be compensated accordingly by the VA. However, with the use of adaptive technologies, such as telephone relay systems (TRS), even a veteran with severe or total hearing loss can still function effectively in a civilian work environment. Hence, the ability to attain gainful employment anywhere in the national economy—despite having a disability—would render him or her ineligible for SSDI benefits. Differences between the current SSDI and VDC evaluation systems make it possible for even a 100% disabled veteran to be denied SSDI coverage. Table 3 illustrates how these differences may operate in four different hypothetical scenarios. Differences in the Treatment of Benefits SSDI payment levels are based solely on a worker's past average monthly earnings and do not compensate recipients for short-term or temporary disabilities. Taking into account age, education and work experience, the recipient must not be able to engage in any work that exists in the national economy. In contrast, VDC—aimed at compensating veterans that have sustained injuries or illnesses as a result of military service—determines payment amounts based on the severity of veterans' service-connected condition(s), without regard for the employability of the veterans. Certain veterans who are unemployable, and have a rating of less than 100%, may be granted additional compensation through IU provisions. VDC benefits also receive differential treatment under the federal tax code. Any income from VA benefits cannot be taxed or apportioned, as opposed to SSDI, which may be taxable. Furthermore, for those veterans that do receive compensation through both programs, VDC benefits do not offset SSDI payment levels, or vice versa. Continued Divergence Between SSA and VA Disability Programs Assessing VA Disability Compensation for Noneconomic Loss Under current statute, the VASRD is used as the sole tool in determining compensation levels for veterans with service-connected disabilities. The VASRD ratings are presumed to reflect the "average" impact of the impairment on "average" earnings capacity or economic loss. However, because VDC is granted for any condition incurred or aggravated by military service, VDC is also provided for conditions that do not impact employment or earnings capacity; thus, payments for those conditions then reflect noneconomic loss. A 2007 report by the Veterans' Disability Benefits Commission concluded that VA disability compensation should additionally compensate veterans for "… their inability to participate in usual life activities and for the impact of their disabilities on quality of life," also called noneconomic loss. The Institute of Medicine has also made recommendations on developing and implementing a methodology that can be used to evaluate the impact of disabilities on veterans' quality of life. This methodology could presumably be used to recommend appropriate compensation for veterans' noneconomic loss. CRS is not aware of similar studies or efforts to identify ways to compensate SSDI recipients for noneconomic loss. Challenges Facing Federal Disability Programs in Brief Administering disability benefits through SSA and the VA has posed considerable challenges. Both agencies have faced criticism for a failure to thoroughly revise disability evaluation standards to reflect the changing nature of the U.S. labor market and advances in medical technology that have redefined the ability of individuals with disabilities to engage in productive work activities. SSA and the VA have also been criticized for their processes of adjudicating applications, and the high levels of claims and appeals pending. These were two of several government-wide findings that led the Government Accountability Office (GAO) to designate federal disability programs as "high-risk." SSA Plan to Address Program Issues According to SSA, the agency seeks to modernize the disability evaluation system and is currently in the process of revising its ratings system, and has further reviewed the role of SSDI in a comprehensive government-wide disability policy. For example, SSA has conducted outreach efforts to wounded warriors returning from Operations Iraqi Freedom (OIF) and Enduring Freedom (OEF) to begin the application process for SSA disability benefits prior to separating from the military. Moreover, in 2012, SSA announced a nationwide expansion of its streamlined medical records service, which will allow SSDI case processing sites to request military medical records from a centralized DOD site. In 2007, SSA developed a plan to eliminate hearings backlogs that increased due to the recent economic decline, increase in baby-boomer claims, and after coming under scrutiny by the GAO, which insisted SSA develop a more comprehensive strategy to reduce backlogs. To expedite the determination process, SSA instituted two new fast-track programs: (1) the Quick Disability Determination (QDD) process uses predictive computer models to flag disability applications with a high likelihood of receiving a favorable determination; and (2) the Compassionate Allowances (CAL) process expedites applicants with severe conditions that habitually receive a favorable determination. Between FY2009 and FY2013, pending initial disability claims fell from 779,854 to 707,700; however, pending disability claims at the redetermination level increased during the same period from 161,264 to 197,788. Also, under the provisions of the Ticket to Work and Work Incentives Improvement Act of 1999 ( P.L. 106-170 ), SSA provides vouchers to Social Security disability beneficiaries that can be used to receive vocational rehabilitation or other employment support services from public or private providers within the SSA Employment Network. SSA has also developed a work incentive policy that enables SSDI recipients to work and still receive monthly benefits with the goal of helping those individuals to eventually achieve self-sufficiency. In 2014 recipients that earn in excess of $770 per month enter a "trial work" period, where they can test their ability to perform on-the-job without losing disability benefits. The disability is not considered to be ended until the recipient is able to work for at least nine months over a 60-month period. SSA also recently concluded the Accelerated Benefits Demonstration project, which tested the health and employment outcomes of SSDI recipients who received health benefits sooner than the 24-month waiting period. Key finding from the study results demonstrated that participants (1) made extensive use of available program services, (2) reported fewer unmet medical needs, and (3) were encouraged to seek work, although employment levels did not increase in comparison with a control group. The results further suggest that continued tracking of participants' employment gains will be important to understand the long-term impacts of providing early health benefits to SSDI beneficiaries. VA Response to VDC Program Criticism As of January 13, 2014, the VA has 636,064 veterans' claims pending for disability compensation and 60.8% (approximately 386,727) of those claims have been pending for 125 days or longer (i.e., from the date the claim was received by the VA). The number of claims pending has been of growing concern to veterans, VSOs, and Members of Congress. Congress appropriated additional resources toward reducing the accumulation of claims and appeals. The average number of days to process a rating-related claim was 181 days in FY2001, prior to the OIF and OEF military conflicts. Because of ongoing efforts by the VA to add personnel and make greater use of technology, the average processing time has been reduced to 175.3 days as of January 2014. In addition to the issues surrounding pending claims, GAO has also specifically cited the VA for inconsistencies in the ratings systems across the VA regional offices. In a separate response to criticism on their process for awarding benefits, the VA—citing the 1956 Bradley Report—asserts that their "… disability ratings represent noneconomic factors, such as pain and suffering, in addition to average loss of earnings." They further state that prior proposals to update the ratings system have proven unpopular with Congress and VSOs. Nevertheless, a recently established advisory committee will advise the VA Secretary on reviews of the VASRD.

Social Security Disability Insurance (SSDI) and Veterans Disability Compensation (VDC)—administered by the Social Security Administration (SSA) and the Department of Veterans Affairs (VA) respectively—are two of the largest federal disability programs, but strongly differ along several dimensions, including the populations served, how each program defines a "disability," as well as varying eligibility requirements. First, SSDI is an insurance program that replaces a portion of earnings for an eligible worker whose illness or injury—while not necessarily caused by a work-related incident—results in an inability to work. SSDI is one of several federal programs funded through the Federal Insurance Contributions Act (FICA) payroll tax and the Self-Employment Contributions Act (SECA) tax to which all workers and employers in covered occupations (including military personnel) and self-employed individuals make contributions. On the other hand, VDC is not insurance, but is a compensation program in that payments are made to veterans who develop medical conditions that are related to their service in the military. VDC is non-contributory and neither veterans nor active military personnel pay into the program, which is funded through a mandatory appropriation as part of the VA annual budget. Second, while the purpose of both SSDI and VDC is to provide income security, SSDI provides a financial "safety-net" to eligible civilian and military workers due to their inability to work as a result of long-term or terminal injury or illness. Conversely, VDC provides veterans with tax-free, cash benefits specifically for service-connected illnesses or injuries. The ability to work is not factored into VDC disability determinations, although additional compensation is available for veterans who are unemployable as the result of a service-connected condition(s). Third, SSDI only compensates workers who are fully disabled, whereas VDC compensates veterans for both partial and fully disabling injuries and illnesses. The VA is further guided by a principle that views disability compensation as an obligation, owed to veterans, for injuries affecting employment that were incurred or aggravated by their service to the country. SSDI benefits are granted solely on medical and economic grounds and other noneconomic factors are not considered. Eligibility requirements generally tend to be more stringent for SSDI than VDC, and most veterans, even if qualified for VDC, will not likely meet the criteria for both programs. Both SSA and the VA have faced challenges in the administration of benefits and have been criticized for a lack of interagency coordination, processes that are "out-of-sync" with modern conceptions of disability, and extensive processing delays for claims and appeals. These issues led, in part, to a Government Accountability Office (GAO) investigation and determination of federal disability programs as "high risk." Both agencies have made efforts to address issues surrounding pending claims and appeals, but differ in their responses to other recommendations. This report provides a description and comparative analysis of the SSDI and VDC programs. These issues will be of particular interest to Congress because of the expected increase in the numbers of SSDI and VDC claims. The recent economic decline and aging baby-boomers have continued to place a strain on SSA's resources. The aging of the veteran population and expansion of presumptive conditions policies have contributed to the increase in VDC claims.

Introduction and Issue Ten years after the 9/11 terrorist attacks, policymakers continue to grapple with the definition of homeland security. Prior to 9/11, the United States addressed crises through the separate prisms of national defense, law enforcement, and emergency management. 9/11 prompted a strategic process that included a debate over and the development of homeland security policy. Today, this debate and development has resulted in numerous federal entities with homeland security responsibilities. For example, there are 30 federal entities that receive annual homeland security funding excluding the Department of Homeland Security (DHS). The Office of Management and Budget (OMB) estimates that 48% of annual homeland security funding is appropriated to these federal entities, with the Department of Defense (DOD) receiving approximately 26% of total federal homeland security funding. DHS receives approximately 52%. Congress and policymakers are responsible for funding homeland security priorities. These priorities need to exist, to be clear and cogent, in order for funding to be most effective. Presently, homeland security is not funded on clearly defined priorities. In an ideal scenario, there would be a clear definition of homeland security, and a consensus about it; as well as prioritized missions, goals, and activities. Policymakers could then use a process to incorporate feedback and respond to new facts and situations as they develop. This report examines how varied, and evolving, homeland security definitions and strategic missions may affect the prioritization of national homeland security policy and how it may affect the funding of homeland security. To address this issue, this report first discusses and analyzes examples of strategic documents, their differing homeland security definitions, and their varying homeland security missions. Evolution of the Homeland Security Concept The concept of homeland security has evolved over the last decade. Homeland security as a concept was precipitated by the terrorist attacks of 9/11. However, prior to 9/11 such entities as the Gilmore Commission and the United States Commission on National Security discussed the need to evolve the way national security policy was conceptualized due to the end of the Cold War and the rise of radicalized terrorism. After 9/11, policymakers concluded that a new approach was needed to address the large-scale terrorist attacks. A presidential council and department were established, and a series of presidential directives were issued in the name of "homeland security." These developments established that homeland security was a distinct, but undefined concept. Later, the federal, state, and local government responses to disasters such as Hurricane Katrina expanded the concept of homeland security to include significant disasters, major public health emergencies, and other events that threaten the United States, its economy, the rule of law, and government operations. This later expansion of the concept of homeland security solidified it as something distinct from other federal government security operations such as homeland defense. Homeland security as a concept suggested a different approach to security, and differed from homeland defense. Homeland defense is primarily a Department of Defense (DOD) activity and is defined as "... the protection of US sovereignty, territory, domestic population, and critical defense infrastructure against external threats and aggression, or other threats as directed by the President." Homeland security, regardless of the definition or strategic document, is a combination of law enforcement, disaster, immigration, and terrorism issues. It is primarily the responsibility of civilian agencies at all levels. It is a coordination of efforts at all levels of government. The differences between homeland security and homeland defense, however, are not completely distinct. An international terrorist organization attack on and within the United States would result in a combined homeland security and homeland defense response, such as on 9/11 when civilian agencies were responding to the attacks while the U.S. military established a combat air patrol over New York and Washington, DC. This distinction between homeland security and homeland defense, and the evolution of homeland security as a concept, was reflected in the strategic documents developed and issued following 9/11. Evolution of Homeland Security Strategic Documents The evolution of this new and distinct homeland security concept has been communicated in several strategic documents. Today, strategic documents provide guidance to all involved federal entities and include the 2010 National Security Strategy and the 2011 National Strategy for Counterterrorism . There are also strategic documents that provide specific guidance to DHS entities and include the 2010 Quadrennial Homeland Security Review , the Bottom-Up Review , and the 2012 Department of Homeland Security Strategic Plan . Prior to issuance of these documents, national and DHS homeland security strategic documents included the 2002 and 2007 National Strategies for Homeland Security and the 2008 Department of Homeland Security Strategic Plan . All of these documents have varying definitions for "homeland security" and varying missions derived from these definitions. While the definitions and missions embodied in these strategic documents have commonalities, there are significant differences. Natural disasters are specifically identified as an integral part of homeland security in five of the seven documents, and only three documents—2008 and 2012 DHS Strategic Plans and the Bottom-Up Review —specifically include border and maritime security and immigration in their homeland security definitions. All of these mentioned issues are important and require significant funding. However, the lack of consensus about the inclusion of these policy areas in a definition of homeland security may have negative or unproductive consequences for national homeland security operations. A consensus definition would be useful, but not sufficient. A clear prioritization of strategic missions would help focus and direct federal entities' homeland security activities. Additionally, prioritization affects Congress's authorization, appropriation, and oversight activities. Effects on Congressional Responsibilities As deficit reduction causes demand for reduced federal spending, Congress may pay more critical attention to homeland security funding. With reduced funding comes the need for higher degrees of organization, focus, and clarity about the purpose and objectives of national homeland security policy. Limited resources heighten the importance of prioritization and need for efficient and effective federal spending. If homeland security policy priorities are unclear, Congress's ability to provide effective authorization, appropriation, and oversight may be hampered. Definitions and Missions as Part of Strategy Development Definitions and missions are part of strategy development. Policymakers develop strategy by identifying national interests, prioritizing missions to achieve those national interests, and arraying instruments of national power to achieve national interests. Strategy is not developed within a vacuum. President Barack Obama's Administration's 2010 National Security Strategy states that strategy is meant to recognize "the world as it is" and mold it into "the world we seek." Developing strategy, however, may be complicated if the key concept of homeland security is not succinctly defined, and strategic missions are not aligned and synchronized among different strategic documents and federal entities. Evolution of the Homeland Security Definitions and Missions Prior to 9/11, federal, state, and local governments responded to domestic terrorist attacks in an ad hoc manner. These terrorist attacks, and the governments' responses, however, did not significantly affect how policymakers perceived, defined, and prioritized security as related to the homeland. Two examples of these domestic terrorist attacks are the 1993 World Trade Center (WTC) and the 1995 Alfred Murrah Federal Building bombings. On February 26, 1993, radicalized Islamic terrorists detonated a bomb beneath the WTC. In response, President Clinton ordered his National Security Council to coordinate the bombings' response and investigation. The CIA's Counterterrorist Center and the National Security Agency, along with the FBI, were among the numerous federal agencies that participated in the investigation. This use of the National Security Council was an ad-hoc response specifically to this event, and it did not result in the development of strategic documents. On April 19, 1995, Timothy McVeigh exploded a bomb-laden truck in front of the Alfred P. Murrah Federal Building in Oklahoma City. Following this bombing, President Clinton directed the Department of Justice (DOJ) to assess the vulnerability of federal facilities to terrorist attacks or violence and to develop recommendations for minimum security standards. These standards, however, were not a wide-ranging strategy for U.S. homeland security strategy. It was the 9/11 terrorist attacks that initiated the debate and development of a broader homeland security strategy. The 9/11 terrorist attacks on New York City, Pennsylvania, and Washington, DC, were a watershed event. As with the 1993 WTC and 1995 Oklahoma City bombings, the federal, state, and local government's response to the 9/11 terrorists attacks was ad hoc. In New York City, first responders included such entities as the New York police and fire departments, and Port Authority and WTC employees. Following the attack, federal entities such as the FBI, DOD, and elements of the intelligence community (IC) coordinated their efforts in investigating and tracking down the responsible terrorists. However, following the 9/11 initial response and subsequent investigations, it was determined that there was a need to reorganize the government to prepare for, mitigate against, respond to, and recover from future attacks. This decision to reorganize the government resulted in an evolution of homeland security definitions and missions. The debate over and development of homeland security definitions persist as the federal government continues to issue and implement homeland security strategy. All of the strategic documents in this report define homeland security as security efforts, however, each one defines these efforts in different terms. 2002–2009 Strategic Document Evolution The first homeland security strategy document issued by the Bush Administration was the 2003 National Strategy for Homeland Security , which was revised in 2007. In 2008, DHS issued Strategic Plan— One Team, One Mission, Securing Our Homeland . The 2007 National Strategy for Homeland Security primarily focused on terrorism, whereas the 2008 Strategic Plan included references to all-hazards and border security. Arguably, the 2003 and 2007 National Strategies for Homeland Security addressed terrorism due to such incidents as the 9/11 terrorist attacks; and the attempted bombing of American Airlines Flight 63 on December 22, 2001. Whereas the 2008 Strategic Plan addressed terrorism and all-hazards due to natural disasters such Hurricane Katrina which occurred in 2005. These documents were superseded by several documents which are now considered the principle homeland security strategies. 2010–Present Document Evolution The White House and DHS are the principle source of homeland security strategies. The primary national homeland security strategic document developed by the White House is the 2010 National Security Strategy , which unlike the 2007 National Strategy for Homeland Security addresses all-hazards and is not primarily terrorism focused. DHS's strategic documents are the 2010 Quadrennial Homeland Security Review ; the 2010 Bottom-Up Review ; and the 2012 Strategic Plan . DHS states that these documents are nested in the 2010 National Security Strategy . At the national level, the 2010 National Security Strategy guides not just DHS's homeland security activities, but it also guides all federal government entity mission activities. One way to understand the breadth of these activities is to examine federal homeland security funding. Federal Homeland Security Mission Activities and Funding The strategic homeland security documents provide federal entities information on the national approach to homeland security. These documents are intended to identify federal entity responsibilities in the area of homeland security and assist federal entities in determining how to allocate federal funding for that purpose. In an effort to measure federal homeland security funding, Congress required OMB to include a homeland security funding analysis in each presidential budget. OMB requires federal departments, agencies, and entities to provide budget request amounts based on the following six 2003 National Strategy for Homeland Security mission areas: Intelligence and Warning; Border and Transportation Security; Domestic Counterterrorism; Protecting Critical Infrastructure and Key Assets; Defending against Catastrophic Threats; and Emergency Preparedness and Response. OMB, however, notes that the National Strategy for Homeland Security was revised in 2007, and that revision consolidated these six mission areas into three: (1) prevent and disrupt terrorist attacks; (2) protect the American people, critical infrastructure, and key resources; and (3) respond to and recover from incidents that do occur. The strategy also states that these original 2003 mission areas are still used to ensure "continuity and granularity." OMB does not address President Obama Administration's issuance of the 2010 National Security Strategy which supersedes the 2007 National Strategy for Homeland Security . In FY2012 appropriations and the FY2013 budget requests, 30 federal departments, agencies, and entities receive annual homeland security funding excluding DHS. OMB estimates that 48% of annual homeland security funding is appropriated to these federal entities, with DOD receiving approximately 26% of total federal homeland security funding. DHS receives approximately 52%. The following table provides FY2012 appropriations and FY2013 budget request homeland security mission amounts for all federal entities. This allocation of federal homeland security funding reveals that approximately 50% is not appropriated for DHS missions or activities. Additionally, it could mean that relying on detailed DHS strategies is insufficient and that a coordinating and encompassing national homeland security definition may be important to prioritizing homeland security activities and funding. The 2010 National Security Strategy states that homeland security is "a seamless coordination among federal, state, and local governments to prevent, protect against, and respond to threats and natural disasters." Homeland security requires coordination because numerous federal, state, and local entities have responsibility for various homeland security activities. The proliferation of responsibilities entitled "homeland security activities" is due to a couple of factors. One factor is that homeland security developed from the pre-9/11 concept of law enforcement and emergency management. Another factor is the continuously evolving definition of "homeland security." Some degree of evolution of the homeland security concept is expected. Policymakers respond to events and crises like terrorist attacks and natural disasters by using and adjusting strategies, plans, and operations. These strategies, plans, and operations also evolve to reflect changing priorities. The definition of homeland security evolves in accordance with the evolution of these strategies, plans, and operations. Definitions The following table provides examples of strategic documents and their specific homeland security definitions. Some common themes among these definitions are: the homeland security enterprise encompasses a federal, state, local, and tribal government and private sector approach that requires coordination; homeland security can involve securing against and responding to both hazard-specific and all-hazards threats; and homeland security activities do not imply total protection or complete threat reduction. Each of these documents highlights the importance of coordinating homeland security missions and activities. However, individual federal, state, local, and tribal government efforts are not identified in the documents. Homeland security—according to these documents—is preventing, responding to, and recovering from terrorist attacks, which is consistent with evolving homeland security policy after 9/11. The focus of the definition of homeland security communicated in these strategy documents differs in regard to two areas that may be considered substantive. Natural disasters are specifically identified as an integral part of homeland security in only four of the six documents, but are not mentioned in the 2007 National Strategy for Homeland Security and the 2011 National Strategy for Counterterrorism. Only one document—the Bottom-Up Review —specifically includes border and maritime security and immigration in its homeland security definition. The 2012 Strategic Plan uses the encompassing terms "other hazards" to define any threat other than terrorism. These issues are significant and call for substantial funding. An absence of consensus about the inclusion of these policy areas may result in unintended consequences for national homeland security operations. For example, not including maritime security in the homeland security definition may result in policymakers, Congress, and stakeholders not adequately addressing maritime homeland security threats, or more specifically being able to prioritize federal investments in border versus intelligence activities. The competing and varied definitions in these documents may indicate that there is no succinct homeland security concept. Without a succinct homeland security concept, policymakers and entities with homeland security responsibilities may not successfully coordinate or focus on the highest prioritized or most necessary activities. Coordination is especially essential to homeland security because of the multiple federal agencies and the state and local partners with whom they interact. Coordination may be difficult if these entities do not operate with the same understanding of the homeland security concept. For example, definitions that don't specifically include immigration or natural disaster response and recovery may result in homeland security stakeholders and federal entities not adequately resourcing and focusing on these activities. Additionally, an absence of a consensus definition may result in Congress funding a homeland security activity that DHS does not consider a priority. For example, Congress may appropriate funding for a counterterrorism program such as the State Homeland Security Grant Program when DHS may have identified an all-hazards grant program, such as Emergency Management Performance Grant Program, as a priority. It is, however, possible that a consensus definition and overall concept exists among policymakers and federal entities, but that it isn't communicated in the strategic documents. Finally, DHS Deputy Secretary Jane Lute recently stated that homeland security "... is operation, it's transactional, it's decentralized, it's bottom-driven," and influenced by law enforcement, emergency management, and the political environment. Conversely, DHS Deputy Secretary Lute stated that national security "... is strategic, it's centralized, it's top-driven," and influenced by the military and the intelligence community. Some see in these comments as a reflection of a DHS attempt to establish a homeland security definition that is more operational than strategic and an illustration of the complexity of a common understanding of homeland security and its associated missions. Missions Varied homeland security definitions, in numerous documents, result in all the homeland security stakeholders identifying and executing varied strategic missions. Homeland security stakeholders include federal departments and agencies, state and local governments, and non-profit and non-governmental organizations. The strategic documents in this report identify numerous homeland security missions such as terrorism prevention; response and recovery; critical infrastructure protection and resilience; federal, state, and local emergency management and preparedness; and border security. As noted earlier, none of these documents specifically tasks a federal entity with the overall homeland security responsibilities. The following table summarizes the varied missions in these strategic documents. These documents all identify specific missions as essential to securing the nation. All of the documents state that the nation's populace, critical infrastructure, and key resources need protection from terrorism and disasters. This protection from both terrorism and disasters is a key strategic homeland security mission. Some, but not all, of the documents include missions related to border security, immigration, the economy, and general resilience. Members of Congress and congressional committees, however, have sometimes criticized these documents. Senator Susan Collins—current ranking Member, Committee on Homeland Security and Governmental Affairs—expressed disappointment in the Quadrennial Homeland Security Review and Bottom-Up Review because it does not communicate priorities and stated that it does not compare favorably to the most recent Quadrennial Defense Review . The Quadrennial Defense Review identifies national security and U.S. military priorities and these priorities through a process "... from objectives to capabilities and activities to resources." Furthermore, the Quadrennial Homeland Security Review missions are different from the 2007 National Strategy for Homeland Security missions, and neither identifies priorities, or resources, for DHS, or other federal agencies. Since the National Strategy for Homeland Security and the Quadrennial Homeland Security Review missions are differing and varied, and because the Quadrennial Homeland Security Review does not specifically identify a strategic process to achieve the missions, one may assume that this document is solely operational guidance. Additionally, some critics found the Bottom-Up Review lacking in detail and failing to meet its intended purpose. Further congressional criticism includes an observation on the absence of a single DHS strategy. At a recent House Homeland Security Committee's Subcommittee on Oversight, Investigations and Management hearing, Chairman Michael McCaul stated that "... DHS needs a single strategic document which subordinate agencies can follow and make sure the strategy is effectively and efficiently implemented. This single document should conform to the National Security Strategy of the United States of America. If the agencies do not have a clearly established list of priorities, it will be difficult to complete assigned missions." Other criticism includes the Council on Foreign Relations' (CFR's) discussion of 2010 National Security Strategy (NSS). CFR states that the "... one thing that the NSS discussion of resilience omits, but which the Deputy National Security Adviser John Brennan has emphasized, is that despite all the homeland security precautions, there is likely to be a successful attack. When that happens, real resilience will entail a calm, deliberate response and confidence in the durability of the country's institutions." Multiple definitions and missions and an absence of prioritization result in consequences to the nation's security. Analysis and Considerations Policymakers are faced with a complex and detailed list of risks, or threats to security, for which they then attempt to plan. However, managing those risks 99% of the time with even a single failure may lead to significant human and financial costs. Homeland security is essentially about managing risks. The purpose of a strategic process is to develop missions to achieve that end. Before risk management can be accurate and adequate, policymakers must ideally coordinate and communicate. That work to some degree depends on developing a foundation of common definitions of key terms and concepts. It is also necessary, in order to coordinate and communicate, to ensure stakeholders are aware of, trained for, and prepared to meet assigned missions. At the national level, there does not appear to be an attempt to align definitions and missions among disparate federal entities. DHS is, however, attempting to align its definition and missions, but does not prioritize its missions; there is no clarity in the national strategies of federal, state, and local roles and responsibilities; and, potentially, funding is driving priorities rather than priorities driving the funding. DHS is aligning its definition and missions in the Quadrennial Homeland Security Review , the Bottom-Up Review , and the 2012 Strategic Plan ; however, DHS does not prioritize the missions. DHS prioritizes specific goals, objectives, activities, and specific initiatives within the missions, and prioritizes initiatives across the missions. There is still no single national homeland security definition, nor is there a prioritization of national homeland security or DHS missions. There is no evidence in the existing homeland security strategic documents that supports the aligning and prioritization of the varied missions, nor do any of the documents convey how national, state, or local resources are to be allocated to achieve these missions. Without prioritized resource allocation to align missions, proponents of prioritization of the nation's homeland security activities and operations maintain that plans and responses may be haphazard and inconsistent. Another potential consequence of the absence of clear missions is that available funding then tends to govern the priorities. Congress may decide to address the issues associated with homeland security strategy, definitions, and missions, in light of the potential for significant events to occur similar to the 9/11 terrorist attacks and Hurricane Katrina. Many observers assert that these outstanding policy issues result from the varied definitions and missions identified in numerous national strategic documents. Additionally, they note that these documents do not consistently address risk mitigation associated with the full range of homeland security threats. From this perspective one piece missing from these documents, and their guidance, is a discussion of the resources and fiscal costs associated with preparing for low risk, but high consequence threats. Specifically, Congress may choose to consider a number of options addressing the apparent lack of a consensus homeland security definition that prioritizes missions by requiring the development of a more succinct, and distinct, national homeland security strategy. One of these options might be a total rewrite of a national homeland security strategy. This option would be similar to the Bush Administration's issuance of national homeland security strategies in 2002 and 2007. Such a strategy could include a definitive listing of mission priorities based on an encompassing definition that not only includes DHS specific responsibilities, but all federal department and agency responsibilities. A strategy that includes priorities could improve Congress's and other policymakers' ability to make choices between competing homeland security missions. This option would also be a departure from the current Administration's practice of including national homeland security guidance in the National Security Strategy. Another option would be to build upon the current approach by requiring the Administration to develop the National Security Strategy that succinctly identifies homeland security missions and priorities. Alternatively, Congress may determine that the present course of including national homeland security guidance in the National Security Strategy is adequate, and may focus strictly on DHS activities. This option would entail DHS further refining its Quadrennial Homeland Security Review which it has begun to do with its 2012 Strategic Plan . It has been argued that homeland security, at its core, is about coordination because of the disparate stakeholders and risks. Many observers assert that homeland security is not only about coordination of resources and actions to counter risks; it is also about the coordination of the strategic process policymakers use in determining the risks, the stakeholders and their missions, and the prioritization of those missions. Without a general consensus on the physical and philosophical definition and missions of homeland security, achieved through a strategic process, some believe that there will continue to be the potential for disjointed and disparate approaches to securing the nation. From this perspective general consensus on the homeland security concept necessarily starts with a consensus definition and an accepted list of prioritized missions that are constantly reevaluated to meet risks of the new paradigm that is homeland security in the 21 st century. These varied definitions and missions, however, may be the result of a strategic process that has attempted to adjust federal homeland security policy to emerging threats and risks.

Ten years after the September 11, 2001, terrorist attacks, the U.S. government does not have a single definition for "homeland security." Currently, different strategic documents and mission statements offer varying missions that are derived from different homeland security definitions. Historically, the strategic documents framing national homeland security policy have included national strategies produced by the White House and documents developed by the Department of Homeland Security (DHS). Prior to the 2010 National Security Strategy, the 2002 and 2007 National Strategies for Homeland Security were the guiding documents produced by the White House. In 2011, the White House issued the National Strategy for Counterterrorism. In conjunction with these White House strategies, DHS has developed a series of evolving strategic documents that are based on the two national homeland security strategies and include the 2008 Strategic Plan—One Team, One Mission, Securing the Homeland; the 2010 Quadrennial Homeland Security Review and Bottom-Up Review; and the 2012 Department of Homeland Security Strategic Plan. The 2012 DHS strategic plan is the latest evolution in DHS's process of defining its mission, goals, and responsibilities. This plan, however, only addresses the department's homeland security purview and is not a document that addresses homeland security missions and responsibilities that are shared across the federal government. Currently, the Department of Homeland Security is developing the 2014 Quadrennial Homeland Security Review, which is due late 2013 or early 2014. Varied homeland security definitions and missions may impede the development of a coherent national homeland security strategy, and may hamper the effectiveness of congressional oversight. Definitions and missions are part of strategy development. Policymakers develop strategy by identifying national interests, prioritizing goals to achieve those national interests, and arraying instruments of national power to achieve the national interests. Developing an effective homeland security strategy, however, may be complicated if the key concept of homeland security is not defined and its missions are not aligned and synchronized among different federal entities with homeland security responsibilities. This report discusses the evolution of national and DHS-specific homeland security strategic documents and their homeland security definitions and missions, and analyzes the policy question of how varied homeland security definitions and missions may affect the development of national homeland security strategy. This report, however, does not examine DHS implementation of strategy.

Introduction Base erosion and profit shifting (BEPS) are "tax-avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations." For example, countries worldwide can experience reduced tax collections through various mechanisms that firms use to shift corporate profits out of higher tax jurisdictions into lower tax jurisdictions and other mechanisms that reduce interest, dividend, and royalty taxes. The Organization for Economic Cooperation and Development (OECD) has been engaged in an ongoing project to reduce BEPS. In October 2015, the OECD published its final list of 15 BEPS action items to equip governments with measures to address tax avoidance (although some updated or additional material has been provided). Some of these proposals can be (or have been) implemented in the United States and in other countries through administrative actions, and others would require legislative action. Some would require modifications of international tax treaties. U.S. multinational firms will be affected not only by actions taken by the United States but also by actions undertaken by other countries. The OECD framework was adopted by the G-20 Finance Ministers in February 2016. All OECD and G-20 countries agreed to implement four minimum BEPS standards: 1. Action 5, countering harmful tax practices (mostly aimed at patent boxes); 2. Action 6, preventing treaty abuse (largely about arranging payments to flow through countries with treaties that reduce withholding taxes on dividends and other passive payments); 3. Action 13, country-by-country (CbC) reporting; and 4. Action 14, increasing the effectiveness of dispute resolution. The BEPS project presents opportunities and concerns. One opportunity is that the United States could gain from more multinational cooperation to deal with profit shifting, which has been estimated to cause a loss in revenues of billions of dollars. The BEPS action items address the main methods of achieving profit shifting, including Action 4 (excessive interest deductions in high-tax countries) and Actions 8-10 (transfer pricing, that is, the price of purchasing and selling between related companies, in which pricing of intangibles is thought to be the major method used to accomplish profit shifting). In contrast, the United States risks losing some revenue if other countries increase their taxation of U.S. firms, even if that income was previously in low-tax jurisdictions, because the United States has a worldwide tax system that taxes income of foreign subsidiaries when repatriated but provides a foreign tax credit (i.e., credits for foreign taxes paid offset U.S. tax on foreign source income). Concerns have been expressed, in congressional hearings and in articles, about claims to U.S. multinationals' income tax bases by other countries that may be viewed as inappropriate. The Senate Finance Committee requested that the Government Accountability Office (GAO) study BEPS actions; GAO's study focused on transfer pricing guidance and documentation, including CbC reporting. The concern is that CbC reporting, which will share data with other countries about the activities of U.S. multinational firms, may be used by countries to effectively implement a formula-based approach to taxation. The United States has adopted CbC reporting for 2017 (a year behind most countries), even though all of its sharing agreements are bilateral, with a country-by-country agreement, whereas most countries signed a multilateral agreement. Companies are also concerned about confidentiality, and there have been proposals to make CbC reports public. The United States will share these data only through confidential bilateral agreements. In addition, some are concerned about the permanent establishment (which generally determines whether a country has any right to tax any profits under an income tax) issues in Action Item 7 and the use of an expanded permanent establishment treatment to allow foreign taxation of U.S. firms' income that is not appropriately allocated to the foreign sources. Some concerns about capturing revenues by other countries have been heightened by the European Union's (EU's) actions against several U.S. multinational corporations (among them Apple in Ireland) calling for back tax payments and by the United Kingdom's (UK's) and Australia's enactments of diverted profits taxes (sometimes referred to as the "Google tax"), which addresses profits of firms without permanent establishments, as well as the allocation of profits for firms with permanent establishments. At the same time, a uniform set of standards and reporting requirements may be beneficial to U.S. multinationals, as many countries might otherwise have enacted unilateral changes in rules and reporting standards. In particular, the uniform CbC reporting may be beneficial in that it forestalled unilateral enactment of reporting requirements that vary from country to country and that may have been more burdensome to firms than the uniform reporting rules. Although the United States has adopted the four minimum standards, other countries are in the process of adopting additional standards in various action items. The OECD's recent progress report highlighted increased transparency in rules, reduced opportunities for treaty abuse, curtailment of harmful tax practices via patent boxes, eliminating high returns to "cash boxes" addressed in the transfer pricing action item, and CbC reporting. Europe has a general constraint in which EU rules prohibit laws that discriminate against cross-border restrictions on trade. Such a restriction is what BEPS measures are sometimes targeting, as in the Controlled Foreign Corporation, or CFC, rules (Action 3), which are designed to prevent artificial shifting of income into low-tax foreign subsidiaries, and limitations of benefits (LOB) in the multilateral instrument (Action 15). Many of the action items may not be relevant to certain countries that already have achieved the standards (such as CFC rules or limits on interest deductions); also, many actions require legislative changes that may be difficult or time consuming. For the United States, proposed actions in Action 1 (the digital economy) or most provisions under Action 5 (harmful tax practices) would not be relevant because they apply to value added taxes (or VATs) or special regimes (such as patent boxes) that do not exist in the United States. Many of the other standards are already partly or fully captured in U.S. law and practice, even though in some cases U.S. practices are at odds with the BEPS standards. Notably, although the United States has strong CFC rules, its check-the-box and temporary look-through rules conflict with BEPS standards. Its restrictions on interest deductions are weaker than those suggested by BEPS. An important approach used by multinational corporations, cost-sharing arrangements, also appears incompatible with the transfer pricing guidelines. These issues are discussed in further detail below. This report first reviews the basics of international tax rules. It then discusses the various action items organized into Action Item 1, which relates to the digital economy and proposes standards only with respect to VATS; Action Items 2-5, 7, and 8-10, items related primarily to profit shifting; Action Item 5, which relates to harmful tax practices; Action Item 6, regarding tax treaties; and Action Items 11-15, which are primarily administrative in nature. Brief Overview of International Tax Rules Territorial or Worldwide Under a territorial or source-based tax, all income earned within a country is taxed only by that country regardless of the nationality of the firms. Alternatively, under a worldwide or residence-based system, a tax would be imposed on foreign source income and a credit allowed for foreign taxes paid. For purposes of the corporate profits tax, most countries have a territorial system (although most have some type of anti-abuse rules, as discussed below in reference to CFC rules). The current U.S. tax system is a hybrid. It has some elements of a residence-based or worldwide tax, in which income of a country's firms is taxed regardless of its location, and some elements of a source-based or territorial tax. The provisions that introduce territorial features are deferral and cross-crediting. Deferral, CFC Rules, and Check-the-Box Deferral allows a firm to delay taxation of its earnings in foreign-incorporated subsidiaries until the income is paid as a dividend to the U.S. parent company. Some income, however, is taxed currently. Income that is not part of corporate profits, such as royalties and interest payments, and income earned by foreign branches of U.S. firms are taxed currently. In common with many other countries, the United States has anti-abuse rules to tax income that is easily shifted on a current basis. Internationally, they are called CFC rules, but in the United States they are commonly referred to as Subpart F rules, after the section of the tax code containing the rules. The rules apply to foreign firms in which U.S. shareholders own at least 50% of the voting power or value, for U.S. shareholders owning at least 10% of the voting interest. Many CFCs are wholly owned by a single U.S. parent. Subpart F rules currently tax passive income (such as interest) received by a subsidiary, income of sales and services subsidiaries in foreign countries where the production and consumption of those goods and services take place in other countries, and income from insurance of risks outside the country (or within the country if receiving the same premiums). Income invested in U.S. property (including lending to the parent) is taxed currently (to prevent a way to repatriate without paying dividends). There are de minimis exclusions (for small amounts or shares or tax rates more than 90% of the U.S. rates) and full inclusion rules (when Subpart F income is more than 70% of total income). Other countries have similar rule features that trigger current taxation, such as type of income and tax rate. EU member countries are constrained in applying CFC rules to other EU member states. Since the late 1990s, the scope of Subpart F has been reduced by the adoption of check-the-box rules. Check-the-box was a regulatory provision, but it has been codified and extended through the temporary look-through rules, set to expire after 2019. The provision allows a foreign subsidiary of a U.S. parent to elect to disregard its own (second tier) subsidiary, incorporated in a different country, as a separate entity. If the second tier subsidiary borrows from the first tier subsidiary, it can deduct the interest in the country of incorporation; normally, the payment of interest would be considered Subpart F income and taxed currently. Under check-the-box, the payment is not recognized because there is no separate entity. If the first tier subsidiary is in a no-tax jurisdiction, the interest will be deducted, but not taxed currently. This type of arrangement creates what is referred to as a hybrid entity, which is characterized differently in different jurisdictions. Foreign Tax Credit and Cross-Crediting The U.S. tax system allows a credit against U.S. tax due on foreign source income for foreign income taxes. This foreign tax credit is designed to prevent double taxation of income earned by foreign subsidiaries of U.S. corporations. Thus, firms are not levied a combined U.S. and foreign tax in excess of the greater of the foreign tax or U.S. tax due if the income were earned in the United States. If the foreign tax credit had no limit, a worldwide system with current taxation and a foreign tax credit would produce the same result, for firms, as a residence-based tax, because the tax effectively applying would be the tax of the country of residence. Firms in countries with a higher rate than the U.S. rate would get a refund for the excess tax, and firms in countries with a lower rate than the U.S. rate would pay the difference. However, to protect the nation's revenues from excessively high foreign taxes, the credit is limited to the U.S. tax due. Cross-crediting occurs when credits for taxes paid to one country, that are in excess of the U.S. tax due on income from that country, can be used to offset U.S. tax due on income earned in a second country that imposes little or no tax. If the limit were applied on a country-by-country basis, a firm would pay the minimum of the U.S. tax or the foreign tax in each country. Cross-crediting also allows income subject to a low tax to have its U.S. income tax offset by credits on highly taxed income. For this reason, foreign tax credit limits are applied to different categories of income, or baskets. The main baskets are passive and active baskets. Notably, however, royalties on active business operations are classified in the active basket, and because they are typically not taxed in the country of source, they can benefit from excess credits against U.S. tax from foreign taxes on active income. There are also restrictions on the use of excess credits generated from oil and gas extraction, which is often subject to relatively high foreign tax rates. The combination of deferral, which allows firms to choose the income to be subject to tax, and cross-crediting means that multinational firms on average have relatively little U.S. tax; the effective U.S. residential tax is estimated at 3.3%. Allocation of Income The first right of taxation goes to the source country, regardless of whether the residence country has a territorial tax or a worldwide tax with a foreign tax credit. To assess some of the actions considered in the allocation of income, whether suggested or rejected, it is important to consider the fundamental definition of a tax on profits (or income from capital). Income from capital is created by investment, which involves forgoing resources in the present to obtain income in the future. The return can simply be the cost of waiting or opportunity cost (because resources could earn interest elsewhere) in the form of a riskless return and a risk premium that compensates for uncertainty and variability of the future return. Presumably, then, the profit representing waiting should accrue to the owner of the asset or the entity that gave up resources to make investments, and the profit representing risk should be borne by the person subject to the risk. When firms, especially closely related firms, are located in different taxing jurisdictions, the allocation of profits, whether returns to waiting or returns to risk, can become complicated. Successful innovations can also result in excess returns (beyond the amounts necessary to attract capital), either because of patent protection or other features that incur a degree of monopoly power over some time period. Because the returns are the upside of risk bearing, they should accrue to the party bearing the risk. Note that under an income tax, the returns should accrue based on the investment; the size of the market (i.e., the provision of customers) is not a source of value, although the prospective market size is a factor in a decision to undertake an investment. This view is embodied in the basic international rules. As discussed later in this report, risk bearing is an important issue in the BEPS standards as well as in the GAO review of the transfer pricing issues addressed by BEPS. Nexus and Permanent Establishment Nexus is the first step in the process of determining whether a country has the right to tax any of a firm's profits. A U.S. firm that exports abroad, without taking part in an activity within the country it is exporting to, is not subject to profits taxes by that country. To establish the right to tax, a firm has to have nexus, or connection, with the country, which requires a permanent establishment. A permanent establishment is generally viewed as having a physical presence, which means that some assets are in the country (and a profits tax is a tax on the return to assets). Obviously a firm that manufactures abroad or has retail stores abroad has a physical presence, but other circumstances with a minimal presence are less clear. If nexus is established, then the amount of income sourced in that country must be determined. In the U.S. tax law, this establishment of a presence is termed effectively connected income and generally must require a physical presence or be derived from assets that are used in the United States. Tax treaties (discussed below under Action 6) also contain provisions on permanent establishment. Because most income sourced abroad is not subject to U.S. tax on a current basis, U.S. firms can benefit by recognizing profit in low-tax-rate jurisdictions. The country to which corporate profits are sourced is a major concern of the BEPS projects. Evidence exists of significant profit shifting out of high-tax and into low-tax jurisdictions (as discussed in Action Item 11 below). Profit Shifting: Leveraging and Transfer Pricing Two major methods used to recognize more profit in low-tax jurisdictions than economic reality suggests are increased leveraging and use of transfer pricing, primarily of intangible assets such as drug formulas, technological advances, and trademarks. To shift profits through leveraging, firms locate their debt in high-tax countries, including the United States. This technique involves both U.S. multinational firms locating their debt in the United States rather than abroad and foreign parents of U.S. subsidiaries locating debt in their U.S. subsidiaries. As noted above, the creation of a hybrid entity by check-the-box can also lead to reducing profit taxable by the U.S. system, although it is not clear whether the United States or other high-tax countries lose revenue. The tax code contains general provisions (called thin capitalization rules) to restrict large interest deductions, disallowing deductions that exceed 50% of income before interest, depreciation, and certain other deductions. There is also a safe harbor, so that the limit does not apply if the debt-to-equity ratio is not greater than 1.5 to 1. Recently, new regulations issued under Section 385 would require some debt between related entities to be reclassified as equity. The second method of profit shifting is through transfer pricing methods that determine the price associated with a transfer of goods and assets. The standard for transfer pricing is that goods and assets bought and sold between related firms should reflect arm's length pricing, that is, the price that would be paid by two unrelated firms. If a U.S. firm sells a good or asset to its foreign subsidiary for a price that is too low, profit in the United States is reduced and profit abroad is increased. Most of the transfer pricing issues arise due to intangible assets that are often unique, so there is not a market to observe arm's length prices. A variety of different methods are used to determine transfer prices. When an intangible asset is transferred abroad (such as the right to sell a mobile phone or to sell advertising for a search engine), there is sometimes a buy-in payment by the foreign subsidiary, followed by cost-sharing payments. The subsidiary pays for a share of the research costs in the United States in return for a share of the rights (to future technological advances). Tax Treaties The United States and other countries have tax treaties designed to avoid double taxation. An important area of coverage in treaties is the agreements regarding withholding taxes, but treaties cover other issues as well, such as the recognition of a permanent establishment or other grounds to impose source-based taxes, such as corporate profits taxes. For U.S. firms' subsidiaries incorporated abroad, the treaties of those countries of incorporation and other countries are also relevant. Withholding Taxes on Dividends, Interest, and Royalties, and Treaty Shopping and Abuse The United States and other countries may impose withholding taxes on dividends, interest, royalties, and capital gains payments. In the case of the United States, a 30% withholding tax is applied to dividends and royalties. Interest is subject to a withholding tax, but interest paid by banks and insurance companies is exempt. Capital gains are generally exempt with some exceptions, notably from the sale of real estate. Member states of the European Union cannot impose withholding taxes on each other. The United States has a number of treaties with other countries that reduce tax rates, in some cases to zero on royalties, and in the case of U.S. subsidiaries of foreign parents to 5% for major trading partners. A network of such treaties exists around the world. One issue addressed by the OECD BEPS action items is treaty shopping, in which recipients without treaty benefits funnel payments through countries with generous withholding tax treatment to avoid withholding taxes. Treatment of withholding taxes also plays a role in some of the tax planning arrangements to shift profits to low-tax jurisdictions. For example, some tax planning arrangements in Europe funnel profits (via royalties) through the Netherlands to eliminate withholding taxes on royalties. The United States has a limitation on benefits (LOB) that requires a foreign person to certify to the payer that it qualifies for benefits of reduced withholding rates in treaties. Other countries may have general anti-treaty shopping provisions in domestic law. Other Issues Tax treaties also address other issues such as defining residency and defining the circumstances under which profits of U.S. firms will be taxed abroad (and vice versa). Business profits are taxed in state of residence unless carried on in the foreign country through a permanent establishment (i.e., the mere fact of selling in a foreign country is not adequate to establish a basis for profits taxation). If a permanent establishment exists, some share of profits must be allocated to the foreign country and subject to its taxes. Action 1: The Digital Economy Action 1 focuses on the general issue of the effects of the digital economy. It discusses the broad set of consequences of a digital economy that may exacerbate base erosion and profit shifting issues or even render existing rules obsolete. The discussion deals with three types of taxes: (1) corporate profits taxes; (2) withholding taxes on income such as dividends, interest, and royalties (in this case, royalties); and (3) the value added tax (VAT). Standards, however, are provided only with respect to the VAT. The digital economy is an economy based on digital technologies. It refers to numerous online activities, such as advertising, broadcasting and media, production monitoring, retailing, and tracking, as well as financial services, remote education and health care diagnosis and records, software, and cloud computing. Digital activity also involves gathering customer data and converting it into revenue (such as through sales of advertising) and user-generated content. These activities are characterized by mobility, reliance on intangible assets, network effects that may lead to oligopoly or monopoly, and in some cases low barriers to entry that lead to volatility. The OECD analysis also raises questions of whether income from certain activities, such as cloud computing, should be considered profit or royalties. The digital economy issues are particularly important to U.S. multinationals because U.S. firms are the major firms in this industry. With many aspects of the digital economy rendering the physical presence rules for nexus irrelevant, this discussion focuses on new approaches for establishing nexus as well as tightening (but not abandoning) physical presence (addressed in the permanent establishment standards under Action Item 7). The OECD considered, but abandoned, using economic presence rather than physical presence as the standard nexus test. Economic presence might be measured by sales, having a local domain name or website, having a local payment option, the volume of data collected, contract conclusion with customers, and monthly active users. Action Item 1 also considered allocating income through fractional apportionment, and a modified deemed profit ratio on presumed expenses. In addition, the action item discussed a withholding tax on digital transaction payments and an equalization levy (an excise tax, for example, on gross sales). None of these approaches were provided as a standard, although countries are free to adopt such an approach if needed to address BEPS issues. It can be argued that these particular standards are inconsistent with the concept of where profit accrues, meaning that the profit from remote sales or digital sales should accrue to the source of the investment and ownership of the asset, and not be based on the location of customers (just as exports of goods into a foreign market would not trigger profits tax). A physical presence in a country would require some amount of capital assets (such as a building or equipment), but a digital presence would not. The adoption of economic rather than physical presence as a basis for nexus could have consequences for U.S. firms in that other countries might increase taxes imposed, which might ultimately be credited by the United States. Standards were not provided specific to the digital economy with respect to profits taxes and passive income from capital. Related standards were subsumed in other actions, such as the definition of permanent establishment (Action 7), in which proposals were made to limit exceptions, and CFC rules (Action 3), in which proposals were made to ensure current taxation of income in the digital economy to the ultimate parent company, as well as other action items. Action 1 did discuss options to ensure that the digital enterprises that provide business-to-customer direct sales be subject to the VAT by requiring compliance by the nonresident remote sellers. This issue is not directly relevant to the United States, although U.S. firms could be affected by other countries' VAT regimes. Action Items Relating to Profit Shifting by Multinational Corporations The following actions relate primarily to reducing profit shifting by multinationals. Action 2: Neutralizing the Effects of Hybrid Mismatch Arrangements Hybrid mismatch arrangements involve the use of hybrid entities or hybrid instruments to provide multiple deductions for a single expense, deductions in one country without taxation in another, and multiple foreign tax credits for a single amount of foreign tax paid. Hybrid entities generally involve cases in which the entity is not seen as a separate entity from one country's perspective but is from another country's perspective. Hybrid instruments are financial arrangements that are treated as debt in one jurisdiction and equity in another. The most common example of a hybrid entity from the United States' perspective is in check-the-box, in which an entity can be disregarded for purposes of Subpart F rules. For example, a subsidiary of a U.S. parent in the Cayman Islands has in turn a German subsidiary that borrows and deducts interest in Germany. If the German subsidiary were a separate entity for U.S. tax purposes, Subpart F rules would treat the interest income paid by the German subsidiary to the Cayman Islands subsidiary as currently taxable. Because check-the-box allows the German subsidiary to be disregarded for U.S. tax purposes, the interest income is not seen as an item of income and is not taxed. (Note that this hybrid mismatch is created by the check-the-box rule, and there is a suggestion to disallow this check-the-box treatment for purposes of measuring Subpart F income in Action Item 3.) An example of a hybrid instrument might be an instrument considered debt, with interest deductible, in the United States but as equity in a foreign country, which does not tax foreign source income and therefore does not tax dividends. The action item identifies three types of treatments to be addressed: (1) the payment is deductible in one country and not included in the other (D/NI); (2) where the payment gives rise to double deductions (DD)—for example, both parent and subsidiary take the deduction and it exceeds the dual inclusion, or the firm is a dual resident of two countries; and (3) an indirect D/NI arrangement. The action item suggests the treatment of D/NI as the denial of a deduction by the payer, and if that does not occur, the inclusion of income by the payee as a defensive move. For a double deduction, the remedy would deny the parent deduction (and if not, the payer deduction) or deny the resident deduction. This action contains a number of additional detailed proposals for domestic law changes (such as denying dividend exemptions when payments are deductible, preventing duplicate credits, altering CFC rules to include hybrid entity incomes, and encouraging information reporting). It also contains changes to ensure hybrid instruments and entities are not used to obtain treaty benefits inappropriately. The United States already has rules that cover certain standards associated with deductible hybrid payments and dual residents, as well as tax treaty provisions that cover the treaty recommendations. Otherwise no legislative proposals are active. In particular, no changes have been proposed to eliminate check-the-box and the look-through rule. Action 3: CFC Rules Many of the standards in Action 3 are for countries that do not have CFC rules to establish them (most countries, especially developed countries, do), but also to strengthen them. Most of these standards are not particularly relevant to the United States, which already has a fairly strong set of CFC rules. One suggestion, however, is not to allow check-the-box treatment with respect to Subpart F income. Another is to consider including certain types of additional income, such as intellectual property (IP) income; digital activities income; and finance, banking, and insurance incomes. The action also discusses the possibility of a substance analysis, which would determine if there is little enough economic activity (through employees, business premises, or other measures) that all of the income of the CFC should be taxed. In addition, the action item discusses two possible features that are not in current U.S. CFC rules. One is to subject returns to IP in excess of a normal return to CFC rules. Another is to tax at some minimum or partial rate. Some approaches similar to these proposals have been advanced in the past. For example, proposals have been made to tax excess income from intangibles based on a cost mark-up as Subpart F income or to impose a minimum tax on intangible income earned in low-tax jurisdictions. The current tax regime in the United States already incorporates many of these standards, although, as noted earlier, no changes have been proposed to eliminate check-the-box and the look-through rule. The United States has been discussing the possibility of moving to a territorial tax. The director of the OECD's Center for Tax Policy and Administration, Pascal Saint-Armans, indicated that "from a European perspective, it is hard to understand how you would move to a territorial tax without repealing check-the-box." Action 4: Limiting Base Erosion Involving Interest Deductions and Other Financial Payments One of the key methods used to shift profits into low- or no-tax jurisdictions is leveraging—that is, borrowing and deducting interest. Some countries, including the United States, have thin capitalization rules that limit interest deductions, and, as noted in the discussion of U.S. tax law, provisions that treat foreign subsidiary loans as repatriations subject to tax. The discussion considers three types of leveraging: (1) third-party debt in high-tax countries, (2) intragroup loans to generate deductions in excess of expense, and (3) third-party or intragroup to fund tax-exempt operations. It also notes a variety of rules that have been adopted to address leveraging: arm's length tests, which compare interest rates with those between unrelated parties; a withholding tax on interest payments; disallowing a percentage of interest expense as a share of income; limiting interest deductions to the worldwide income share; and targeted anti-avoidance aimed at special transactions needing a consistent approach. Challenges with some of these rules are the complications (with respect to arm's length) and withholding that may be either inadequate or too high and cannot be imposed on payments between EU member states. The proposal combines several effects of the rules: a fixed limit on interest that cannot exceed a percentage (between 10% and 30%) of pretax earnings (before interest and depreciation), supplemented by a worldwide group ratio rule, which allows interest to exceed the fixed limit up to the average of the worldwide interest share. These rules might be accompanied with de minimis rules for entities with a low level of interest. It also suggests an exclusion for loans used to fund public-benefit policies, which are frequently highly leveraged. The proposal noted that these general rules might not apply to the banking and insurance sectors. An updated 2016 report provided additional technical details and concluded that the common approach was not appropriate for banking and insurance, suggesting that each country independently identify risks and take actions. The general BEPS-proposed rules limiting leveraging are stricter than the current U.S. rules in some respects, and changes to meet this standard would require legislation. The recently adopted Section 385 debt-equity regulations would restrict interest deductions by related businesses by characterizing certain debt as equity. Although proposals have been made in the past for strengthening the interest deductibility rules or a worldwide group ratio rule, there are no targeted legislative changes currently being considered for the United States regarding interest deductions. Action 7: The Artificial Avoidance of Permanent Establishment Status The first step in allocating income to a particular source jurisdiction for the purpose of profits taxes is establishing nexus, which requires a permanent establishment. Traditionally, a permanent establishment has been considered to be a physical presence. Tax authorities in many countries and cases have not been able in court to address profit attribution because of the lack of a permanent establishment (which meant they did not have standing). This action item addresses several issues in avoiding permanent establishment. The first is avoiding the permanent establishment status through the use of a commissionaire arrangement, which is an arrangement in certain civil law countries (such as France and Germany). In a commissionaire arrangement, a firm (the agent) would sell products in its own name but on behalf of a foreign enterprise (the principal) that owns the products. Legal title passes directly from the principal to the customer. Customers, however, have only a contract with the commissionaire and can only sue the commissionaire; the commissionaire has a contract with the principal. The principal can substitute for a distributor and avoid having a permanent establishment. The firm owning the products does not have permanent establishment and thus does not pay tax on profits. The commissionaire pays taxes only on a commission that is set by contract usually based on a cost-plus formula or a percentage of sales value. This treatment can reduce the amount of profit taxes in the country where products are sold, which could be larger if the sales were made by a subsidiary or related company established in the country of sales. In a related strategy, a clause in the OECD Model Tax Convention, Article 5(5), provides there is no permanent establishment if contracts are not concluded in the state where sales take place, and Article 5(6) provides there is no permanent establishment where the person who habitually exercises the authority to conclude contracts is an independent agent. This measure would modify Articles 5(5) and 5(6) to include as a basis of permanent establishment circumstances where the agent habitually concludes contracts or plays the leading role or when the independent agent acts almost exclusively for the principal where it is closely related (based on all the relevant facts and circumstances). The second issue to avoid permanent establishment status is due to a list of exceptions to business operations that were considered to be preparatory or auxiliary. A concern is that these activities, in the digital age, may now be considered core (as discussed in Action 1). (An example might be a warehouse for storing and delivering goods that the enterprise sells online.) Another concern is fragmentation, in which firms divide operations into several smaller ones to make the argument that the activities of each are preparatory or auxiliary. The action item would add language to define what is preparatory or auxiliary in light of the core activities or the firm and to consider the whole of activities. This action item also addresses other strategies, such as those that split up contracts into shorter periods of less than a year with different companies so that they do not meet the standards for permanent establishment. It notes that the principal purposes test, or PPT (discussed below in Action 6), would address splitting up of contracts as well. The action item mentioned, but did not address, the use of a network of agents to sell insurance. The OECD subsequently released a discussion draft on the attribution of profits to permanent establishments, even though this issue is addressed in Actions 8-10 on transfer pricing. These changes in determining permanent establishment are to be included in the multilateral instrument discussed in Action 15. Note also that Actions 8-10 also limit intragroup interest paid to companies without sufficient substance to a risk free rate. Why permanent establishment revisions should be an important part of BEPS is a concern, because a significant amount of profit shifting would be unlikely. These limited business involvements would seem to imply modest, if any, profit reallocations. U.S. firms are concerned that permanent establishment status may open the door to inappropriate assignment of profits to what are, essentially, countries that are the target of exports (concerns that may have increased given some actions in the EU state aid cases, with Apple and other firms, and the enactment of diverted profits taxes and equalization taxes that impose taxes on firms without permanent establishments). A more benign reason that other countries might be interested in addressing the permanent establishment status is because it is necessary for local tax authorities to investigate and possibly prevail in the courts on matters of the allocation of profits. A number of countries have already agreed to the permanent establishment rules. The United States has not yet taken any actions relating to this action item. Actions 8-10: Aligning Transfer Pricing Outcomes with Value Creation When related companies buy or sell commodities, services, or assets internally, a transfer price must be charged to allocate profits. The core of transfer pricing rules is the arm's length principle, that is, that goods and assets must be exchanged with the same prices that would be charged between unrelated firms. Ideally, the method of setting prices would be to rely on a comparable uncontrolled price (CUP). In many instances, there are no comparables, and a variety of other methods are used, including resale costs, cost-plus methods, and net profit indicators, such as profit margins. Intangibles, such as technology, know how, and brand value, are often unique and particularly hard to value. The basic thrust of these action items is to move from the current emphasis on contractual arrangements to actual economic issues of functions performed, assets used, and risk undertaken. This objective is reflected in the title of this set of action items: pricing should reflect value creation. In aligning transfer pricing outcomes with value creation, the BEPS plan focused on three key areas. 1. Action 8 considers transfer pricing of intangibles. 2. Action 9 considers the contractual allocation of risks, including funding by a capital-rich funding member of the multinational group whose returns do not correspond with activities. 3. Action 10 considers a variety of issues, including transactions that are not commercially rational for the individual enterprises, the diversion of profits from the economically important activities, and payments (such as management fees and head office expenses) that erode the tax base. The action items introduce two important clarifications. The first is that the undertaking of risk is associated with a higher expected return and cannot be allocated by contract to a party that does not exercise control or have the financial capacity to assume the risk. The second is that legal ownership alone does not necessarily generate a right to the return from exploiting an intangible. This latter concern specifically mentions cost-contribution arrangements (discussed earlier) that are used in the United States, referred to as cost-sharing arrangements. In addition, the items note that a capital-rich member that provides funding but does not control the risks will be entitled to no more than a riskless return or less (e.g., if the transaction is not rational). The OECD documents sometimes call these cash boxes, which are also limited by other BEPS action items. The CbC reporting in Action 13 (discussed below) provides information that assists in the risk assessment and other transfer pricing issues. These action items stress that outcomes based on contracts do not necessarily reflect reality. Risks must be associated with actual decisionmaking, capital provided without functions should have no more than a risk-free return, and commercially irrational transactions can be disregarded. To undertake risk, the entity must have both control and the financial capacity to bear risk; otherwise, it should receive only a risk-free return. The following sections provide further guidance on various items, not necessarily in numerical order, partly because of some of the specific actions (e.g., some actions in Action 8 are discussed in the context of the general guidance in Action 9). Guidance for Applying the Arm's Length Principle (Action 9) Various factors that might be considered in determining arm's length pricing are contractual terms, functions (including assets used and risks assumed), characteristics of property transferred or services provided, economic circumstances of the parties and the market, and business strategies pursued. The fundamental theme of this section is that conduct is more important than the contract. In addition, terms of arrangements may change over time, and care should be exercised when changes are triggered by knowing the risk outcomes (risk assumption is not relevant when risk outcomes are known). The treatment of risk, including actual control and financial capacity, is a concern. Risk management is not the same as assuming a risk, and true control is the actual making of a decision. According to the proposal, risk assumption should be ex ante. Other issues that would affect transfer pricing include whether the geographic market is homogeneous or diverse, whether the firm is attempting to penetrate a new market by underpricing, location effects (e.g., restrictions on foreign firms), and group synergies. Persistent losses in one firm when the group as a whole is profitable should raise questions, although there are some legitimate reasons for shorter-term losses. Commodity Transactions and the Transactional Split Profit Method (Action 10) Countries face several problems and policy challenges regarding commodity transactions. In some cases CUP can be used, although pricing dates in contracts should not be used, but rather estimates of shipping dates. The transactional profit split method may be appropriate when other methods do not work (e.g., in the case of global trading of financial instruments or of unique intangibles). Some of the inputs into this approach include invested capital costs, functional contributions, and the weighting of factors. In some cases, inexact comparables may be better, but the transactional split profit may be better for highly integrated operations (e.g., global trading of financial instruments). Whether the profit split can be used to support results under a TNMM (transactional net margin method) and other methods is under discussion. The profit split method is being considered further. Transfers of Intangibles (Action 8) This section focuses on defining intangibles, ensuring the appropriate profit allocation, and developing rules for hard-to-value intangibles. Many of the issues are related to the risk issues discussed in Action 9, with only a risk-free return allowed if there is no function performed or control of risk. Under circumstances where there are information asymmetries between the firm and tax authorities, tax authorities can consider ex-post outcomes as evidence of ex ante pricing arrangements for hard-to-value intangibles. Legal ownership does not determine returns; returns should be aligned with value creation (development, maintenance, enhancement, protection, and exploitation of intangibles). The assumption of risk requires exercising control and having the capacity to bear risk. If the entity provides financing without functions, it should receive only a risk-adjusted return, and if it provides only financing with no control over financial risks, it should have a risk-free return. The discussion defines intangibles to include patents; know-how and trade secrets, such as trademarks, trade names, and brands; rights under contracts and government licenses (but not company registration); licenses and similar limited rights in intangibles; and good-will and going concern value. Group synergies are not intangibles but should be addressed as comparability factors; market-specific characteristics are also not intangibles. Transfer pricing should assure group members are compensated for functions, assets, and risks assumed, with risk requiring control and capacity to bear; generally these are determined on an ex ante basis. The discussion continues the emphasis on functions, assets, and risks as opposed to contracts. Various methods can be used in transfer pricing, excluding rules of thumb that apportion income between licensor and licensee and discouraging methods based on cost. Other approaches discussed are CUP, transactional cost methods, and discounted cash flow. The discussion notes that risk also depends on payment form: payments contingent on sales or profits are more risky than a fixed amount. For hard-to-value intangibles, tax authorities should be able to consider ex-post outcomes, and use their consistency with ex ante outcomes to monitor transfer pricing. Management Fees and Head Office Expense (Action 10) This section of the discussion looks at low value-adding intra-group services, suggesting that CUP or cost-based approaches might be used. Cost-Contribution Arrangements (Action 8) This section discusses profit attribution based on cost-contribution arrangements (CCAs), the type of cost-sharing arrangement used by U.S. multinationals (in which foreign subsidiaries finance part of research and development [R&D] in return for the right to sales in a geographic area or a share of profits). These arrangements are contractual ones that allow business enterprises to share in the contributions and risks of developing, producing, or obtaining intangibles, tangible assets, or services. This particular part of the action item is provided to ensure that the same rules applying to contractual arrangements in general are also applied to cost contribution arrangements, whether in allocating risks, valuing and pricing intangibles, or corresponding to economic reality. These approaches are not generally compatible with the Action 8 guidelines if the subsidiary does not exercise control over the risks it assumes or does not have the capacity to bear the risk. Contributions and benefits should not be measured at cost, but rather at value. For CCAs for developing assets, the entity must exercise control over risk, including the opportunity to take on, lay off, or decline a risk-bearing operation, make decisions about how to respond to risks, and exercise control. For service CCAs, allocation could be based on some formulas, for example, shares of income, costs saved, sales, profits, and units employed, as well as the value of contributions consisting of performance of services. This is an important issue from a U.S. standpoint because of the common use of cost-sharing arrangements in developing intangibles and sharing the benefits of the research, often on the basis of geographic rights to product sales. In cases in which the firm has developed excess returns (due, for example, to market power or brand name), it would be unlikely to share those high returns with an unrelated firm in exchange for financing a proportionate share of research. Further Risk Allocation Issues The GAO report on transfer pricing, while agreeing that profit shifting would be lessened when actual conduct rather than contractual agreements determine profit allocation, expressed some fundamental reservations about applying the arm's length principle because it does not account for the ways in which entities bear risk. Its argument is that a parent cannot transfer risk to its subsidiary "because any costs incurred by the subsidiary will be reflected in a change in the market value of the parent corporations. In general, related corporations do not have the same ability to transfer risk as unrelated corporations." Subsequently, the report notes with respect to arm's length pricing (ALP) with risk that "…the application of the ALP is problematic in this situation because risk cannot be allocated between parties by the very fact that they are related." A similar view was taken by Ed Kleinbard, law professor at the University of Southern California, when commenting on a court case relating to Medtronic and its Puerto Rican subsidiary. The Internal Revenue Service (IRS) viewed the manufacture of medical devices in Puerto Rico as routine manufacturing (with a cost plus markup), but the Tax Court found additional income could be attributed to the subsidiary because it faced significant quality control challenges for instruments implanted in the body. Kleinbard's point was that if these instruments suddenly began exploding in the body, it would be the reputation and value of the parent Medtronic company that would bear the costs. IRS has appealed that decision. U.S. Actions The United States has not taken any actions regarding these standards. Although indications have been made by Treasury authorities that current U.S. practices are consistent with the new OECD guidelines, current cost-sharing arrangements may appear not to be. In fact, the notion of an independent voice in making decisions about risk or controlling the operation by a subsidiary seems inconsistent with the common management of a firm and its subsidiary, especially where separate management is largely a paper operation. Thus, even if there were a true separation of control of risk, the reality, as suggested by GAO and by Kleinbard's comment, is that risk cannot be allocated away from the parent. Discussion Drafts Under Actions 8-10 The OECD circulated, for comment, discussion drafts on two issues. The first is the attribution of profits to permanent establishments created in Action 7. These profits, after deducting the arm's length payment to the agent, may be zero or in some circumstances may be positive. The second discussion draft is on a particular method of transfer pricing not fully addressed in the October 15 report, the transaction profit splits method. This method may be appropriate for highly integrated businesses with comparables. The draft indicates that the split is of actual profits but should be based on information known or reasonably seen. It requires a high level of integration of activities, offers flexibility, and is less likely to have extreme and improbable results. It is difficult to apply, and the lack of comparables is insufficient reason to use that method because an inexact comparables method may be better. The GAO study raises the same questions about the transaction profit splits method as they did about risk allocation in general, namely that the profit split method when based on contributions can permit profit shifting. Action 5: Harmful Tax Practices This action item is not particularly relevant to U.S. rules, as it primarily addresses preferential regimes, largely focused on patent boxes, or special regimes that provide for lower tax rates for income from certain types of innovations or intellectual property (IP). The United States does not have a patent or innovation box, although proposals have been made for adopting one; a proposal by Representatives Boustany and Neal would appear to be consistent with OECD requirements in most respects. A number of other countries do have preferential regimes, although they vary substantially. Although this provision would not affect U.S. rules (at least not currently), it could have economic effects that might be of concern. Notably, while it would reduce the likelihood of artificial profit shifting due to preferential regimes, it might increase the attractiveness of locating research abroad rather than in the United States. This action item is also concerned with transparency in certain tax rules, which would affect the United States, largely because the item covers advance pricing arrangements (APAs) that agree in advance to transfer prices. The OECD has had a long history of examining harmful tax practices, and this action item continues that examination and makes recommendations. Identifying Preferential Regimes This recommendation focuses on the substantial activity requirement for a preferential regime and on the use of risk allocation for artificial profit shifting. Prior OECD work on identifying a harmful preferential regime considered four fundamental factors: (1) no- or low-tax rates on geographically mobile income, (2) ring fencing (allowing benefits for foreign and not domestic firms), (3) lack of transparency (details not apparent or inadequate regulation or disclosure), and (4) no effective exchange of information. They also identified eight other factors to consider: artificial base, no transfer pricing principles, a foreign source income exception, a negotiable rate or base, secrecy, a wide network of tax treaties, promotion as tax minimization device, and encouragement of arrangements that are tax driven with no substantial activities. A no- or low-tax rate must apply to characterize a regime as potentially harmful. To determine if a potentially harmful regime is actually harmful, several factors are considered: shifting activity rather than generating new activity, activities commensurate with income or investment, and whether the preferential regime is the primary motivation for location. A harmful regime can be abolished or changed, and if not, other countries can take defensive measures. The action item elevates the no-substantial-activities test to a primary factor. IP Regimes The item has a specific focus on IP regimes (often referred to as parent boxes). It requires that R&D expenses occur in the country, rejecting the alternatives of value creation and a transfer pricing approach based on functions and risk. The proportion of expenditures on research as a share of total expenditures determines the share of income that is eligible for the preferential rate. The approach allows outsourcing (perhaps limited) to unrelated firms but not to related ones. The action item covers patents and functionally equivalent treatments (i.e., broadly defined patents, copyrighted software, and certain certified items [for smaller firms]). Coverage of acquired patents would be limited. Firms must track income and expenses by product; current patent boxes could be grandfathered, with no new participants. The action item subsequently examines existing IP regimes and finds them generally inconsistent with the proposed actions. It subsequently discusses tax incentives for disadvantaged areas and generally found them not to be an issue. Non-IP Regimes The action item also considers briefly aspects to establish substantial activities or core income-generating items in the case of other types of preferential regimes: headquarters, distribution and service centers, financing or leasing, fund management, banking and insurance, shipping, and holding companies. Holding companies are a special case, and their potential for profit shifting may be addressed with other work on information exchange, treaty abuse, hybrid mismatches, and ring fencing. The subsequent examination of non-IP regimes finds most to not constitute harmful tax practices. Transparency in Rulings The action item requires transparency and information exchange for certain types of rulings related to preferential regimes, advance pricing agreements, downward adjustments in profit, permanent establishment, conduits, and any other ruling that would give rise to BEPS issues. U.S. Actions The only U.S. action planned is to exchange information about unilateral advance pricing agreements (i.e., agreements between the taxpayer and the IRS on transfer prices). This information would include the taxpayer's name, the transaction, and the countries involved, but not the actual rulings. Other countries could request the rulings under the regular exchange of information process, subject to treaty requirements. Action 6: Treaty Abuse The treaty shopping item has three major elements: 1. an inclusion of a statement in tax treaties that the parties intend to avoid creating an opportunity for no or reduced taxation through tax evasion, including treaty shopping; 2. a limitation on benefits (LOB), such as that in U.S. treaties, aimed at treaty shopping; and 3. a more general anti-abuse rule based on a principal purpose test (PPT) of transactions. If one of the principal purposes is to obtain treaty benefits, these benefits would be denied unless in accordance with the purpose of the treaty. The action item proposes flexibility and allows implementation through a combined LOB and PPT rule, a PPT rule alone, or an LOB rule with a mechanism to deal with any remaining conduit financing arrangements not already dealt with in the treaty. The LOB rules have specific criteria and are more certain, whereas the PPT rule is a more flexible rule that deals with a broader range of abuses but with less certainty. The statement of intent to avoid opportunities through tax evasion is a minimum provision. The need for flexibility reflects the presence of restrictions within the EU on withholding taxes on member states, the existence of domestic law anti-abuse rules in some states, or a general economic substance rule. The United States does not plan to include PPT and already has LOB rules. Actions 11-15: Tax Administration and Information This section addresses the remaining five provisions (11-15): monitoring BEPS, mandatory disclosure, country-by-country (CbC) reporting, dispute resolution, and a multilateral instrument to incorporate BEPS into bilateral tax treaties. Measuring and Monitoring BEPS (Action 11) Action 11 provides a review of indicators, evidence, and data needs to monitor BEPS. It notes that revenue losses due to BEPS are estimated at between 4% and 10% of global corporate income tax revenues ($100 billion to $240 billion annually) at 2014 levels. It summarizes BEPS indicators, including (1) profit rates of affiliates in low-tax countries are higher than the multinational firms' worldwide profit; (2) effective tax rates of large multinationals are lower (by 4 to 8.5 percentage points) than those of similar domestic firms; (3) foreign direct investment is increasingly concentrated in countries with high ratios of investment to gross domestic product (GDP); (4) the separation of taxable profits from the location of value-creating activities is especially clear with intangibles and has grown (e.g., royalties compared with R&D spending are six times higher in low-tax countries than on average and have increased three-fold between 2009 and 2012); and (5) debt is more concentrated among affiliates in high-tax countries (e.g., ratios are three times higher than worldwide firm ratios). The action item also notes that measuring the magnitude of BEPS is constrained by existing data limitations. It provides suggestions to improve the analysis of existing data and uses new data provided under Actions 5, 13, and 12. It proposes that the OECD work with governments to report and analyze more corporate statistics and notes that CbC data analysis has the potential to improve BEPS economic analysis. Action 11 goes on to describe existing data sources, including private and government entities (i.e., both public and private tax return data). It has an extensive review of empirical studies, including the effect of tax rates on profit shifting. It notes that there is a difference between the effect of unilateral policy changes and internationally coordinated ones. Action 11 discusses the need for additional analysis on the pervasiveness of BEPS (whether profit shifting is due to a small group of firms or most firms); differences in profitability of multinational and domestic firms that make comparisons difficult; factors contributing to group and affiliate profitability; other tax factors in location decisions; effects of uncertainty, reputation and compliance costs, and disclosures; the mobility of capital and labor; and governments' strategic behavior. Two appendices discuss evidence of tax planning (e.g., profit rates and patent locations) and provide a toolkit for estimating BEPS effects. Action 11 encourages publication of new corporate tax statistics on a consistent basis across countries and also suggests that governments improve public reporting of business tax revenue statistics, especially for multinational firms. Although the focus of Action 11 is worldwide, U.S. multinational firms are likely responsible for a significant share of the profit shifting from the United States to low-tax countries. Estimates suggest that, for 2012, revenue losses amounted to 5%-19% of U.S. corporate profits taxes, or $20 billion to $76 billion. Another indicator of profit shifting out of the United States is the share of taxable income as a ratio of GDP, made possible by tax data on the distribution of profits of foreign affiliates by country that is available in the United States, but not in general in other countries. While profits of U.S.-controlled foreign corporations as a share of GDP in the remaining six of the G-7 countries was 0.6% in 2004, rising to 0.7% in 2010, large tax havens showed much higher ratios and, in some cases pronounced growth (e.g., the share in Ireland rose from 7.6% to 41.9%). Small tax havens also showed high-growth rates (e.g., the share rose from 546.7% to 2,065.6% in the Cayman Islands). Mandatory Disclosure Rules (Action 12) The action item proposes mandatory disclosure rules for aggressive or abusive transactions and structures. The idea behind this proposal is to provide tax authorities with early information and to act as a deterrent. Disclosure would also place pressure on tax avoidance markets, and there would be a more limited opportunity to intervene. Current mandatory disclosure regimes are of two basic types. A transaction-based approach is used in the United States, which identifies schemes and then requires disclosure from taxpayers who benefit and persons (such as promoters) who provide assistance. This approach requires reporting from both taxpayers and promoters. A promoter-based approach is used in the United Kingdom and Ireland and places the primary disclosure obligation on the promoter. The transaction-based approach tends to rely on specific hallmarks, whereas the promoter-based approach covers generic ones, for example, in which tax benefits are one of the main benefits. In various cases (e.g., when the promoter is offshore and there are practical difficulties in compliance), the disclosure obligation must fall on the taxpayer. A country may introduce a dual reporting requirement or one that falls primarily on the promoter, but the recommendation for offshore promoters, and for no promoter or cases where the promoter asserts legal privilege, is that the obligation should fall on the taxpayer. The action also discusses defining the scope of a disclosure regime: single step or multistep. A single-step regime would broadly cover tax benefits even if the tax benefit is not identified as avoidance or the main benefit. This approach may generate a large number of disclosures. A multistep regime would define a threshold condition (such as cases in which the tax benefit is the main benefit), although this approach might not work well for international transactions. A dollar de minimis is also an option. In addition, the action discusses generic hallmarks, such as confidentiality, containing a premium fee or contingent fee, contractual protection (e.g., insurance against failure), and a standardized-tax product, and specific hallmarks, such as the generation of losses, common to a number of countries. The United States also includes listed transactions (used before), transactions of interest (with potential), and generating book-tax differences. Other countries have hallmarks such as leasing transactions, schemes to convert salary into nontaxed compensation, schemes involving entities in low-tax jurisdictions, schemes with hybrid instruments, converting income into capital or gifts, differences used in the United States. The action suggests a mix of generic and specific hallmarks. The action recommends disclosure at the date of availability in which the promoter discloses and at implementation when the taxpayer discloses. It also discusses penalties and some other procedural matters. This action item also has a number of recommendations for international tax schemes, including removal of the threshold condition, hallmarks that focus on BEPS risks, a broad definition, and to make inquiries as to whether the arrangement will be covered by disclosure requirements. It encourages information exchange and, in particular, recommends using the Joint International Tax Shelter Information and Collaboration (JITSIC) network. Existing U.S. law has disclosure provisions, and there is no indication of any action in this area. Transfer Pricing Documentations and Country-by-Country Reporting (Action 13) This action item provides for a standardized approach to providing information to document multinationals' activities. The first is the provision of a master file that contains information on operations and transfer prices and is available to all tax administrations. The second is detailed transfer pricing information in a local file for each country that identifies related-party transactions and transfer pricing analyses. The third is a CbC report that will provide, for each jurisdiction, information on revenue, profit, taxes paid, employees, capital, retained earnings, and tangible assets. It also requires information on the business activities of each entity in the jurisdiction. The first two reports will be provided directly to local tax administrations, and the CbC report will be filed in the parent's jurisdictions and shared through automatic exchange of information. The reports apply to firms with revenue of 750 million euros or more. Reporting will begin in 2018 for the 2016 tax year. The action item provides recommendations for the design including penalties, focuses on international tax schemes, and proposes information sharing. The Treasury has implemented CbC reporting but is not requiring the master or local file to be submitted. The GAO study indicated that Treasury officials believed they already have enough information to enforce transfer pricing. Although many countries have signed multilateral agreements, the United States is implementing bilateral agreements in 2017. The United States has opted for bilateral treaties because of concerns about confidentiality and inappropriate use. As of June 12, 2017, bilateral agreements have been signed with Iceland, New Zealand, Norway, and the Netherlands, with more in the pipeline. Companies have expressed a concern that if agreements are not finalized by mid-2018, international affiliates would be required to provide local reporting. The GAO study reported stakeholder (representing companies) concerns about several issues. One was that the information in the reports could be misused and lead, effectively, to formulary apportionment, where profits are based on the share of business factors. Such a move could lead to double taxation and audit disputes. GAO also discussed administrative costs for the IRS, indicating they would be similar to other regulatory changes of this nature, and compliance costs for firms. The OECD had indicated the CbC reporting could reduce compliance costs by standardizing reporting, but stakeholders believed compliance costs would be increased both because of requirements to collect new information and increased audits and disputes. They indicated that most costs for U.S. multinationals would be the CbC reporting rather than the reports filed with local authorities. Making Dispute Resolutions More Effective (Action 14) The action item seeks to improve the effectiveness of the mutual agreement procedure (MAP) to provide for more certainty and limit double taxation. It has a minimum standard that includes three elements for countries: ensure treaty obligations for MAP are implemented and cases resolved in a timely manner, ensure that administrative processes promote the prevention and timely resolution, and ensure access to the procedure. Peer reviews are being conducted on each country's practices. Some countries committed to binding arbitration. Action 14 is consistent with the United States' position, and U.S. tax treaties call for mandatory binding arbitration, although treaties with Japan, Spain, and Switzerland that would require binding arbitration have been delayed in the Senate for unrelated reasons with no definite prospects for approval. Some of the developing countries have been reluctant to adopt binding arbitration as a part of dispute resolution because of fears of giving up sovereignty over tax matters. One commentator has suggested that the minimum standards in Action 14 are not meaningful because nearly all treaties already have MAP rules. Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (Action 15) The multilateral instrument (MLI) was a document designed to modify bilateral tax treaties to quickly implement the BEPS measure. This agreement has been signed by almost 70 countries, although the United States has not, and has not indicated any intention to sign. To accommodate differences across countries as to what elements of the BEPS standards are to be adopted, the MLI was made very flexible, and some see that flexibility weakening its value.

Taxes collected by countries around the world can be reduced through various avoidance mechanisms that shift corporate profits out of higher-tax-rate jurisdictions into lower-tax-rate jurisdictions and through other mechanisms that reduce taxes on interest, dividends, and royalties. The Organization for Economic Cooperation and Development (OECD) has been engaged in a project to reduce such base erosion and profit shifting (BEPS) in which firms use tax-avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low- or no-tax locations. In October 2015, the OECD published its final list of 15 BEPS action items. The OECD framework was endorsed by the G-20 Finance Ministers in February 2016. All OECD and G-20 countries agreed to implement four minimum BEPS standards: 1. Action 5, countering harmful tax practices (mostly aimed at patent boxes); 2. Action 6, preventing treaty abuse (largely about arranging payments to flow through countries with treaties that reduce withholding taxes on dividends and other passive payments); 3. Action 13, country-by-country (CbC) reporting; and 4. Action 14, increasing the effectiveness of dispute resolution. These action items have led to limited changes to U.S. companies because of either a lack of relevance (no patent box regime exists in the United States) or existing practices, although CbC reporting requires additional information from U.S. multinationals. Although implementation of some items can be done through regulation, others would require legislation or treaty amendments, which must be approved by the Senate. Other than the four agreed-upon standards, the remaining proposals are not specific recommendations because there was no agreement among the countries. Action Item 1 contains an extensive discussion of the digital economy, but its proposals relate only to the value added tax (VAT), which the United States does not have. Action Items 2-4 and 7-10 relate to profit shifting by multinational firms via a variety of mechanisms, including locating interest deductions in high-tax countries or through transfer prices of the sales of goods and services between related corporations. The United States has generally adopted few changes, although present practices in many aspects already embody the standards. One instance in which U.S. rules appear at variance with OECD proposals are check-the-box rules, which create hybrid entities with, for example, interest deducted in one country but not taxed in another. The OECD standards for transfer prices stress that the allocation of income should reflect functions, assets, and risks that are controlled and assumed, rather than contractual arrangements. Cost-sharing arrangements commonly used in the United States, which allow foreign subsidiaries to provide financing for research in the United States in exchange for a share of profits, is also an area in which U.S. practice appears inconsistent with BEPS proposals. The Government Accountability Office (GAO), in a study of the transfer-pricing issues, while indicating that a move from contract to content would reduce profit shifting, argued that risk could not be transferred between related firms in the same way as between unrelated firms. The United States and other countries would benefit by gaining revenues from reductions in base erosion and profit shifting which, according to Action Item 11 on measuring and monitoring BEPS, costs between 4% and 10% of global corporate tax revenues. There have, however, been concerns that the United States risks losing some revenue and companies paying additional taxes if other countries inappropriately increase their taxation of U.S. firms, eventually generating foreign-tax credits that offset U.S. income tax. These effects might occur through changes in the definition of permanent establishment and through the use of CbC data to move to an effective formula-based approach to taxation, which could produce double taxation. At the same time, a uniform set of standards and reporting requirements may be beneficial, as many countries were proceeding to enact unilateral changes and reporting requirements prior to the OECD project. Concerns have also been expressed by firms regarding confidentiality and compliance costs of CbC reporting. The United States has opted for bilateral agreements to share CbC data in part to help ensure confidentiality.

Background Mexico shares a nearly 2,000-mile border with the United States, and the two countries have historically close trade, cultural, and demographic ties. Mexico's stability is of critical importance to the United States, and the nature and intensity of violence in Mexico has been of particular concern to the U.S. Congress. Rising murders, intimidation of Mexican politicians in advance of the 2018 elections, and increasing assassinations of journalists and media personnel have continued to raise alarm. In 2017, 12 journalists were murdered and that number may increase in 2018, as 7 journalists were killed in the first 6 months of the year. Mexico's brutal drug trafficking-related violence has been dramatically punctuated by beheadings, public hanging of corpses, car bombs, and murders of dozens of journalists and government officials. Beyond these brazen crimes, violence has spread from the border with the United States to Mexico's interior, flaring in the Pacific states of Michoacán and Guerrero in recent years, in the border state of Tamaulipas, and in Chihuahua and Baja California, where Mexico's largest border-region cities of Juárez and Tijuana are located. Organized crime groups have splintered and diversified their crime activities, turning to extortion, kidnapping, auto theft, oil smuggling, human smuggling, retail drug sales, and other illicit enterprises. These crimes often are described as more "parasitic" for local populations inside Mexico. Addressing the question of whether violence (as measured by the number of intentional homicides) has reached new heights, the Justice in Mexico project at the University of San Diego reports that total homicides in Mexico increased by 7% between 2014 and 2015. Drug traffickers continue to exercise significant territorial influence in parts of the country, particularly near drug production hubs and along drug-trafficking routes during the Peña Nieto administration as they had under the previous president. Although homicide rates declined during the first two years of Peña Nieto's six-year term, total homicides rose 7% in 2015, 22% in 2016, and 23% in 2017, reaching a record level. In 2017, government statistics from the National Public Security System indicate there were more than 29,000 intentional homicides—a new record that exceeded the previous high in 2011. In addition, several analysts have raised concerns about severe human rights violations involving Mexican military an d police forces, which, at times, have reportedly colluded with Mexico's criminal groups. Notably, the Mexican armed forces injured or killed some 3,900 individuals in their domestic operations, between 2007 and 2014, with the victims labeled as "civilian aggressors." However, the high death rate (about 500 were injuries and the rest killings) indicates the lethality of the encounters with Mexican military and official reports did not sort out in published statistics how many of the military's victims were armed or were mere bystanders. (Significantly, these statistics did not continue to be made public after 2014). Due to casualty estimates being reported differently by the Mexican government than by the media outlets that track the violence, some debate exists on exactly how many have perished. This report conveys government data, but the data have not consistently been reported promptly or completely. For example, the government of President Felipe Calderón released tallies of "organized-crime related" homicides through September 2011. For a time, the Peña Nieto administration also issued such estimates, but it stopped in mid-2013. Although precise tallies diverged, the trend during President Calderón's tenure was a sharp increase in the number of homicides related to organized crime through 2011, when the number started a slight decline before Calderón left office in late 2012. Of total intentional homicides since 2006, many sources indicate that roughly 150,000 of total homicides were organized crime-related killings. Violence is an intrinsic feature of the trade in illicit drugs. Violence is used by traffickers to settle disputes, and a credible threat of violence maintains employee discipline and a semblance of order with suppliers, creditors, and buyers. This type of drug trafficking-related violence has occurred routinely and intermittently in U.S. cities since the early 1980s. The violence now associated with drug trafficking organizations in Mexico is of an entirely different scale. In Mexico, the violence is not only associated with resolving disputes or maintaining discipline but also has been directed toward the government, political candidates, and the news media. Some observers note that the excesses of some of Mexico's violence might even be considered exceptional by the typical standards of organized crime. Yet, Mexico's homicide rate is not exceptional in the region, where many countries are plagued by high rates of violent crime, such as in the northern triangle countries of Central America—El Salvador, Guatemala, and Honduras. Overall, the region of Latin America has a relatively high homicide level; with 8% of the world's population, Latin America has 33% of the world's intentional homicides. Mexico's quick rise in killings associated with the drug war along with the violence in six other countries in the region—Brazil, Colombia, El Salvador, Guatemala, Honduras, and Venezuela—is also concerning to many observers. University of San Diego researchers observe that although Mexico's homicide rates compared to homicide rates in other Western Hemisphere countries fall somewhere in the middle of the regional grouping, the rapid rise in both Mexico's rate of homicides and its absolute number of homicides is unmatched. Estimates of Mexico's disappeared or missing—numbering more than 34,000 as recently reported by the Mexican government—has created both domestic and international concern. Former President Calderón made an aggressive campaign against criminal groups, especially the large drug trafficking organizations (DTOs), the central focus of his administration's policy. He sent several thousand Mexican military troops and federal police to combat the organizations in drug trafficking "hot spots" around the country. His government made some dramatic and well-publicized arrests, but few of those captured kingpins were either prosecuted or convicted. Between 2007 and 2012, as part of much closer U.S.-Mexican security cooperation, the Mexican government significantly increased extraditions to the United States, with a majority of the suspects wanted by the U.S. government on drug trafficking and related charges. The number of extraditions peaked in 2012, but declined somewhat in the first two full years after President Peña Nieto took office. Another result of this "militarized" strategy was an increase in accusations of human rights violations against the Mexican military, which was largely untrained in domestic policing. When President Peña Nieto took office in late 2012, he indicated he would take a new direction in his security policy: more focused on reducing criminal violence that affects civilians and businesses and less oriented toward removing the leadership of the large DTOs. His then-attorney general, Jesus Murillo Karam, said in 2012 that Mexico faced challenges from some 60 to 80 crime groups operating in the country whose proliferation he attributed to the Calderón government's kingpin strategy. However, despite Peña Nieto's stated commitment to shift the focus of the government's strategy, analysts have noted considerable continuity between Peña Nieto and Calderón's security approaches. The Peña Nieto government continued the military and federal police deployments used by the Calderón government to combat the DTOs, but it recentralized control over security to Mexico's interior ministry. Moreover, the use of a strategy of taking down through arrest or killing the top drug kingpins has continued. President Peña Nieto streamlined cooperation with the United States under the Mérida Initiative, which began during President Calderón's term. The Mérida Initiative, a bilateral anticrime assistance package launched in 2008, initially focused on providing Mexico with hardware, such as planes, scanners, and other equipment, to combat the DTOs. The $2.9 billion effort (through 2017) shifted in recent years to focus on training and technical assistance for the police and enactment of judicial reform, including training at the local and state level, southern border enhancements and crime prevention. After some reorganization of bilateral cooperation efforts, the Peña Nieto government continued the Mérida programs. In 2014, the Peña Nieto administration implemented another security strategy element promised during his presidential campaign: standing up a national militarized police force, or gendarmarie . The scope of the force implemented in August 2014 was significantly scaled back from its original proposed size of 40,000 to 5,000 officers who were added to the federal police force. The new force had the mission of protecting citizens from crime and shielding their economic and industrial activities from harm, such as defending vital petroleum infrastructure, although many observers maintain that the gendarmerie's distinct purpose was never followed. President Peña Nieto's focus on crime prevention, which also received significant attention early in his term, eventually declined as well, in part due to slow growth. As world oil prices dropped dramatically in 2014 causing reduced economic expansion, the Peña Nieto administration imposed significant budget austerity measures, including on some aspects of security. Congressional Concerns For more than a decade, Members of Congress convened numerous hearings dealing with the violence in Mexico, U.S. foreign assistance, and border security issues. Congressional concern heightened after U.S. consulate staff and security personnel working in Mexico came under attack, with some killed or wounded, allegedly with corrupt police support. Occasional use of car bombs, grenades, and rocket-propelled grenade launchers—such as the one used to bring down a Mexican army helicopter in May 2015—continue to raise concerns that some Mexican drug traffickers may be adopting insurgent or terrorist techniques. Potential harm from Mexico's criminal groups—or transnational criminal organizations (TCOs), as the U.S. Department of Justice now identifies them—is due in large part to their control of and efforts to move illicit drugs and to expand aggressively into the heroin (or plant-based) and synthetic opioids market. Mexico experienced a sharp increase in opium poppy cultivation between 2014 and 2017; increasingly Mexico has become a transit country for powerful synthetic opioids, such as fentanyl. A large increase in political candidates slain during the 2018 electoral season in Mexico caused some candidates to withdraw from their races in order to avoid violence to themselves or their staffs and families. This poses another concerning threat to democracy in Mexico of overt political intimidation. Crime linked to violence, such as extortion, forced disappearances, and violent robbery, has also risen as the crime groups have diversified their activities. The U.S. Congress has expressed concern over the violence and has sought to provide oversight on U.S.-Mexican security cooperation. The 115 th Congress may continue to evaluate how the Mexican government is combating the illicit drug trade, working to reduce related violence, and monitor the effects of drug trafficking and violence challenges on the security of both the United States and Mexico. In March 2017, the U.S. Senate passed S.Res. 83 in support of both Mexico and China and their efforts to achieve reductions in fentanyl production and trafficking. Going forward, some uncertainty has arisen due to tensions between the Trump Administration and the Mexican government regarding several other areas of the U.S.-Mexican relationship. The Morena party candidate, President-elect Andrés Manuel López Obrador (known by his initials AMLO), won with 53% of the vote on July 1, 2018. A leftist populist, AMLO may fall back on skepticism toward the U.S. government that he advocated during his campaign, with the potential result of lowering cooperation on security matters. Crime Situation in Mexico The splintering of the large DTOs into competing factions and gangs of different sizes took place over several years beginning in 2007 and reaching the present. The development of these different crime groups, ranging from transnational criminal organizations (known as TCOs) to small local mafias with certain trafficking or other crime specialties, has made the crime situation even more diffuse and the groups' criminal behavior harder to eradicate. The large DTOs, which tended to be hierarchical, often bound by familial ties, and led by hard-to-capture cartel kingpins, have been replaced by flatter, more nimble organizations that tend to be loosely networked. Far more common in the present crime group formation is the outsourcing of certain aspects of trafficking. The various smaller organizations resist the imposition of norms to limit violence. The growth of rivalries among a greater number of organized crime "players" has produced continued violence, albeit in some cases these players are "less able to threaten the state and less endowed with impunity." On the other hand, the larger organizations (Sinaloa, for example) that have adopted a cellular structure still have attempted to protect their leadership, as in the 2015 escape orchestrated for the world's most-wanted drug kingpin, "El Chapo" Guzmán, through a mile-long tunnel from a maximum-security prison. The scope of the violence generated by Mexican crime groups has been difficult to measure due to restricted reporting by the government and attempts by crime groups to mislead the public. The criminal actors sometimes publicize their crimes in garish displays intended to intimidate their rivals, the public, or security forces, or they publicize the criminal acts of violence on the internet. Conversely, the DTOs may seek to mask their crimes by indicating that other actors or cartels, such as a competitor, are responsible. Furthermore, some shoot-outs simply are not reported as a result of media self-censorship or because the bodies disappear. One example is the reported death of a leader of the Knights Templar, Nazario Moreno Gonzalez, who was reported dead in 2010, but no body was recovered. Rumors of his survival persisted and were confirmed in 2014, when he was killed in a gun battle with Mexican security forces. (For more on the Knights Templar, see " Knights Templar " section, below.) Forced disappearances in Mexico have also become a growing concern, and efforts to tabulate an accurate count of the missing or forcibly disappeared have been limited, a problem that is exacerbated by underreporting. Government estimates of the number of disappeared people in Mexico have varied over time, especially of those who are missing due to force and possible homicide. In addition, bodies turn up in mass graves, as in the well-known case of the 43 disappeared students in Iguala, Guerrero, where the Mexican police, the victims' families, and international investigators searching for the students' remains found scores of unmarked mass graves containing bodies that previously had not been counted. In the Gulf Coast state of Veracruz, in mid-March 2017, a vast mass grave was unearthed containing some 250 skulls and other remains, some of which were found to be years old. Estimates of the number of disappeared in Veracruz during the term of former Governor Javier Duarte, who was in office from 2010 to 2016, exceed 5,000. Journalist watchdog group Animal Politico, which focuses on combating corruption with transparency, concludes in a 2018 investigative article that combating impunity and tracking missing persons cannot be handled in several states because 20 of Mexico's 31 states lack the biological databases needed to identify unclaimed bodies. Additionally, 21 states lack access to the national munitions database used to trace bullets and weapons. Background on Drug Trafficking in Mexico Drug trafficking organizations have operated in Mexico for more than a century. The DTOs can be described as global businesses with forward and backward linkages for managing supply and distribution in many countries. As businesses, they are concerned with bringing their product to market in the most efficient way to maximize their profits. The Mexican DTOs are the major wholesalers of illegal drugs in the United States and are increasingly gaining control of U.S. retail-level distribution through alliances with U.S. gangs. Their operations, however, are markedly less violent in the United States than in Mexico, despite their reported presence in multiple U.S. jurisdictions. The DTOs use the tools of bribery and violence, which are complementary. Violence is used to discipline employees, enforce transactions, limit the entry of competitors, and coerce. Bribery and corruption help to neutralize government action against the DTOs, ensure impunity, and facilitate smooth operations. The proceeds of drug sales (either laundered or as cash smuggled back to Mexico) are used in part to corrupt U.S. and Mexican border officials, Mexican law enforcement, security forces, and public officials either to ignore DTO activities or to actively support and protect DTOs. Mexican DTOs advance their operations through widespread corruption; when corruption fails to achieve cooperation and acquiescence, violence is the ready alternative. Police corruption has been so extensive that law enforcement officials corrupted or infiltrated by the DTOs and other criminal groups sometimes carry out their violent assignments. Purges of Mexico's municipal, state, and federal police have not contained the problem. The relationship of Mexico's drug traffickers to the government and to one another is a rapidly evolving picture, and any current snapshot (such as the one provided in this report) must be continually adjusted. In the early 20 th century, Mexico was a source of marijuana and heroin trafficked to the United States, and by the 1940s, Mexican drug smugglers were notorious in the United States. The growth and entrenchment of Mexico's drug trafficking networks occurred during a period of one-party rule in Mexico by the Institutional Revolutionary Party (PRI), which governed for 71 years. During that period, the government was centralized and hierarchical, and, to a large degree, it tolerated and protected some drug production and trafficking in certain regions of the country, even though the PRI government did not generally tolerate crime. According to numerous accounts, for many years the Mexican government pursued an overall policy of accommodation. Under this system, arrests and eradication of drug crops took place, but due to the effects of widespread corruption the system was "characterized by a working relationship between Mexican authorities and drug lords" through the 1990s. The system's stability began to fray in the 1990s as Mexican political power decentralized and the push toward democratic pluralism began, first at the local level and then nationally with the election of the National Action Party (PAN) candidate, Vicente Fox, as president in 2000. The process of democratization upended the equilibrium that had developed between state actors (such as the Federal Security Directorate, which oversaw domestic security from 1947 to 1985) and organized crime. No longer were certain officials able to ensure the impunity of drug traffickers to the same degree and to regulate competition among Mexican DTOs for drug trafficking routes, or plazas . To a large extent, DTO violence directed at the government appears to be an attempt to reestablish impunity, while the inter-cartel violence seems to be an attempt to reestablish dominance over specific drug trafficking plazas. The intra-DTO violence (or violence inside the organizations) reflects a reaction to suspected betrayals and the competition to succeed killed or arrested leaders. Before this political development, an important transition of Mexico's role in the international drug trade took place during the 1980s and early 1990s. As Colombian DTOs were forcibly broken up, Mexican traffickers gradually took over the highly profitable traffic in cocaine to the United States. Intense enforcement efforts of the U.S. government led to the shutdown of the traditional trafficking route used by the Colombians through the Caribbean. As Colombian DTOs lost this route, they increasingly subcontracted the trafficking of cocaine produced in the Andean region to the Mexican DTOs, which they paid in cocaine rather than cash. These already-strong Mexican organizations gradually took over the cocaine trafficking business, evolving from being mere couriers for the Colombians to being the wholesalers they are today. As Mexico's DTOs rose to dominate the U.S. drug markets in the 1990s, the business became even more lucrative. This shift raised the stakes, which encouraged the use of violence in Mexico to protect and promote market share. The violent struggle between DTOs over strategic routes and warehouses where drugs are consolidated before entering the United States reflects these higher stakes. Today, the major Mexican DTOs are polydrug, handling more than one type of drug, although they may specialize in the production or trafficking of specific products. According to the U.S. State Department's International Narcotics Control Strategy Report (INCSR ) , Mexico is a major producer of heroin, marijuana, and methamphetamine destined for the United States. It is also the main trafficking route for U.S.-bound cocaine from the major supply countries of Colombia, Peru, and Bolivia. The west coast state of Sinaloa, with its long coastline and difficult-to-access areas, remains favorable for drug cultivation and forms the heartland of Mexico's drug trade. Marijuana and poppy cultivation has flourished in the state for decades. It has been the source of Mexico's most notorious and successful drug traffickers. In the U.S. State Department INCSR covering 2017, published in March 2018, coca bush cultivation and cocaine production in Colombia rose sharply, with the U.S. government estimating for 2016 that Colombia produced 710 metric tons of pure cocaine (and this estimate was subsequently adjusted higher by the Office of National Drug Control Policy (ONDCP) to 772 metric tons for 2016). Cocaine of Colombian origin supplies most of the U.S. market, and most of that supply is trafficked through Mexico. DEA warns that Mexican TCOs present an acute threat to U.S. communities given their dominance in heroin and fentanyl exports in its 2017 National Drug Threat Assessment (NDTA). Mexico's heroin traffickers, who traditionally provided black or brown heroin to U.S. cities west of the Mississippi, began to innovate and changed their opium processing methods to produce white heroin, a purer and more deadly product. The 2017 NDTA maintains that Mexico produced about 93% of the heroin seized in the United States in 2015, and Mexico may be a producer country and is a trafficker of the potent synthetic opioid, fentanyl, which is 30 to 50 times more potent than heroin. The Mexican government eradicates both opium poppy (from which heroin is derived) and cannabis, and it increased its eradication efforts of both plant-based drugs in 2016. According to the State Department's INCSR , Mexico expanded its poppy cultivation to 32,000 hectares (ha) in 2016, from 28,000 ha in 2015. The U.S. government estimated that Mexico's potential production of heroin in 2016 totaled 81 metric tons, three times its estimated production in 2013. In 2016, Mexican forces seized roughly 13 metric tons of cocaine, 26 metric tons of methamphetamine, and about 235 kilograms of opium gum, while shutting down 136 clandestine drug laboratories. Evolution of the Major Drug Trafficking Groups The DTOs have been in constant flux in recent years. By some accounts, when President Calderón came to office in December 2006, there were four dominant DTOs: the Tijuana/Arellano Felix organization (AFO), the Sinaloa cartel, the Juárez/Vicente Carillo Fuentes organization (CFO), and the Gulf cartel. Since then, the large, more stable organizations that existed in the earlier years of the Calderón administration have fractured into many more groups. For several years, the U.S. Drug Enforcement Administration (DEA) identified the following organizations as dominant: Sinaloa, Los Zetas, Tijuana/AFO, Juárez/CFO, Beltrán Leyva, Gulf, and La Familia Michoacana. In some sense these might be viewed as the "traditional" DTOs. However, many analysts suggest that those 7 groups now seem to have fragmented to between 9 and as many as 20 major organizations. Today, fragmentation, or "balkanization," of the major crime groups has been accompanied by many groups' diversification into other types of criminal activity. The following section focuses on nine DTOs whose current status illuminates the fluidity of all the crime groups in Mexico as they face new challenges from competition and changing market dynamics. Nine Major DTOs Reconfiguration of the major DTOs—often called transnational criminal organizations, or TCOs, due to their diversification into other criminal businesses—preceded the fragmentation that is so common today. The Gulf cartel, based in northeastern Mexico, had a long history of dominance in terms of power and profits, with the height of its power in the early 2000s. However, the Gulf cartel's enforcers—Los Zetas, who were organized from highly trained Mexican military deserters—split to form a separate DTO and turned against their former employers, engaging in a hyper-violent competition for territory. The well-established Sinaloa DTO, with roots in western Mexico, has fought brutally for increased control of routes through the border states of Chihuahua and Baja California, with the goal of remaining the dominant DTO in the country. Sinaloa has a more decentralized structure of loosely linked smaller organizations, which has been susceptible to conflict when units break away. Nevertheless, the decentralized structure has enabled it to be quite adaptable in the highly competitive and unstable environment that now prevails. Sinaloa survived the arrest of its billionaire founder Joaquin "El Chapo" Guzmán in 2014. The federal operation to capture and detain Guzmán, which gained support from U.S. intelligence, was viewed as a major victory for the Peña Nieto government. Initially the kingpin's arrest did not spawn a visible power struggle within the cartel's hierarchy, as many observers had anticipated. His escape in July 2015 followed by his rearrest in January 2016, however, raised speculation that his role in the Sinaloa cartel might have become more as a figurehead rather than functional leader. The Mexican government's decision to extradite Guzmán to the United States, carried out on January 19, 2017, appears to have led to violent competition from a competing cartel, the Cartel Jalisco-New Generation (CJNG), which had split from Sinaloa. Over 2016 and the early months of 2017, CJNG's quick rise and a possible power struggle inside of Sinaloa between El Chapo's sons and a successor to their father, a longtime associate known as "El Licenciado," or Dámaso López Núñez, reportedly caused increasing violence. In the Pacific Southwest, La Familia Michoacana—a DTO once based in the state of Michoacán and influential in surrounding states—split apart in 2015. It eventually declined in importance as its successor, the Knights Templar, grew in prominence in the region known as the tierra caliente of Michoácan, Guerrero, and in parts of neighboring states Colima and Jalisco (see Figure 2 ). At the same time, CJNG rose to prominence between 2013 and 2015 and is currently deemed by many analysts to be the most dangerous and largest Mexican cartel. CJNG has thrived with the decline of the Knights Templar, which was targeted by the Mexican government. From open-source research, information about the seven "traditional" DTOs (and their successors mentioned above) is more available than about smaller fractions. Current information about the array of new regional and local crime groups, numbering more than 45 groups, is more difficult to assess. The once-coherent organizations and their successors are still operating, both in conflict with one another and at times working cooperatively. A brief sketch follows of each of these nine major organizations, some of which are portrayed in the DEA map in Figure 2 . Tijuana/Arellano Felix Organization (AFO) The AFO is a regional "tollgate" organization that historically has controlled the drug smuggling route between Baja California (Mexico) to southern California. It is based in the border city of Tijuana. One of the founders of modern Mexican DTOs, Miguel Angel Felix Gallardo, a former police officer from Sinaloa, created a network that included the Arellano Felix family and numerous other DTO leaders (such as Rafael Caro Quintero, Amado Carrillo Fuentes, and Joaquín "El Chapo" Guzman). The seven "Arellano Felix" brothers and four sisters inherited the AFO from their uncle, Miguel Angel Felix Gallardo, after his arrest in 1989 for the murder of DEA Special Agent Enrique "Kiki" Camarena. The AFO was once one of the two dominant DTOs in Mexico, infamous for brutally controlling the drug trade in Tijuana in the 1990s and early 2000s. The other was the Juárez DTO, also known as the Carrillo Fuentes Organization. The Mexican government and U.S. authorities took vigorous enforcement action against the AFO in the early years of the 2000s, with the arrests and killings of the five brothers involved in the drug trade—the last of whom was captured in 2008. In 2008, Tijuana became one of the most violent cities in Mexico. That year, the AFO split into two competing factions when Eduardo Teodoro "El Teo" Garcia Simental, an AFO lieutenant, broke from Fernando "El Ingeniero" Sanchez Arellano (the nephew of the Arellano Felix brothers who had taken over the management of the DTO). Garcia Simental formed another faction of the AFO, reportedly allied with the Sinaloa DTO. Further contributing to the escalation in violence, other DTOs sought to gain control of the profitable Tijuana/Baja California-San Diego/California plaza in the wake of the power vacuum left by the earlier arrests of the AFO's key players. Some observers believe that the 2010 arrest of Garcia Simental created a vacuum for the Sinaloa DTO to gain control of the Tijuana/San Diego smuggling corridor. Despite its weakened state, the AFO appears to have maintained control of the plaza through an agreement made between Sanchez Arellano and the Sinaloa DTO's leadership, with Sinaloa and other trafficking groups paying a fee to use the plaza. Some analysts credit the relative peace in Tijuana to a law enforcement success, but it is unclear how large of a role policing strategy played. In 2013, the DEA identified Sanchez Arellano as one of the six most influential traffickers in the region. Following his arrest in 2014, however, Sanchez Arellano's mother, Enedina Arellano Felix, who was trained as an accountant, reportedly took over. It remains unclear if the AFO retains enough power through its own trafficking and other crimes to continue to operate as a tollgate cartel. Violence in Tijuana rose to more than 100 murders a month in late 2016, with the uptick in violence attributed to Sinaloa battling its new challenger, CJNG, according to some analyses. CJNG apparently has taken an interest in both local drug trafficking inside Tijuana and cross-border trafficking into the United States. As in other parts of Mexico, the role of the newly powerful CJNG organization may determine the nature of the area's DTO configuration in coming years. Some analysts maintain the resurgence of violence in Tijuana and the spiking homicide rate in the nearby state of Southern Baja California are linked to CJNG forging an alliance with remnants of the AFO. In 2017, Tijuana had one of the highest numbers of homicides in the country, with close to 6% of all homicide victims, suggesting the violence that receded in 2012 has returned. Sinaloa DTO Sinaloa, described as Mexico's oldest and most established DTO, is comprised of a network of smaller organizations. In April 2009, President Barack Obama designated the notorious Sinaloa Cartel as a drug kingpin entity pursuant to the Kingpin Act. Often regarded as the most powerful drug trafficking syndicate in the Western Hemisphere, the Sinaloa Cartel was at its apex an expansive network; Sinaloa leaders successfully corrupted public officials from the local to the national level inside Mexico and abroad to operate in some 50 countries. Traditionally one of Mexico's most prominent organizations, each of its major leaders was designated a kingpin in the early 2000s. At the top of the hierarchy was Joaquin "El Chapo" Guzmán, listed in 2001, Ismael Zambada Garcia ("El Mayo"), listed in 2002, and Juan Jose "El Azul" Esparragoza Moreno, listed in 2003. By some estimates, Sinaloa had grown to control 40%-60% of Mexico's drug trade by 2012 and had annual earnings calculated to be as high as $3 billion. The Sinaloa Cartel has long been identified by the DEA as the primary trafficker of drugs to the United States. In 2008, a federation dominated by the Sinaloa Cartel (which included the Beltrán Leyva organization and the Juárez DTO) broke apart, leading to a battle among the former partners that sparked the most violent period in recent Mexican history. Since its 2009 kingpin designation of Sinaloa, the United States has attempted to dismantle Sinaloa's operations by targeting individuals and financial entities allied with the cartel. For example, in October 2010, Treasury's Office of Foreign Assets Control identified Alejandro Flores Cacho, along with 12 businesses and 16 members of his financial and drug trafficking enterprise located throughout Mexico and Colombia, as collaborators with Sinaloa. (In August 2017, OFAC identified the Flores DTO and its leader, Raul Flores Hernandez, as Kingpins. ) The Sinaloa Cartel's longtime most visible leader, "El Chapo" Guzmán, escaped twice from Mexican prisons in 2001 and again in 2015. The second escape in July 2015 was a major embarrassment to the Peña Nieto administration, and that incident may have convinced the Mexican government to extradite the alleged kingpin rather than try him in Mexico after his recapture. He is now imprisoned in New York, following the Mexican government's decision to extradite him to the United States in January 2017, the day before President Trump's inauguration. Guzmán was indicted in New York District's federal court and will go on trial for operating a continuing criminal enterprise in September. His lawyers are reportedly preparing to argue that he was not the head of the Sinaloa enterprise and instead a "lieutenant" following orders. After Guzman's trusted deputy "El Azul" Esparragoza Moreno was reported to have died in 2014, the head of the Sinaloa DTO was assumed to be Guzmán's partner, Ismael Zambada Garcia, alias "El Mayo," who is thought to be continuing in that leadership role. Sinaloa may operate with a more horizontal leadership structure than previously thought. Sinaloa operatives control certain territories, making up a decentralized network of bosses who conduct business and violence through alliances with each other and local gangs. Local gangs throughout the region specialize in specific operations and are then contracted by the Sinaloa DTO network. The shape of the cartel in the current criminal landscape is evolving, however, as Sinaloa's rivals eye a formidable drug empire built on the proceeds from trafficking South American cocaine, and locally sourced methamphetamine, marijuana, and heroin to the U.S. market. With rising tensions between the United States and Mexico over trade and immigration, the effect on bilateral cooperation on counternarcotics and security, including the use of extradition and sanctions, may diminish and provide opportunities for renewal for well-seasoned traffickers like some in Sinaloa. A former hegemon in the cartel landscape, Sinaloa is now under pressure and its future remains unclear. Some analysts warn that Sinaloa remains powerful given its dominance internationally and its infiltration of the upper reaches of the Mexican government evident in Guzmán's successful escape through a mile-long tunnel out of a top-security prison. Other analysts maintain that Sinaloa is in decline, citing its breakup into factions and violence from inter- and intra-organizational tensions. CJNG has evidently battled with its former partner, Sinaloa, in a number of regions since 2015, and has been deemed by many authorities Mexico's new most powerful crime syndicate. Juárez/Carrillo Fuentes Organization Based in the border city of Ciudad Juárez in the central northern state of Chihuahua, the once-powerful Juárez DTO controlled the smuggling corridor between Ciudad Juárez and El Paso, TX, in the 1980s and 1990s. By some accounts, the Juárez DTO controlled at least half of all Mexican narcotics trafficking under the leadership of its founder, Amado Carrillo Fuentes. Vicente Carrillo Fuentes, Amado's brother, took over the leadership of the cartel when Amado died during plastic surgery in 1997 and reportedly led the Juárez organization until his arrest in October 2014. In 2008, the Juárez DTO broke from the Sinaloa federation, with which it had been allied since 2002. The ensuing rivalry between the Juárez DTO and the Sinaloa DTO helped to turn Ciudad Juárez into one of the most violent cities in the world. From 2008 to 2011, the Sinaloa DTO and the Juárez DTO fought a "turf war," and Ciudad Juárez experienced a wave of violence with spikes in homicides, extortion, kidnapping, and theft—at one point reportedly experiencing 10 murders a day. From 2008 to 2012, the violence in Juárez cost about 10,000 lives. Reportedly, more than 15% of the population displaced by drug-related violence inside Mexico between 2006 to 2010 came from the border city, while having only slightly more than 1% of Mexico's population. Traditionally a major trafficker of both marijuana and South American cocaine, the Juárez cartel has become active in opium cultivation and heroin production, according to the DEA. Between 2012 and 2013 violence dropped considerably and this was attributed by some analysts to both the actions of the police and to President Calderón's socioeconomic program Todos Somos Juáre z , or We Are All Juarez. Other analysts credit the Sinaloa DTO with success in its battle over the Juarez DTO after 2012. They consider Sinaloa's dominance, perhaps abetted by local authorities, to be the reason for the relatively peaceful and unchallenged control of the border city despite the Juárez DTO's continued presence in the state of Chihuahua. Many residents who fled during the years of intense drug-related violence remain reluctant to return to Juárez and cite the elevated homicide rate as one reason. Indeed, the El Paso and Juárez transit route again appears to be in flux with the rise in killings on the Mexican side of the border in 2016 and 2017. Gulf DTO Based in the border city of Matamoros, Tamaulipas, with operations in other Mexican states on the Gulf side of Mexico, the Gulf DTO was a transnational smuggling operation with agents in Central and South America. The Gulf DTO was the main competitor challenging Sinaloa for trafficking routes in the early 2000s, but it now battles its former enforcement wing, Los Zetas, over territory in northeastern Mexico. The Gulf DTO reportedly has split into several competing gangs and some analysts no longer consider it a whole entity and maintain that it is so fragmented that factions of its original factions are fighting. The Gulf DTO arose in the bootlegging era of the 1920s. In the 1980s, its leader, Juan García Abrego, developed ties to Colombia's Cali cartel as well as to the Mexican federal police. García Abrego was captured in 1996 near Monterrey, Mexico. His violent successor, Osiel Cárdenas Guillén, successfully corrupted elite Mexican military forces to become his hired assassins. Those corrupted military personnel became known as Los Zetas when they fused with the Gulf cartel. In the early 2000s, Gulf was considered one of the most powerful Mexican DTOs. Cárdenas was arrested by Mexican authorities in March 2003, but he continued to run his drug enterprise from prison until his extradition to the United States in 2007. Tensions between the Gulf DTO and Los Zetas culminated in their split in 2010. Antonio "Tony Tormenta" Cárdenas Guillén, Osiel's brother, was killed that year, and leadership of the Gulf went to another high-level Gulf lieutenant, Jorge Eduardo Costilla Sanchez, also known as "El Coss," until his arrest in 2012. Exactly what instigated the Zetas and Gulf split has not been determined, but the growing strength of the paramilitary group and its leader was a factor, and some analysts say the Zetas blamed the Gulf DTO for the murder of a Zeta close to their leader, which sparked the rift. Others posit the split happened earlier, but the Zetas organization that had brought both military discipline and sophisticated firepower to cartel combat was clearly acting independently by 2010. Regardless, the ensuing bitter conflict between the Gulf DTO and Los Zetas has been identified as the "most violent in the history of organized crime in Mexico." Mexican federal forces identified and targeted a dozen Gulf and Zeta bosses they believed responsible for the wave of violence in Tamaulipas in the spring and summer of 2014. Analysts have reported that the structures of both the Gulf DTO and Los Zetas have been decimated by federal action and combat between each other, and both groups now operate largely as fragmented cells that do not communicate with each other and often take on new names. From 2014 through 2016, some media sources outside of the state of Tamaulipas and anonymous social media accounts from within Tamaulipas reported daily kidnappings, daytime shootings, and burned-down bars and restaurants in towns and cities such as the port city of Tampico. Like the Zetas, fragmented cells of the Gulf DTO have expanded into other criminal operations, such as fuel theft and widespread extortion. Los Zetas This group originally consisted of former elite airborne special force members of the Mexican Army who defected to the Gulf DTO and became its hired assassins. Although Zeta members are part of a prominent transnational DTO, their main asset is not drug smuggling but organized violence. They have amassed significant power to carry out an extractive business model—thus generating revenue from crimes, such as fuel theft, extortion, human smuggling and kidnapping, that are widely seen to inflict more suffering on the Mexican public than transnational drug trafficking. Los Zetas had a significant presence in several Mexican states on the Gulf (eastern) side of the country, and extended their reach to Ciudad Juárez (Chihuahua) and some Pacific states, and operate in Central and South America. More aggressive than other groups, Los Zetas used intimidation as a strategy to maintain control of territory, making use of social media and public displays of bodies and body parts to send messages to frighten Mexican security forces, the local citizenry, and rival organizations. Sometimes smaller gangs and organizations use the "Zeta" name to tap into the benefits of the Zeta reputation or "brand." Unlike many other DTOs, Los Zetas have not attempted to win the support of local populations in the territory in which they operate, and they have allegedly killed many civilians. They are linked to a number of massacres, such as the 2011 firebombing of a casino in Monterrey that killed 53 people and the 2011 torture and mass execution of 193 migrants who were traveling through northern Mexico by bus. Los Zetas are known to kill those who cannot pay extortion fees or who refuse to work for them, often targeting migrants. In 2012, Mexican marines killed longtime Zeta leader Heriberto Lazcano (alias "El Lazca"), one of the founders of Los Zetas, in a shoot-out in the northern state of Coahuila. The capture of his successor, Miguel Angel Treviño Morales, alias "Z-40," notorious for his brutality, in July 2013 by Mexican federal authorities was a second blow to the group. Some analysts date the beginning of the "loss of coherence" of Los Zetas to Lazcano's killing and consider the ensuing arrest of Treviño Morales to be the event which accelerated the group's decline. In March 2015, Treviño Morales's brother Omar, who was thought to have taken over leadership of Los Zetas, also was arrested in a joint operation by the Mexican federal police and military. According to Mexico's attorney general, federal government efforts against the cartels through April 2015, hit the Zetas the hardest, with more than 30 of their leaders removed. Los Zetas are known for their diversification and expansion into other criminal activities, such as fuel theft, extortion, kidnapping, human smuggling, and arms trafficking. According to media coverage, Pemex, Mexico's state oil company, announced that it lost more than $1.15 billion in 2014 due to oil tapping and it has remained over $1 billion a year in losses since. In early 2017, the Atlantic Council released a report estimating that Los Zetas control about 40% of the market in stolen oil. Los Zetas resisted government attempts to curtail their sophisticated networks for the oil and gas that they stole. Most incidents of illegal siphoning occur in the Mexican Gulf states of Tamaulipas and Veracruz. Although many dispute the scope of the territory now held by Los Zetas factions and how that fragmentation influenced the formerly cohesive group's prospects, most concur that the organization is no longer as powerful as it was during the height of its dominance in 2011 and 2012. Beltrán Leyva Organization (BLO) Before 2008, BLO was part of the Sinaloa federation and controlled access to the U.S. border in Mexico's Sonora state. The Beltrán Leyva brothers developed close ties with Sinaloa head Joaquin "El Chapo" Guzmán and his family, along with other Sinaloa-based top leadership. The January 2008 arrest of BLO's leader, Alfredo Beltrán Leyva, through intelligence reportedly provided by Guzmán, triggered BLO's split from the Sinaloa DTO. The two organizations have remained bitter rivals since. The organization suffered a series of setbacks at the hands of the Mexican security forces, beginning with the December 2009 killing of Arturo Beltrán Leyva, followed closely by the arrest of Carlos Beltrán Levya. In 2010, the organization broke up when the remaining brother, Héctor Beltrán Leyva, took the remnants of BLO and rebranded it as the South Pacific ( Pacifico Sur ) cartel. Another top lieutenant, Edgar "La Barbie" Valdez Villarreal, took a faction loyal to him and formed the Independent Cartel of Acapulco, which he led until his arrest in 2010. The South Pacific cartel appeared to retake the name Beltrán Leyva Organization and achieved renewed prominence under Hector Beltrán Leyva's leadership, until his arrest in October 2014. Splinter organizations have arisen since 2010, such as the Guerreros Unidos and Los Rojos , among at least five others with roots in BLO. Los Rojos operates in Guerrero and relies heavily on kidnapping and extortion for revenue as well as trafficking cocaine, although analysts dispute the scope of its involvement in the drug trade. The Guerreros Unidos traffics cocaine as far north as Chicago in the United States and reportedly operates primarily in the central and Pacific states of Guerrero, México, and Morelos. The Guerreros Unidos, according to Mexican authorities, was responsible for taking the 43 Mexican teacher trainees, who were handed to them by local authorities in Iguala, Guerrero; the group subsequently murdered the students and burned their bodies. The lack of a hegemonic DTO in Guerrero has led to significant infighting between DTO factions and brutal intra-cartel competition, resulting in the state of Guerrero having the highest number of homicides and kidnappings in the country in 2013 and the second most after the state of México in 2014. In the 2017 NDTA, DEA maintains that the Guerreros Unidos are known to traffic heroin and other drugs into the United States. Like other DTOs, the BLO was believed to have infiltrated the upper levels of the Mexican government for at least part of its history, but whatever reach it once had likely has declined significantly after Mexican authorities arrested many of its leaders. According to the 2017 National Drug Threat Assessment , BLO relies on its alliances with the CJNG, the Juárez cartel and elements of Los Zetas to move drugs across the border and maintain distribution points in the U.S. cities of Phoenix, Los Angeles, Chicago, and Atlanta. Inside of Mexico, it remains influential in the states of Morelos, Guerrero, Nayarit, and Sinaloa. La Familia Michoacana (LFM) Based originally in the Pacific state of Michoacán, LFM traces its roots back to the 1980s. Formerly aligned with Los Zetas before the group's split from the Gulf DTO, LFM announced its intent to operate independently from Los Zetas in 2006, declaring that LFM's mission was to protect Michoacán from drug traffickers, including its new enemies, Los Zetas. From 2006 to 2010, LFM acquired notoriety for its use of extreme, symbolic violence, military tactics gleaned from the Zetas, and a pseudo-ideological or religious justification for its existence. LFM members reportedly made donations of food, medical care, schools, and other social services to benefit the poor in rural communities to project a populist "Robin Hood" image. In 2010, however, LFM played a less prominent role, and in November 2010, LFM reportedly called for a truce with the Mexican government and announced it would disband. A month later, spiritual leader and co-founder Nazario "El Más Loco" Moreno González reportedly was killed, although authorities claimed his body was stolen. The body was never recovered, and Moreno González reappeared in another shootout with Mexican federal police in March 2014, after which his death was officially confirmed. Moreno González had been nurturing the development of a new criminal organization that emerged in early 2011, calling itself the Knights Templar and claiming to be a successor or offshoot of LFM. Though "officially" disbanded, LFM remained in operation, even after the June 2011 arrest of leader José de Jesús Méndez Vargas (alias "El Chango"), who allegedly took over after Moreno González's disappearance. Though largely fragmented, remaining cells of LFM are still active in trafficking, kidnapping, and extortion in Guerrero and Mexico states, especially in the working-class suburbs around Mexico City through 2014. Observers report that LFM had been largely driven out of Michoacán by the Knights Templar, although a group calling itself the New Family Michoacan, La Nueva Familia Michoacana , has been reported to be active in parts of Guerrero and Michoacán. As a DTO, LFM has specialized in methamphetamine production and smuggling, along with other synthetic drugs. It also has been known to traffic marijuana and cocaine and to tax and regulate the production of heroin. Knights Templar The Knights Templar began as a splinter group from La Familia Michoacana, announcing its presence in Michoacán in early 2011. Similar to LFM, the Knights Templar began as a vigilante group, claiming to protect the residents of Michoacán from other criminal groups, such as the Zetas, but in reality operated as a DTO. The Knights Templar is known for the trafficking and manufacture of methamphetamine, but the organization also moves cocaine and marijuana north. Like LFM, it preaches its own version of evangelical Christianity and claims to have a commitment to "social justice," while being the source of much of the insecurity in Michoacán and surrounding states. In 2013, frustration with the perceived ineffectiveness of Mexican law enforcement in combating predatory criminal groups led to the birth in Michoacán of " autodefensa " or self-defense organizations, particularly in the tierra caliente region in the southwestern part of the state. Composed of citizens from a wide range of backgrounds—farmers, ranchers, businessmen, former DTO operatives, and others—the self-defense militias primarily targeted members of the Knights Templar. Local business owners, who had grown weary of widespread extortion and hyper-violent crime that was ignored by corrupt local and state police, provided seed funding to resource the militias in Michoacán, but authorities cautioned that some of the self-defense groups had extended their search for resources and weapons to competing crime syndicates, such as the Cártel Jalisco New Generation ( Cartel Jalisco Nueva Generación [CJNG]). Despite some analysts' contention that ties to rival criminal groups are highly likely, other observers are careful not to condemn the entire self-defense movement. These analysts acknowledge some gains in the effort to combat the Knights Templar that had not been made by government security forces, although conflict between self-defense groups also has led to violent battles. The Knights Templar reportedly has emulated LFM's penchant for diversification into other crime, such as extortion. The Knights Templar battled the LFM, and by 2012 its control of Michoacán was nearly as widespread as LFM's once had been, especially by demanding local businesses pay it tribute through hefty levies. According to avocado growers in the rural state who provide more than half the global supply, the LFM and the Knights Templar have seriously cut into their profits. The Knights Templar also moved aggressively into illegal mining, such as mining iron ore from illegally operated mines. Through mid-2014, the Knights Templar reportedly had been using Mexico's largest port, Lázaro Cárdenas, located in the southern tip of Michoacán, to smuggle illegally mined iron ore, among other illicit goods. Analysts and Mexican officials, however, suggest that a 2014 federal occupation of Lázaro Cárdenas resulted in an "impasse," rendering DTOs unable to receive and send shipments. In early 2014, the Mexican government began its controversial policy of incorporating members of the self-defense groups into legal law enforcement, giving them the option to disarm or register themselves and their weapons as part of the "Rural Police Force," despite concerns about competing cartels corrupting these forces or the potential for the groups to morph into predatory paramilitary forces, as occurred in Colombia." The federal police and the Rural Police Force had a brief successful period of cooperation, which ended with the arrests of the two self-defense force leaders (as well as dozens of members) in late spring 2014. The arrests sparked tension between the self-defense movement and federal police, contributing to a renewal of high rates of violence in the area. The Mexican government and self-defense forces delivered heavy blows to the Knights Templar, especially with the confirmed killing in March 2014 of Nazario Moreno González, who led the Knights, and the killing of Enrique Plancarte, another top leader, several weeks later. Previously, the self-defense forces and the Knights Templar reportedly had split Michoacán roughly into two, although other criminal organizations continued to operate successfully in the area. In late February 2015, the Knights Templar DTO leader Servando "La Tuta" Gomez was captured. The former schoolteacher had taken risks by being interviewed in the media. With La Tuta's arrest, the fortunes of the Knights Templar plummeted. But new spinoff groups or fragments of other cartels filled the void, including the rise of such groups as Los Viagras, and they contested the state with the Cartel Jalisco (see below, " Cartel Jalisco-New Generation (CJNG) " ). In March 2017, the alleged leader of Los Viagras, José Carlos Sierra Santana, was killed. The Mexican government quickly reinforced troops and federal police forces in the state to prevent a bloodbath as cartels struggled to assert new patterns of dominance. Cartel Jalisco-New Generation (CJNG) Originally known as the Zeta Killers, the CJNG made its first appearance in 2011 with a roadside display of the bodies of 35 alleged members of Los Zetas. The group is based in Jalisco state with operations in central Mexico, including the states of Colima, Michoacán, Mexico State, Guerrero, and Guanajuato. It has grown into a dominant force in the states of the Tierra Caliente , including Guerrero and Michoacán. Reportedly, it has been led by many former associates of slain Sinaloa DTO leader Ignacio "Nacho" Coronel, who operated his faction in Jalisco until he was killed by Mexico's security forces in July 2010. CJNG has early roots in the Milenio cartel, which was active in the t ierra c aliente region of southern Mexico before it disintegrated in 2009. The group is a by-product of the Milenio cartel's collapse and was allied with the Sinaloa federation until 2014. CJNG reportedly served as an enforcement group for the Sinaloa DTO until the summer of 2013. Analysts and Mexican authorities have suggested the split between Sinaloa and CJNG is one of the many indications of a general fragmentation of crime groups. Ruben Oseguera Cervantes, alias "El Mencho," a top wanted fugitive by the DEA, is the group's current leader. The Mexican military delivered a blow to the CJNG with the July 2013 capture of its leader's deputy, Victor Hugo "El Tornado" Delgado Renteria. In January 2014, the Mexican government arrested the leader's son, Rubén Oseguera González (also known as "El Menchito"), believed to be CJNG's second-in-command. However, El Menchito, who has dual U.S.-Mexican citizenship, was released in December 2014 due to lack of evidence in a federal case. Captured again in late June 2015, El Menchito was again released by a judge. On July 3, 2015, he was rearrested by Mexican authorities; he is being held in the Miahutlan, Oaxaca, maximum-security prison. In 2015, the Mexican government declared CJNG one of the most dangerous cartels in the country and one of two with the most extensive reach. In October 2016, the U.S. Department of the Treasury echoed the Mexican government when it described the group as one of the world's "most prolific and violent drug trafficking organizations." According to some analysts, CJNG has operations throughout the Americas, Asia, and Europe. The group allegedly is responsible for distributing cocaine and methamphetamine along "10,000 kilometers of the Pacific coast in a route that extends from the Southern Cone to the border of the United States and Canada." To best understand CJNG's international reach, it is important to first consider its expansion within Mexico. Analysts contend that CJNG has presence in 14 states throughout the country, a combined area that makes up nearly half of Mexico. Recent reports indicate the group has pushed into Aguas Calientes, San Luis Potosi, and Zacatecas states. The group has battled Los Zetas and Gulf cartel factions in Tabasco, Veracruz, and Guanajuato, and it has battled the Sinaloa federation in the Baja peninsulas and Chihuahua. CJNG's ambitious expansion campaign has led to high levels of violence, particularly in Ciudad Juarez and Tijuana, where it has clashed with the Sinaloa federation for control of the lucrative heroin trade and corresponding smuggling routes. The group also has been linked to several mass graves in southwestern Mexico and was responsible for shooting down an army helicopter in 2015, the first successful takedown of a military asset of its kind in Mexico. CJNG's efforts to dominate key ports on both the Pacific and Gulf Coasts have allowed it to consolidate important components of the global narcotics supply chain. In particular, CJNGs asserts control over the ports of Veracruz, Mazanillo, and Lazaro Cardenas, which has given the group access to precursor chemicals that flow into Mexico from China and other parts of Latin America. As a result, the CJNG has been able to pursue an aggressive growth strategy, underwritten by U.S. demand for Mexican methamphetamine and heroin. Despite leadership losses, CJNG has extended its geographic reach and maintained its own cohesion while exploiting the splintering of the Sinaloa organization. DTO Fragmentation, Competition, and Diversification As stated earlier, the DTOs today are more fragmented and more competitive than in the past. However, analysts disagree about the extent of this fragmentation, its importance, and whether the group of smaller organizations will be easier to dismantle. Fragmentation that began in 2010 and accelerated in 2011 redefined the "battlefield" and brought new actors, such as Los Zetas and the Knights Templar, to the fore. In 2018, an array of smaller organizations is active, and some of the once-small groups, such as CJNG, have exploded into the space left after other DTOs were dismantled. Recently, some analysts have identified CJNG as a cartel with national reach like the Sinaloa DTO, although it originally was an allied faction or the armed wing of Sinaloa organization. A newer cartel, known as Los Cuinis, also was identified as a major organization in 2015. In April 2015, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) named both CJNG and Los Cuinis as Specially Designated Narcotics Traffickers under the Foreign Narcotics Kingpin Designation Act. According to an OFAC statement, the traditional DTOs in Mexico are being replaced by new organizations that are becoming "among the most powerful drug trafficking organizations in Mexico." Other analysts view the fragments as the cause of heightened violence, but note that groups which "survived the cartel breakups" have been less able to conduct transnational drug trafficking. Contrary to the experience in Colombia in the 1980s and 1990s with the sequential dismantling of the enormous Medellin and Cali cartels, fragmentation in Mexico has been associated with resurging violence. A "kingpin strategy" implemented by the Mexican government has incapacitated numerous top- and mid-level leaders in all the major DTOs, either through arrests or deaths in arrest efforts. However, this strategy with political decentralization contributed to violent succession struggles, shifting alliances among the DTOs, a proliferation of new gangs and small DTOs, and the replacement of existing leaders and criminal groups by even more violent ones. The ephemeral prominence of some new gangs and DTOs, regional changes in the power balance between different groups, and their shifting allegiances often catalyzed by government enforcement actions make it difficult to portray the current Mexican criminal landscape. The Stratfor Global Intelligence group contends that the rival crime networks are best understood in regional groupings, and at least four geographic identities emerged in 2014 and early 2015. Those umbrella groups are Tamaulipas state, Sinaloa state, tierra caliente regional group, and perhaps another umbrella group emerging along the southeastern coast of Mexico split off from the Tamaulipas umbrella group. (See Figure 3 .) Some believe diversification of the DTOs and their evolution into poly-crime outfits may be evidence of organizational vitality and growth. Others contend that diversification signals that U.S. and Mexican drug enforcement measures are cutting into profits from drug trafficking or constitutes a response to shifting U.S. drug consumption patterns and policies, such as legalization of marijuana in some states and heightened demand for plant based and synthetic opioids. The growing public condemnation of the DTOs also may be stimulated by the organizations' diversification into street crime, which causes more harm to average Mexican civilians than intra- and inter-DTO violence related to conflicts over drug trafficking. Because the DTOs have diversified, many analysts now refer to them as transnational criminal organizations, organized crime groups, or simply mafias. Others maintain that much of their nondrug criminal activity is in service of the central drug trafficking business. The current crime organization landscape is exceptionally fluid, yet several analysts are attempting to define it. Sam Logan and James Bosworth describe the increasing multiplication of groups: The tendency for criminal groups in Mexico is toward small and local ... as the number of well-armed criminal groups jumps from the six significant groups we counted in 2006 ... to over 10 in 2012 with a steady growth of new groups to bring the total to possibly over 20 by the end of 2014. Analyst Eric Olson of the Woodrow Wilson Center for International Scholars believes the DTOs are more accurately described as "organized crime groups" and notes that these groups are extremely local in character, although they are engaged in diverse criminal activity. (Many of the actors have diversified beyond the transnational drug trade, as noted above.) Mexican political scientist Eduardo Guerrero-Gutiérrez developed a useful typology of different DTOs in 2015 (see Table 1 ). He defines four types of DTOs: national cartels, regional cartels, toll-collector cartels, and drug trafficking cells. In 2015, Guerrero had identified more than 200 organizations across the country in the final category. Some of these groups do not participate solely in drug trafficking-related violence but also are engaged in what he terms "mafia-ridden" violence. Outlook The goal of the Mexican government's counter-DTO strategy has been to diminish the extent and character of the DTOs' activity from a national-security threat to a law-and-order problem and, once this is achieved, to transfer responsibility for addressing this challenge from military forces back to the police. President Peña Nieto did not succeed in reducing the scope of the military in its domestic policing function. Instead, the Mexican military has been challenged by accusations of extrajudicial executions by members of its forces and also for the use of torture and other severe human rights violations. The government remains challenged by the corruption of politicians by DTOs, such as the former governor of Veracruz alleged to have fostered a "state of terror" during his administration, and he is among 14 sitting and former governors accused of deep corruption in office. In the wake of the six years under the PRI, some towns have experienced serious displacement; they are often described as ghost towns. They include towns close to the border in Texas in the states of Coahuila and Tamaulipas; and in the heart of Mexico's Golden Triangle of drug cultivation, especially the state of Sinaloa. The splintering of the large criminal organizations has driven violence, according to several analysts. A key cause of the violence has been the transition to a post-Sinaloa cartel dominated-era, with the rise of a lucrative heroin trade and synthetic opioids, such as fentanyl, causing renewed conflict. Nevertheless, some observers remain convinced of the capacity of the Sinaloa DTO, and the newly predominant CJNG, to use their well-established bribery and corruption to operate with impunity in Mexico. Many U.S. government officials and policymakers have deep concerns about the Mexican government's capacity to decrease the violence in Mexico and curb the power of the country's criminal groups. Many analysts have viewed as problematic the current government's continued reliance on a controversial kingpin strategy. They note while it has reduced the violence in some cases, it has not lowered violence in a sustainable way. For some observers, Mexico's DTO challenge remains largely an organized crime or mafia problem, coupled with endemic corruption. Accordingly, these analysts contend that the most important tools for managing the problem include long-term institutional reform to replace a culture of illegality and corruption with one of rule of law and respect for lawful authority. The prospects for strengthening U.S.-Mexican security cooperation, including the future of the Mérida Initiative, remain unclear. The new administration in Mexico may be less willing to adapt to the changing approaches of the U.S. government, and could demand changes in the bilateral relationship or be uncooperative unless treated as a respected partner.

Mexican drug trafficking organizations (DTOs) pose the greatest crime threat to the United States, according to the U.S. Drug Enforcement Administration's (DEA's) National Drug Threat Assessment published in October 2017. These organizations have for years been identified for their strong links to drug trafficking, money laundering, and other violent crimes. These criminal groups have trafficked heroin, methamphetamine, cocaine, marijuana, and, increasingly, the powerful synthetic opioid fentanyl. U.S. overdoses due to opioid consumption sharply increased to a record level in 2016, following the Mexican criminal syndicates expanded control of the heroin and synthetic opioids market. The major DTOs and new crime groups have furthered their expansion into such illicit activity as extortion, kidnapping, and oil theft that costs the government's oil company more than a billion dollars a year. Mexico's DTOs have also been in constant flux. Early in his term, former Mexican President Felipe Calderón (2006-2012) initiated an aggressive campaign against Mexico's drug traffickers that was a defining policy of his government and one that the DTOs violently resisted. By some accounts, in 2006, there were four dominant DTOs: the Tijuana/Arellano Felix organization (AFO), the Sinaloa cartel, the Juárez/Vicente Carillo Fuentes organization (CFO), and the Gulf cartel. Government operations to eliminate DTO leadership sparked organizational changes, which led to significant instability among the groups and continued violence. In recent years, larger and more stable organizations have fractured, leaving the DEA and other analysts to identify seven organizations as predominant: Sinaloa, Los Zetas, Tijuana/AFO, Juárez/CFO, Beltrán Leyva, Gulf, and La Familia Michoacana. In some sense, these organizations include the "traditional" DTOs, although the 7 organizations appear to have fragmented further to at least 9 (or as many as 20) major organizations. A new transnational criminal organization, Cartel Jalisco-New Generation, which split from Sinaloa in 2010, has sought to become dominant with brutally violent techniques. During the term of President Enrique Peña Nieto that will end in 2018, the government has faced an increasingly complex crime situation that saw violence spike. In 2017, Mexico reached its highest number of total intentional homicides in a year, exceeding, by some counts, 29,000 murders. In the 2017-2018 electoral season according to a Mexican security consultancy recording political violence, 152 office holders and political candidates (and pre-candidates) were killed, allegedly by crime bosses and others in an effort to intimidate public office holders. If non-elected public officials are included, victims in the 2018 electoral season exceed 500. On July 1, 2018, Andrés Manuel López Obredor won the election for President by as much as 30 points over the next contender. He leads a new party, Morena, but has served as Mayor of Mexico City and comes from a leftist ideological viewpoint. López Obredor campaigned on fighting corruption and finding new ways to combat crime and manage the illicit drug trade. U.S. foreign assistance for Mexico in the Consolidated Appropriations Act, 2018 (P.L. 115-141) totaled $152.6 million, with more than $100 million of that funding focused on rule of law and counternarcotics efforts. The 115th Congress pursued oversight of security conditions inside of Mexico and monitored the Mexican criminal organizations not only because they are the major wholesalers of illegal drugs in the United States but also to appraise their growing control of U.S. retail-level distribution. This report examines how the organized crime landscape in Mexico has been altered by fragmentation of criminal groups and how the organizational shape-shifting continues. For more background, see CRS In Focus IF10867, Mexico's 2018 Elections; CRS Report R41349, U.S.-Mexican Security Cooperation: The Mérida Initiative and Beyond; and CRS In Focus IF10400, Transnational Crime Issues: Heroin Production, Fentanyl Trafficking, and U.S.-Mexico Security Cooperation.

Introduction After more than two years of social unrest and economic stagnation following the 2011 popular uprising, the government of Egypt is facing serious economic pressures that, if not remedied, could lead to economic collapse and possibly new levels of violence. The International Monetary Fund (IMF) has been in negotiation with the government of Egypt for at least $4.8 billion in loans in exchange for structural economic reforms, such as subsidy reduction. Egyptian acceptance of an IMF loan could also pave the way for billions more in financial assistance from other bilateral and multilateral donors, potentially providing Egypt with time to stabilize its political system and economy. The Obama Administration is encouraging President Mohammed Morsi to reach out to the opposition and the public in order to gain the political support to quickly reach a deal with the IMF in order to stave off further economic uncertainty. Egyptian leaders are concerned about the political ramifications of required IMF reforms, which could be politically unpopular. Congress, which annually oversees and appropriates $1.55 billion in bilateral foreign aid to Egypt, is following the situation in Egypt closely, including the Islamist-led government's stated commitment to, among other things, pursuing democratic principles and continued peace with Israel. Some Members of Congress are also closely monitoring Egypt-IMF negotiations. U.S. funds to provide bilateral debt relief to Egypt have been tied to Egypt committing to an economic program in conjunction with the IMF. Legislative language also has been proposed that would tie U.S. bilateral economic assistance to Egypt to, among other things, an IMF program and implementation of reforms under the program. Congress could also pass legislation to shape U.S. policy toward Egypt at the IMF. More generally, in the 113 th Congress, lawmakers have proposed a number of bills that would prohibit, restrict, or rescind bilateral U.S. assistance and/or arms sales to Egypt. This report provides an overview of the economic situation in post-revolution Egypt and negotiations between Egypt and the IMF. It also analyzes why an IMF program is controversial in Egypt and the relationship between an IMF program for Egypt and U.S. foreign policy goals in the region. It discusses the IMF program from a congressional perspective, including how debt relief for Egypt has been tied to an IMF program and legislation that would condition U.S. bilateral economic assistance to Egypt on an IMF program. For more information on the political situation in Egypt, see CRS Report RL33003, Egypt: Background and U.S. Relations , by [author name scrubbed]. For more information on the IMF, see CRS Report R42019, International Monetary Fund: Background and Issues for Congress , by [author name scrubbed]. Background Deteriorating Economic Conditions in Post-Revolution Egypt Economic conditions in Egypt have gradually deteriorated since the 2011 revolution, potentially exacerbating an already polarized Egyptian political climate. Neither military nor civilian authorities have been able to restore confidence in the economy. Continued insecurity stemming from deterioration in law and order has hampered investment. The Islamist-led government and the opposition have blamed each other for worsening economic conditions, and while Egypt has not reached a crisis "tipping point," there is some concern that economic shocks, such as a dramatic currency devaluation or sudden steep rise in the cost of living, could lead to street violence. Before the political changes began taking shape, Egypt's economy was strong in many respects. The economy was growing at a fairly rapid pace, averaging 5% a year between 2000 and 2010. Starting in 2004, the government pursued wide-ranging structural reforms, including tariff reductions, privatization of state-owned enterprises, and reductions in regulation of the private sector, among other policy measures, that aimed to improve the business environment and make Egypt's economy more competitive. The 2008 World Bank Doing Business report ranked Egypt as the top worldwide economic reformer. In general, reforms helped attract foreign capital, and foreign direct investment (FDI) in Egypt surged from 1.2% of GDP in 2000 to 9.3% of GDP in 2006. The global financial crisis of 2008-2009 had limited impact on Egypt's economy, due to low exposure to the types of structured financial products at the heart of the financial crisis and the government's accommodating fiscal and monetary policies following the onset of the crisis. Behind strong growth and capital inflows during the 2000s, however, Egypt's economy faced a number of vulnerabilities. Average Egyptians saw little immediate benefit from the economic reforms praised by outside observers and investors. Growth had done little to lower persistently high unemployment, which averaged 9.9% during the 2000s (and was reportedly much higher among youth), or substantially reduce poverty. Fifteen percent of the population, or about one in seven Egyptians, were living on less than $2 per day in 2008. The government was also running relatively large budget deficits, averaging 8.2% of GDP between 2002 and 2010. In its 2010 annual review of Egypt's economy, the IMF cautioned about the need for fiscal consolidation and recommended a value-added tax (VAT), energy subsidy reform, and measures to contain the fiscal cost of pension and health reforms. Persistent budget deficits also left public debt at 73% of GDP in 2010, above the 60% threshold that some economists believe is stable and conducive to growth. The IMF also warned about the need to continue reform "momentum" to further improve the business environment and build the private sector. Finally, inflation had steadily increased through the decade, from 2.8% in 2000 to 11.7% in 2008. The revolution in Egypt unraveled the conditions underpinning growth in the 2000s and brought potential vulnerabilities to the forefront. The revolution and ensuing political uncertainty eroded investor confidence, triggering a sharp reduction in capital inflows and an abrupt decline in tourism revenue, on which many jobs depend. Economic growth fell to 1.8% in 2011 and 2.2% in 2012. Unemployment rose from 9.2% in 2010 to 12.3% in 2012. The new Egyptian authorities, brought to power in elections in mid-2012 as the military regime that took power in early 2011 formally stepped aside, retreated from previous pledges for fiscal consolidation, and the budget deficit widened from 7.8% of GDP in 2010 to 11.2% in 2012. General economic trends in Egypt before and after the revolution are depicted below, in Figure 1 . The Morsi government has been reluctant to reduce fuel subsidies, and has continued to earmark a large proportion of fiscal expenditures for social spending, seemingly as a means for securing continued political support. The government has also increasingly relied on domestic markets to finance the deficit, which is more expensive than borrowing on international markets and has further strained government finances. Public debt rose from 73% of GDP in 2010 to 80% in 2012. Political uncertainty and capital outflows have also reduced demand for Egypt's currency, the Egyptian pound, resulting in pressure on the Egyptian pound to depreciate. The Egyptian central bank generally does not allow its currency to be determined entirely by market forces (i.e., to float freely, like the U.S. dollar), and has been selling foreign exchange reserves in an attempt to manage a gradual depreciation. The central bank's holdings of foreign exchange reserves fell from $34 billion in the fourth quarter of 2010 to $12 billion in 2012, a level that many economists fear puts the central bank at risk of running out of reserves and triggering a currency crisis. The central bank has also increased interest rates to stem pressure on the pound, which some economists fear undermines the government's growth objectives in the short term. A depreciated local currency means that Egyptian households' wealth and wages are worth less in terms of purchasing power, as imported goods become more expensive. Egypt-IMF Negotiations With slowing growth, rising unemployment, dwindling foreign exchange reserves, and a growing budget deficit, many economists argue that Egypt faces two broad economic challenges: (1) sustaining macroeconomic stability in the short term; and (2) implementing economic reforms in the medium term to deliver growth to broad segments of society ("inclusive growth"), foster private sector development, and create jobs. The IMF is in a position to help stabilize Egypt's economy and, potentially, advance reform efforts. The IMF provides loans to countries facing economic crises, and its short-term loans (typically disbursed over one to three years) can ensure continuous access to affordable financing, providing the government with breathing space to implement needed economic reforms. IMF loans are disbursed in phases ("tranches"), contingent upon the implementation of economic reforms, which have been negotiated between the government and the IMF at the onset of the program ("conditionality"). Targets may be revisited, however, over the course of the program in response to changing economic conditions. Other Arab countries in "transition" are facing similar pressures, and the IMF has negotiated and started programs in Jordan, Morocco, Tunisia, and Yemen. Egyptian authorities and the IMF have been in on-again, off-again negotiations essentially since political changes started taking shape in Egypt. Two tentative ("staff-level") agreements were reached, in June 2011 and November 2012, but no agreement has been finalized or implemented. Egyptian authorities have been reluctant to commit to economic reforms that may be politically unpopular and ultimately saddle the economy with more debt. A particular source of concern are fuel subsidies, which many economists view as inefficient and regressive but constitute a financial safety net for many Egyptian households. In turn, the IMF's lending policies prevent it from pursuing a program that does not have adequate conditionality commitments in place. Continuing political concerns and uncertainty in Egypt have also contributed to the delay. In the absence of an IMF deal, Egyptian authorities are increasingly turning to other countries in the region for financial assistance, such as Libya and Qatar (described in greater detail below). However, funds from other governments may only provide a bridging mechanism and could fail to ensure that Egyptian authorities address underlying structural challenges. Tentative Deal #1: June 2011 At the time of the first staff-level agreement, in June 2011, the military-controlled Supreme Council of the Armed Forces (SCAF), led by Field Marshal Mohamed Hussein Tantawi, was exercising executive authority in Egypt and therefore negotiating with the IMF. Tantawi rejected the proposed $3.2 billion IMF loan, reportedly because he was hesitant to burden Egypt with what he considered was too much foreign debt and perhaps believing that Egypt could receive short-term loans or grants from Gulf Arab countries instead. Many economists have since suggested that the terms of the June 2011 staff-level agreement would have been far less onerous in terms of conditionality than subsequent proposals; as economic conditions in Egypt continued to deteriorate in coming months, the size of the IMF program for Egypt, and the reforms attached to it, have become more ambitious. The June 2011 staff-level deal was reached before the Muslim Brotherhood began to wield real political power in post-Mubarak Egypt, but the party generally applauded the SCAF's rejection of IMF assistance as an assertion of Egyptian sovereignty, while being careful not to rule out any future multilateral lending. According to one Muslim Brotherhood communiqué published after the SCAF's rejection of the $3.2 billion IMF loan: The Egyptian government has adopted a new policy to strike a balance when dealing with international financing institutions. It has recently refused to finance the deficit through loans loaded with political and economic conditions. The importance of this policy is that it signals that the authorities are reconsidering ensuring the independence of the state, which is consistent with the aspirations of the revolution, to get rid of the inherited dependency of the old regime. Regardless of the methods of handling the issue and covering the budget deficit, this step would recast the Egyptian relationship with the IMF and the World Bank, which would require a great deal of effort directed at achieving stability, development, production, self-reliance and the development of our local resources. This approach also delivers a clear message to international financial institutions regarding the need to move from an era of political loans that have supported many authoritarian governments, and shifting towards taking into account more balanced relations in the new era, which would be based on the interests of the states and safeguarding their economic development. Tentative Deal #2: November 2012 Following the 2011-2012 parliamentary elections that enabled the Muslim Brotherhood's Freedom and Justice Party to form a majority coalition, Islamists assumed partial control over governance amidst a worsening economic crisis. Though the SCAF still maintained executive authority in the first half of 2012, the Brotherhood insisted that it would not support any new IMF deal unless a new, more broadly based government was formed of which it would presumably be a part. In March 2012, Saudi Arabia reportedly deposited $1 billion in Egypt's central bank, which eased some of the immediate pressure on the Egyptian government to secure financing from the IMF quickly. Egypt also reportedly received financial assistance from Qatar. Months later, former Brotherhood leader Mohammed Morsi became president and wrested most day-to-day executive authority from the SCAF. Islamists also controlled the upper house of parliament (the lower house having been dissolved by the courts pending new elections). A second staff-level agreement was reached between Egypt and the IMF in November 2012, to provide a 22-month, $4.8 billion loan program. Reaching an agreement with the IMF was also expected to unlock funds from other bilateral and multilateral donors. It is not uncommon for other donors to wait until an IMF program is in place, which can serve as a seal of approval for the government's economic policies and provide greater assurance that assistance would be used by the government wisely. The total financing package, including funds from the IMF, was reportedly $14.5 billion in loans and deposits on relatively favorable terms (compared to borrowing on the private debt market). At the time, the government was planning on reducing spending, primarily by cutting energy subsidies, and boosting revenue, including through reforms to move from a general sales tax to a value-added tax. Possibly to demonstrate good will, the government lifted subsidies on 95-octane petrol in line with the plan in November 2012. The program likely included other policy measures as well; specifics would have been released publicly when the program was finalized. One analyst expected the IMF "to ask Egypt to do all the things that the IMF always asks a country to do, which is to get its fiscal house in order; increase taxes, reduce the budget deficit, get rid of subsidies so that it can bring down inflation, do other things that will boost growth, and then get Egypt back on some kind of path toward recovery." In December 2012, public outcry erupted over the proposed tax increases, causing the government to reverse course. The Egyptian finance minister requested a delay in the program, and eventually the government postponed the program until after the parliamentary elections, which were to end in June 2013. Current Status By the spring of 2013, with the economic situation still unstable, it appeared that the government would not be able to wait on IMF assistance until parliamentary elections were completed. The elections have been put on hold, possibly until the fall of 2013, due to judicial review of the electoral law. In the meantime, President Morsi has attempted to replace hundreds of judges who he believes are obstructing his agenda. Moreover, ensuring broad Egyptian public support for an IMF loan, a goal sought by many IMF members, seemed distant at best, as trust between President Morsi and his opponents had deteriorated significantly in prior months. In March 2013, the IMF suggested that Egypt could qualify for emergency short-term financing from the IMF to stave off imminent economic collapse. Assistance would have taken the form of a bridge loan, smaller and shorter-term than the programs previously negotiated between the IMF and Egypt. It would have provided about $700 million, substantially smaller than the $4.8 billion previously on the table, but would have not come with the same conditions attached to more standard (non-emergency) loan facilities. This support could have provided Egypt with much-needed short-term cash to get through the elections, while providing the government with time to negotiate a more traditional, longer-term IMF program. However, the Morsi government eventually ruled out such emergency assistance. One Western diplomat reportedly said that the rejection of emergency financing by the government was an attempt to "bully the Fund to giving Egypt the loan." Likewise, Steven Cook of the Council on Foreign Relations has cautioned that "Egypt will likely get the aid it needs to keep the country afloat, but the way they have gone about securing this assistance suggests a misplaced arrogance.... the Egyptians should dispense with their implicit 'give it to us or else' approach. Whether they like it or not, donors are not going to hand over cash without any terms." In contrast, President Morsi reportedly argued that Egypt had "done what was required" for a longer-term IMF program and had prepared a program of reforms. Reforms announced in early 2013 include, for example, elimination of energy subsidies for industrial firms over a three-year period, increases in the price of wheat, and implementation of a progressive property tax on large properties. Reforms were also announced to protect the most vulnerable segments of society, including plans to implement universal health care and, for low-income families, raising the minimum tax exemption and increase social security pensions. The reforms have not been without political costs. For example, the government's plans for bread subsidy reforms resulted in bakeries across Egypt threatening to shut down. Meanwhile, the Obama Administration has stressed the urgency facing Egypt with regard to an IMF program, and regarding economic and political conditions more broadly. On April 2, 2013, Secretary of State John Kerry remarked, "We share a very real concern in the Obama Administration about the direction that Egypt is apparently moving in.... We have been working very, very hard in the last weeks to try to get the government of Egypt to reach out to the opposition, to deal with the IMF, to come to an agreement which will allow Egypt to begin to transform its economy and improve the lives of its citizens." While negotiations with the IMF continued, the Egyptian government reportedly received pledges for financial support in April 2013 from Libya ($2 billion deposit to the central bank) and Qatar ($3 billion purchase of government bonds). A list of selected bilateral financial assistance to Egypt is provided in Table 1 . Some analysts believe that financial support from neighboring countries could again delay an IMF program, while others argue that this assistance could be the start of a broader financial assistance program, which includes IMF funding. By mid-April, Egypt's latest round of talks with the IMF ended without an agreement. Reportedly, the IMF stated that Egypt has taken "valuable first steps" to address energy subsidies, and that the Egyptian authorities "intend to build on these steps with further actions to address, in a socially balanced way, the country's fiscal and balance of payments deficits, and create conditions for sustained recovery of the economy." It is not clear when talks will resume. Meanwhile, spending on fuel subsidies has increased by 40% from the previous fiscal year, largely due to a steady decline in the Egyptian pound. Stopgap funding from Qatar and Libya may allow Egypt to "muddle through" until later in the year, perhaps after parliamentary elections. By late April 2013, some economists began predicting that Egypt could avoid a fiscal crisis until late 2013. According to former finance minister Samir Radwan, "They [the Morsi government] go through the motions of pretending they are serious about an IMF deal, but actually they are not." U.S. officials continue to emphasize the importance of an IMF deal, but may be frustrated by Egypt's inability to reach a deal. In recent testimony before the Senate Appropriations Subcommittee on State, Foreign Operations and Related Programs, Secretary Kerry remarked that: Egypt is more of a question mark right now. I mean, I'll just tell you, there are a lot of ifs about Egypt at this moment. And we've been working very, very hard with the Egyptian government to try to bring them to a point where they're prepared to embrace important reforms that are key to the IMF money, to be more inclusive with the opposition, to build out civil society, to live up to their promises regarding democracy, and it's a question mark whether they're going to make the right choices. And I can't frame it any other way for you now. Egyptian Politics and IMF Assistance Many Egyptians view the history of modern Egypt as characterized by a long and painful legacy of the state being beholden to foreign powers, including the Ottoman Empire, European colonizers, and the United States. The narrative of colonialism and anti-imperialism permeates Egyptian political discourse and is particularly potent on issues of foreign lending and assistance. The IMF in particular is a controversial institution in Egypt, largely due to the popular association of IMF programs with autocratic rule under the Mubarak regime, and a common belief that IMF programs directly led to the rise of unemployment, poverty, inequality, and corruption (see text box ). Older Egyptians from the middle and lower classes may have particularly high disregard for the IMF, as many associate reductions in their standard of living and political freedoms with IMF-mandated reductions in government spending and privatization. The IMF's lack of credibility with large segments of Egyptians has contributed to the reluctance of new leaders in Egypt to pursue a program. One historian notes how former President Mubarak's government was acutely aware of the popular opposition to Egyptian acceptance of IMF reforms in the early 1990s: In the eyes of the regime, the economic reforms were a potential source of trouble not only because they led, or could lead, to material losses for a large part of the population; they were also potentially dangerous in that a considerable part of 'public opinion,' influenced by the dominant discourse of the past, considered them irreconcilable with the social and political achievements of the [1952] revolution and with their own interests. At present, it is difficult to gauge the extent of anti-IMF sentiment in Egypt. Although opposition to any Egyptian dealings with the IMF exists, most Egyptians are not necessarily blaming foreign lenders for their poor economy—yet. To date, small-scale protests have occurred outside the Egyptian stock exchange with protestors chanting that IMF support is akin to "economic colonialism." Islamists, including hard-line Salafists, at times also have expressed reservations over accepting IMF support, arguing that Islamic law bans the payment of interest on loans. Egyptian leftists—who currently constitute the backbone of political opposition to Morsi—have been the most vocal opponents of IMF credit. They are led by third-place finisher in the 2012 presidential election Hamdeen Sabahi, who has denounced the IMF loan on his Facebook page. Some analysts believe that there is widespread public apathy toward the IMF, with a poll conducted in August 2012 showing that only two-thirds of Egyptians were aware of the IMF loan under discussion. During an IMF delegation visit to Egypt in mid-April 2013, fund representatives held meetings with various opposition figures and political parties, including Amr Moussa, Amr Hamzawy, Mohamed ElBaradei, the Wafd party, and Hamdeen Sabahi. Reportedly, these political figures voiced various demands, including calls for greater transparency in government-IMF negotiations, and concerns, such as the burden IMF-mandated reforms would pose for the average citizen. Egypt, the IMF, and U.S. Foreign Policy Goals The Obama Administration has supported IMF involvement in Egypt, arguing that it promotes economic reforms in Egypt and would stabilize the economy and facilitate democratic transition. The Administration has encouraged President Morsi to reach out to the opposition and the public in order to garner political support to quickly reach a deal with the IMF. In April 2013, Treasury Secretary Jacob Lew expressed support for an IMF loan to Egypt, and explicitly stated that "It would be very much in the United States' best interests for Egypt to be on a more sustainable course." Likewise, in a March 2013 visit to Cairo, Secretary of State John Kerry remarked that: In all my meetings, I conveyed a simple but serious message: The brave Egyptians who stood vigil in Tahrir Square did not risk their lives to see that opportunity for a brighter future squandered. The Egyptian people must come together to address their economic challenge. I encouraged President Morsi to implement the homegrown reforms that will help his country secure an IMF agreement, put Egypt on the path to establishing a firm economic foundation and allow it to chart its own course. He agreed and said that he plans to move quickly to do so.... The United States can and wants to do more. Reaching an agreement with the IMF will require further effort on the part of the Egyptian government and broad support for reform by all Egyptians. When Egypt takes the difficult steps to strengthen its economy and build political unity and justice, we will work with our Congress at home on additional support. These steps will also unlock much-needed private-sector investment and broader financial assistance. More broadly, however, there is debate within Washington over whether an IMF deal (among other things) is an opportunity, or not, for the United States to exert influence over the Islamist-led government of Egypt to pursue policies in line with U.S. interests and values. Some argue that Egypt's need for external assistance presents the United States, which has the largest financial stake and voting power in the IMF, with an opportunity to condition U.S. support for Egypt at the IMF on the government's commitment to, among other things, pursuing democratic principles and continued peace with Israel. Some analysts are especially concerned that President Morsi, a former Muslim Brotherhood leader, appears to be consolidating power at the expense of non-Islamist political forces—behavior that they believe the Obama Administration should signal is unacceptable. These advocates suggest that U.S. support for an IMF deal amidst perceived rising Islamist autocracy would be a setback for democracy in post-Mubarak Egypt. According to Egypt experts Robert Kagan (Brookings) and Michele Dunne (Atlantic Council): The United States made a strategic error for years by coddling Mubarak, and his refusal to carry out reforms produced the revolution of Tahrir Square. We repeat the error by coddling Morsi at this critical moment. The United States needs to use all its options—military aid, economic aid and U.S. influence with the IMF and other international lenders—to persuade Morsi to compromise with secular politicians and civil-society leaders on political and human rights issues to rebuild security and get the economy on track. On the other hand, some observers suggest that the United States should not push Egypt too hard in its negotiations with the IMF, arguing that Egypt is "too big to fail"—from a political and an economic standpoint (Egypt has the largest population of any country in the Middle East and North Africa [about 83 million]). Proponents of an IMF deal assert that if economic collapse were to occur there, the consequences for global, regional, and U.S. national security would be severe. Examples of U.S. security interests in Egypt could include access to the Suez Canal for global commerce and U.S. naval vessels; Egypt's 35-year-old peace treaty with Israel; and U.S.-Egyptian and Egyptian-Israeli military and intelligence cooperation. Moreover, opponents of stringent conditionality assert that any Egyptian government acceptance of IMF-mandated reforms would be politically painful enough; additional behind-the-scenes U.S. political pressure on President Morsi could unintentionally push him to seek financial aid from other, non-Western sources. Egyptian authorities have already received financial support from Saudi Arabia, Libya, and Qatar. It is unclear whether the Gulf countries support an IMF program for Egypt, and whether they are willing to commit to similar funding levels. It is also unclear what implicit or explicit political or economic conditions would be attached to financial assistance from neighboring countries in the absence of IMF involvement, and whether these conditions would be in line with U.S. interests. Issues and Options for Congress Considering U.S. Policy Toward Egypt at the IMF Congress may reflect the bifurcated views identified above over the optimal U.S. policy toward Egypt at the IMF. Some lawmakers who oppose ongoing U.S. bilateral assistance to Egypt may oppose any existing or future IMF support of Egypt. For other lawmakers who may support existing aid to Egypt, the prospect of additional support to Egypt, either through the IMF, bilateral aid, or both, poses several potential concerns. First, some may be concerned that in the rush to stabilize Egypt, the Administration could be too lenient in terms of the reforms it seeks from the Egyptian government. Second, other lawmakers may not want the Administration to push for tough conditions on an IMF loan, fearing that onerous conditions could risk the Egyptian government avoiding an IMF loan and risking economic collapse, and/or risk pushing the Egyptian government to other sources of financing that may not be aligned with U.S. interests. If Congress wants to influence U.S. policy toward Egypt at the IMF, it has legislative tools at its disposal to do so. The executive branch, through the Treasury Department, manages day-to-day participation of the United States in the IMF, but Congress over the years has passed a number of "legislative mandates" that impact actions of the U.S. Executive Director at the IMF. Often, but not exclusively, included in appropriations bills, legislative mandates can direct U.S. representatives at the IMF to advocate certain policies, direct the U.S. Executive Director to vote for or against certain types of programs or policies, and/or require the Treasury Department to submit reports to Congress on IMF issues or activities. Existing legislative mandates focused on specific countries direct the U.S. representatives at international financial institutions (IFIs) to, for example, oppose non-humanitarian assistance to a specific country (as in the case of Belarus); advocate assistance to help a government improve its economic system and accelerate development (as in the case of Mongolia); or oppose any non-humanitarian financial assistance to a specific country until certain political conditions have been met (as in the case of Zimbabwe). Congress could pass similar legislation directing the "voice and vote" of the U.S. Executive Director at the IMF with regard to IMF programs and policies toward Egypt. It could also pass resolutions laying out congressional views on IMF engagement with Egypt. Using the IMF as a Benchmark for U.S. Assistance to Egypt Some lawmakers may seek to use the terms of IMF conditions as "financial benchmarks" for the provision of existing or any new bilateral economic aid to Egypt. One potential concern, however, is how stringent the conditionality attached to the IMF program would be. According to Egyptian economist Ashraf Swelam, "[a]t a time when the economic situation in Egypt is going from bad to worse, every new draft of the reform program submitted to the IMF—in the endless rounds of negotiations dating all the way back to February 2011—has been a watered down version of its predecessor." U.S. debt relief has already been tied to an IMF program (see text box below), and legislation has been introduced in the 113 th Congress to require an IMF agreement as a condition for U.S. bilateral assistance. Specifically, during Senate debate in March 2013 over the full-year continuing resolution ( H.R. 933 , passed into law as P.L. 113-6 ), a proposed amendment ( S.Amdt. 44 ) would have, if adopted, conditioned the obligation of U.S. economic assistance to Egypt on the President's certification, among other things, that the government of Egypt has "signed and submitted to the International Monetary Fund a Letter of Intent and Memorandum of Economic and Financial Policies designed to promote critical economic reforms and has begun to implement such measures." This amendment was not included in the final legislation as enacted. Outlook Financial assistance from neighboring countries may reduce the immediate fiscal pressures on Egypt, but it does not address deeper structural problems in Egypt's economy. If Egypt ultimately fails to reach an agreement with the IMF, it could signal a temporary setback for the Obama Administration, or it may be indicative of an oncoming period characterized by less U.S.-Egyptian cooperation on economic matters. In testimony before the House Appropriations Subcommittee on State, Foreign Operations, and Related Programs, Secretary of State Kerry questioned whether the United States should be doing more to influence Egypt, when he remarked that: I can't give you assurances about what this current [Morsi] administration is going to do, because I think they're still sorting through that. And the die is not cast yet. That was the purpose of my visit [to Egypt] and the purpose of the money which I am grateful to you for releasing. Qatar has put another $2 billion at the availability of Egypt just in the last week or so. Before that, they put about $4 billion or $5 billion. Libya has loaned them $2 billion in the last week or so. And the IMF is in negotiating for $4.8 billion. We promised $1 billion and until I took the 190 [$190 million] that you kindly helped us to be able to provide, we didn't provide them with a dime, not a dime. We gave them a promise and a year later, we've given them zero. Now, you know, you don't buy your interests and you don't buy your—that's not what foreign aid is about. But I'll tell you, if you're not helpful to people in their time of need, if you're not there, part of the process, it's very, very difficult to have the kind of leverage to say, a diverse pluralistic politics is critical to us when they say, what's it matter to you? You don't really care. You're not helping us. The other guys are helping us. Thank you, we'll, you know, do what we want to do. On the other hand, though U.S. officials may not entirely embrace aid from non-IMF sources for Egypt such as Qatar, the Administration may feel that it must deal cautiously with Morsi's government so that the United States does not alienate friendly elements of the Egyptian opposition. Some policymakers may feel that non-IMF lending for Egypt may keep Egypt's financial situation in shaky, but workable order, and help to stave off a worst case scenario. However, it remains uncertain whether President Morsi's government can receive non-IMF stop-gap lending indefinitely, and on what terms.

Congress, which annually oversees and appropriates $1.55 billion in bilateral foreign aid to Egypt, is following the political and economic situation in Egypt closely. Economic conditions in Egypt have deteriorated rapidly since the 2011 "revolution." Political uncertainty abruptly reduced foreign capital flows into Egypt; growth, while still positive, has slowed substantially; the central bank is at risk of running out of foreign exchange reserves; and unemployment has increased from 9.2% before the revolution to 12.3% in 2012. Many policymakers and analysts fear that the fragile economic conditions in Egypt jeopardize the country's political transition and broader stability in the region. Egyptian authorities and the International Monetary Fund (IMF) have been in negotiations for more than two years over an IMF loan to Egypt in exchange for policy reforms that, if successful, could stave off economic collapse and create more "inclusive" growth. The IMF reached tentative agreements with first the military-controlled Supreme Council of the Armed Forces (SCAF) in June 2011 and later with Egyptian President Mohammed Morsi in November 2012. The November 2012 program would have provided $4.8 billion in assistance, and other donors pledged about $9.7 billion in additional financing once the IMF program was in place. No agreement has been finalized or implemented to date. Egyptian authorities have been reluctant to commit to economic reforms that may be politically unpopular and increase the country's debt. Pressure to cut fuel subsidies is a particular issue. More broadly, many Egyptians associate the IMF programs in the late 1980s and 1990s with adverse social outcomes. On its part, the IMF has resisted a program that does not have sufficient conditionality consistent with its lending policies. Continuing political concerns and uncertainty in Egypt have also contributed to the delay. In the absence of an IMF agreement, the Egyptian government has recently secured financial support from Libya and Qatar. Issues for Congress Some lawmakers who oppose ongoing U.S. bilateral assistance to Egypt may oppose any existing or future IMF support of Egypt, on several potential grounds. Some may be concerned that in the rush to stabilize Egypt, the Administration could be too lenient in terms of the reforms it seeks from the Egyptian government. Others may not want the Administration to overly politicize an IMF loan. They fear that the application of too much pressure on the Morsi government could make accepting a possibly unpopular IMF deal too politically controversial to pursue and that the lack of IMF involvement in Egypt could undermine U.S. interests in the region. The United States makes the single largest financial commitment to the IMF, and, with the largest voting power at the IMF, the United States wields a high degree of influence over IMF decisions. If Congress wanted to shape U.S. policy toward Egypt at the IMF, it could pass a "legislative mandate" legislation directing the U.S. representative at the IMF to use its "voice and vote" to push for certain policies toward Egypt at the IMF. Lawmakers may also want to use the terms of IMF conditions as "benchmarks" for the provision of existing or new bilateral economic aid to Egypt. Concerns about bilateral debt relief are, in part, related to the absence of an IMF agreement. Additionally, legislative language (S.Amdt. 44) proposed in March 2013, but not adopted, would have tied U.S. bilateral economic assistance to Egypt to, among other things, an IMF program.

Introduction This report presents background information and discusses potential issues for Congress relating to U.S. ballistic missile defense (BMD) efforts in the Asia-Pacific region. These efforts pose several potential policy, funding, and oversight issues for Congress. Decisions that Congress makes on these issues could affect U.S. defense funding requirements and military capabilities, and U.S. relations with countries in the Asia Pacific region, including China, Japan, South Korea, North Korea, and Australia. This report focuses on U.S. BMD efforts specific to the Asia-Pacific area. Other CRS reports cover U.S. BMD efforts elsewhere and issues other than BMD affecting U.S. relations with countries in the Asia-Pacific region. Overview The growing number and modernization of ballistic missiles in the Asia-Pacific region poses a security challenge for the United States and its allies. Observers believe North Korea has a large arsenal of short-range ballistic missiles (SRBMs). These North Korean SRBMs are believed to have sufficient range to hit targets in South Korea and Japan, including some U.S. military bases there. In recent years, North Korea has also conducted several tests of a long-range ballistic missile system that culminated in a successful space launch in December 2012. Yet, North Korea has not to date demonstrated a reliable capability to hit targets such as Guam or other U.S. territory with a ballistic missile. Congress has expressed strong concern about the ballistic missile threat from both North Korea and Iran and strong interest in ballistic missile defense (BMD) systems to counter those threats. Section 229 of the National Defense Authorization Act (NDAA) for FY2013 ( P.L. 112-239 ) states that it is the sense of the Congress that "the threat from regional ballistic missiles, particularly from Iran and North Korea, is serious and growing, and puts at risk forward-deployed forces, assets, and facilities." The Department of Defense (DOD) is seeking to counter this threat with various measures, including the deployment of increasingly capable BMD systems. Although China is not the focus of U.S. BMD policy, Chinese missiles nevertheless present a complicating factor and increasing challenge for U.S. policy. As a matter of policy and as a result of treaty commitments, the United States extends deterrence to protect its allies in the Asia-Pacific region. In essence, this means the United States will help deter threats to these allies and, if deterrence fails, use U.S. assets to defeat these threats. In 2010, the United States publicly confirmed to South Korea—and thus implicitly to Australia, Japan, and other allies covered by the U.S. "nuclear umbrella"—that extended deterrence includes BMD capabilities. Congress reinforced this commitment in the FY2013 NDAA when it stated in Section 229 that, "The United States has an obligation to meet its security commitments to its allies, including ballistic missile defense commitments." Similarly, the FY2014 NDAA ( P.L. 113-66 ) and FY2015 NDAA ( P.L. 113-291 ) encourage the United States to cooperate with regional allies on BMD issues to enhance the security of all partners. As the threat from ballistic missiles has increased, the United States has gradually expanded its deployment of BMD assets and associated sensors in East Asia. The configuration of sensors, command-and-control (C2) centers, and BMD interceptors in East Asia—in other words, the regional "architecture" of U.S. BMD—has slowly evolved in concert with contributions from treaty allies. Cooperation on regional BMD offers the potential for greater effectiveness and cost efficiency, but it is proceeding at different rates with different countries. The U.S.-Australia partnership on early warning satellites dates back to the early Cold War and the Defense Support Program (DSP) that began in 1970. The United States and Japan have been cooperating on BMD programs since the 1990s and have a mature partnership. South Korea and Australia are beginning to acquire the necessary hardware and software for a more robust BMD capability to include missile interceptors. Southeast Asian allies Thailand and the Philippines have so far not spent their relatively scarce defense funds to procure and deploy BMD systems. The most authoritative DOD directive on BMD policy, the 2010 Ballistic Missile Defense Review Report (BMDR), declared a policy of implementing the "phased adaptive approach" (PAA) in East Asia. That approach seeks to address the most acute near-term threats with deployments of existing technology and to pursue the deployment of BMD programs designed to deal with future, longer range ballistic missile threats as those threats develop. New capabilities are phased in to the system as they become available. The implementation of the phased adaptive approach in East Asia would require more formal arrangements. Fulfilling the requirement in Section 229 of the FY2013 NDAA, in August 2013 DOD published a report to Congress on regional ballistic missile defense that elaborates on the "phased, tailored, and adaptive approaches" to regional BMD architectures. Although the BMDR and the 2010 Nuclear Posture Review (NPR) both explicitly commit the United States to the goal of maintaining "strategic stability" with Russia and China, the two countries have raised strong objections to U.S. BMD programs. Moscow and Beijing both argue that the programs pose a threat to their nuclear deterrents, with Russian concerns focused on BMD in Europe, and Chinese concerns focused on BMD in the Asia-Pacific. Issues for Congress related to the evolution of U.S. BMD posture and policy in the Asia-Pacific region include appropriations for BMD programs; the potential for Foreign Military Sales (FMS) financing of BMD technology to allies; the role of BMD cooperation in shaping alliance relationships and overall U.S. strategy in the Asia-Pacific region; the effect of U.S. BMD cooperation on U.S. relations with China, North Korea, and Russia; and the possible role of U.S. BMD cooperation in influencing Chinese, North Korean, and Russian military developments. U.S. BMD Policy The stated focus of U.S. BMD policy is to defend against limited missile strikes from so-called rogue states, namely Iran and North Korea, on the U.S. homeland or against allies and U.S. forces deployed abroad. As a matter of policy, U.S. missile defenses are not intended to alter the balance of nuclear deterrence with the major nuclear-armed states, i.e. Russia and China. U.S. and allied BMD assets in the Asia-Pacific region are, however, inherently capable of intercepting short-range ballistic missiles (SRBMs) in East Asia that are launched not just from North Korea, but also from China. Future U.S. BMD capabilities in the region may be designed to counter much longer-range ballistic missiles regardless of their country of origin. The guiding policy for deployment of BMD capabilities under the Obama Administration has been the Phased Adaptive Approach (PAA). The PAA seeks to address the most acute near-term threats with deployments of existing technology and to pursue BMD programs designed to deal with future, longer-range ballistic missile threats as those threats develop. U.S. policy aims to develop and deploy an overall global BMD system eventually linking regional and homeland BMD. The 2010 BMDR states that the United States "will pursue a phased adaptive approach within each region [Europe, the Persian Gulf, and East Asia] that is tailored to the threats unique to that region, including their scale, the scope and pace of their development, and the capabilities available and most suited for deployment." Regional BMD systems can provide a number of strategic benefits to the United States both in peacetime and in war, and can help to prevent premature escalation of a crisis into a war. In 2009, the United States announced plans for a European PAA and has so far completed the first phase of that effort. Phase two is on track with the installation of an Aegis Ashore system in Romania in 2015. Efforts to formalize an Asia-Pacific PAA (APPAA) are underway, but prospects remain unclear. Implementation of an APPAA could provide an opportunity for the United States to identify and prioritize missile threats and to rally allies and partners around a common vision for defending their territory and U.S. deployed forces in the region. Currently, many of the platforms and sensors required for a Phase 1 APPAA are already in place, such as Patriot and Aegis interceptor platforms and various ground-based sensors and radars. What is lacking is a formal agreement that would lay out a path forward for a more integrated approach with allies and partners, as well as rules of engagement and clarity on various command and control issues. Regional Policy Context In late 2011, the Obama Administration announced a new centerpiece for its foreign and defense policy known as the "strategic rebalancing" (originally called a "pivot") to the Asia-Pacific region . The January 2012 Defense Strategic Guidance issued by DOD also highlights this change, and U.S. officials have since expounded on the various elements of the strategy. Since 2012, the U.S. military has increased rotational deployments to Australia, the Philippines, and South Korea, and has pledged to deploy its most advanced assets (such as the F-35 Joint Strike Fighter) to East Asia at an early date. One major thrust of the rebalancing strategy is deepened engagement with allies and partners in the region and a concurrent effort to knit strong bilateral ties into a web of regional security cooperation, particularly among treaty allies. The United States has fostered U.S.-Australia-Japan and U.S.-Japan-South Korea trilateral security cooperation and has encouraged India to take a more proactive role in Asia-Pacific security. Some Chinese observers see these developments as a policy to "contain" China, although U.S. officials and many non-Chinese scholars reject that notion. Ballistic Missile Capabilities in East Asia Several countries in the Asia-Pacific region possess ballistic missiles and have space launch programs. North Korea's ballistic missiles and their continued development and deployment are a significant security concern and a central focus of U.S. BMD policy. The U.S. position for some time has been that Russian ballistic missiles do not threaten U.S. regional interests or the U.S. homeland, because of strategic deterrence, and therefore, in former Defense Secretary Robert Gates' words, U.S. BMD systems "are not focused on trying to render useless Russia's nuclear capability." China's ballistic missile forces and their modernization are of some concern to the United States, but China's missile forces are also not a stated focus of U.S. BMD programs. U.S. policy seeks to maintain strategic stability with China. North Korea's Ballistic Missile Threats Observers believe that North Korea has a large arsenal of ballistic missiles that could reach targets in South Korea and Japan. Pyongyang has declared its intent to develop a nuclear-armed ICBM capability, but North Korea's longer range missiles capable of reaching Guam, Alaska, or the continental United States appear unreliable and in some cases remain untested. Yet, many analysts believe that Pyongyang is moving closer to its goal of a nuclear-armed ICBM capability. According to the Department of Defense (DOD), "North Korea has several hundred SCUD SRBM and Nodong medium-range ballistic missiles (MRBM) available for use against targets on the Korea Peninsula and Japan." An independent assessment from 2011 estimated that North Korea has a stockpile of roughly 700 SRBMs with about 100 launchers. However, these missiles are highly inaccurate and therefore less militarily effective when armed with conventional warheads. Since 2010, the North Korean military has unveiled new ballistic missiles seemingly based on Russian designs, although the new MRBM and a reported mobile ICBM vehicle paraded through Pyongyang have not been flight tested and some analysts have assessed them as mock-ups. Experts remain divided on the potential capabilities of these missile types. DOD and others have noted that North Korea "displayed what appears to be a road-mobile ICBM" in April 2012. Some have more recently noted that North Korea may be testing sea-launched ballistic missile technologies as well. Despite international condemnation and United Nations Security Council (UNSC) prohibitions, North Korea twice in 2012 launched long-range ballistic missiles ostensibly carrying satellite payloads, demonstrating the importance that Pyongyang places on continued development of ballistic missiles. North Korea has made slow progress toward developing a reliable long-range ballistic missile. The December 2012 launch was the first successful space launch after four consecutive test failures in 1998, 2006, 2009, and April 2012. North Korea's inconsistent progress toward developing a long-range missile calls into question the 1999 U.S. National Intelligence Estimate that North Korea could successfully test an ICBM that could deliver a small nuclear payload to the United States by 2015. The author of a 2012 RAND technical report on the North Korean nuclear missile threat asserts that the Unha-3 rocket, which successfully lifted an estimated 100 kg satellite payload into orbit in December 2012, is not capable of carrying a nuclear warhead at intercontinental range. Some experts concluded in 2011 that a future North Korean ICBM "would almost certainly have to undergo an extensive flight-test program that includes at least a dozen, if not two dozen, launches and extends over three to five years." Such a program would make North Korean intentions obvious to the world. On the other hand, it is possible that North Korea would take a radically different approach and accept one successful test as sufficient for declaring operational capability. Many see North Korea's Unha-3 "space launch vehicle" as a cover to mask an ICBM program. However, no country has ever first developed a space launch program and then ICBM program. Additionally, there is increasing concern over North Korean development and static engine testing of a road-mobile ICBM that some refer to as the KN-08. The potential ability of North Korea to miniaturize a nuclear warhead and mate it to a ballistic missile, especially an ICBM, is a key concern of the United States. The official position of the Director of National Intelligence is that "North Korea has not yet demonstrated the full range of capabilities necessary for a nuclear armed missile." Others assess that "North Korea likely has the capability to mount a plutonium-based nuclear warhead on the shorter range [800-mile] Nodong missile" already. Although senior North Korean military leaders stated in 2012 their long-range missiles could hit the United States with nuclear weapons, there is no clear evidence that Pyongyang has developed a warhead small enough to fit on an ICBM or one capable of surviving re-entry at ICBM range. In October 2014, Gen. Scaparrotti, Commander U.S. Forces Korea, said that he believes North Korea has "the capability to have miniaturized a device at this point, and they have the technology to potentially actually deliver what they say they have. We have not seen it tested," however, he added. Other Countries in the Region with Significant Ballistic Missile Arsenals China27 China's ballistic missiles are not the focus of U.S. BMD programs and policy. China fields what it calls a "lean and effective" nuclear arsenal that is believed to be significantly smaller than the arsenals of the United States and Russia, even though China has no treaty obligations restricting the number of missiles it can deploy. China has long had a declaratory "no first use" policy for its nuclear weapons, under which its limited nuclear arsenal is intended to deter nuclear attacks against China and give China the ability to retaliate after a nuclear strike. The 2013 DOD report to Congress on military and security developments involving China reported that China's nuclear arsenal included 50-75 silo-based and road-mobile ICBMs. The 2014 edition of the report did not include a specific number. A 2013 report from the Bulletin of the Atomic Scientists estimated that China then had approximately 250 nuclear warheads, deliverable by nearly 150 nuclear-capable land-based ballistic missiles and aircraft and an emerging nuclear-capable ballistic submarine fleet. China has been engaged in a slow but steady nuclear modernization effort over the years, an effort that China portrays, at least in part, as a response to U.S. BMD advances. The U.S. National Air and Space Intelligence Center (NASIC) states that "China has the most active and diverse ballistic missile development program in the world," and NASIC notes that China is developing methods to counter ballistic missile defenses. According to DOD, China now fields additional road-mobile DF-31A ICBMs and more sophisticated silo-based DF-5 ICBMs. China is also developing a new road-mobile ICBM, the DF-41, possibly capable of carrying multiple warheads to a range of 4,600 miles, and a sea-based nuclear capability in the form of a new class of nuclear-powered ballistic missile submarine. China's strategic missile forces, known as the Second Artillery, also fields conventionally armed ballistic missiles, including SRBMS, MRBMs, and anti-ship ballistic missiles (ASBMs). These missiles are believed to be intended to deter Taiwan from formalizing its de facto separation from China. Almost all of China's SRBMs, perhaps more than 1,000, according to the 2014 DOD report, are deployed opposite Taiwan. Also of concern to the United States is China's fielding of an ASBM, the DF-21D, known colloquially as a "carrier killer" missile. DOD states that this missile has a range in excess of 900 miles (1,500 km) and "provides the PLA the capability to attack large ships, including aircraft carriers, in the western Pacific Ocean." The development of the DF-21D ASBM is part of an apparent Chinese effort to develop new systems and tactics to counter or impede the ability of the U.S. military to intervene in a conflict in the Western Pacific. The United States refers to this effort as providing China with anti-access/area denial (A2/AD) capabilities. Referencing both China's and Iran's pursuit of "asymmetric means to counter our power projection capabilities," the 2012 Defense Strategic Guidance states that the U.S. military will invest in BMD as one of several approaches to ensure continued power projection capabilities in A2/AD environments. In addition to deploying ballistic missiles, China is also developing its own BMD technology. China reported that it successfully tested a ground-based mid-course missile interceptor within its own territory on January 27, 2013. This was China's second reported such test; the first was on January 11, 2010. Chinese media noted that the United States is the only other country to have attempted this technically challenging feat. The Chinese test followed by hours the U.S. test of a three-stage ground-based missile interceptor, underscoring an element of competition in the technological development of BMD systems. According to a senior U.S. official, China also tested an anti-satellite weapon in the guise of a BMD test in July 2014. China's intentions in developing missile defense technology remain unclear. Russia The number of Russian ICBMs is constrained by formal treaty with the United States; their numbers have declined significantly since the early 1990s. Russian ballistic missiles are not the focus of U.S. BMD programs. Currently, Russia has about 320 ICBM launchers, which, along with its small force of bombers, falls well below the limit of 700 deployed delivery systems contained in the new strategic arms reduction treaty, known as the New START Treaty. The 1987 Intermediate-Range Nuclear Forces (INF) Treaty prohibits the United States and Russia from possessing any MRBM or IRBM. Russia is developing the RS-26, which has been tested above and below the 5,500 km range defined for ICBMs. Its anticipated initial deployment in 2015 is reported to be in Irkutsk in southeastern Siberia "from where it would possibly be directed at China because it would lack the range to reach targets in Europe." Russia possesses a few hundred very short-range SRBMs that are not likely capable of reaching targets in South Korea or Japan. U.S. and Allied BMD Capabilities in the Region The responses of the United States and its allies in the Asia-Pacific region to the threat of ballistic missiles have included political statements, policy coordination, changes to military doctrine, research and development programs, deployment of sensors, and procurement of ballistic missile interceptors and assets. President Obama has declared that, in response to threats from North Korea, "the United States is fully prepared and capable of defending ourselves and our allies with the full range of capabilities available, including the deterrence provided by our conventional and nuclear forces." The actions of Asia-Pacific countries reflect variation in how defense policymakers in these countries view their vulnerability to ballistic missile threats. The sense of insecurity is most acute among Japanese elites, whereas Australian leaders feel relatively secure from missile attack. South Korean policymakers are aware of the threat, but until recently have prioritized defense against North Korea's long-range artillery and a cross-border invasion. Southeast Asian leaders appear to be less concerned about ballistic missiles, and their relatively modest defense budgets cannot support the acquisition of technologically advanced BMD systems without forcing reductions in other desired capabilities. U.S. BMD assets currently in operation use kinetic kill vehicles to intercept ballistic missiles at various points in the missile's trajectory (upper tier/mid-course and lower-tier/descent phase), conceptually akin to "a bullet hitting a bullet." Ground-Based Interceptors (GBI) are designed to counter ICBMs aimed at the continental United States, but other systems such as the PAC-3, Terminal High-Altitude Area Defense (THAAD), and Aegis SM-3 are designed to intercept SRBMs and MRBMs in an allied defense and force protection role. Only the GBI is designed to intercept an ICBM launched from the Asian continent toward the United States. United States . The United States has an array of BMD assets already deployed in the Asia-Pacific region: SM-3 interceptors on Aegis-equipped destroyers; PAC-3 batteries at military bases in the theater; and early warning sensors in Japan, on land (AN/TPY-2), at sea (floating X-band radar), and in space. In response to North Korea's threatening actions and statements in early 2013, DOD decided to deploy a THAAD system to Guam two years ahead of schedule. The Navy, in particular, is seeking an evolution in its BMD capabilities over the next decade to increase its ability to intercept more sophisticated MRBMs, IRBMs, and eventually to develop limited capabilities against ICBMs. Existing DOD plans call for 48 BMD-capable Aegis vessels and over 400 SM-3s acquired by FY2020. The United States is exploring ways to leverage its BMD investments by collaborating with other countries to establish the APPAA; U.S. defense officials have expressed a desire for trilateral BMD cooperation. In December 2014, the U.S. military deployed a second AN/TPY-2 radar in Japan (at the Kyogamisaki Communications Site near Kyoto) and, as of early 2015, is considering deploying THAAD to South Korea in response to North Korean provocations (see section below for further discussion). Japan . More than any other country, Japan has invested heavily in BMD. The Japan Maritime Self-Defense Force (JMSDF) has four destroyers equipped with Aegis tracking software and SM-3 Block IA interceptors, and the Ministry of Defense plans to add four more BMD-capable Aegis destroyers. Japan fields 17 PAC-3 units, protecting key locations in Tokyo and throughout the archipelago, and will procure more. All these BMD assets are linked with Japan's advanced FPS-3 and FPS-5 radar. Japanese defense officials say that a space-based early warning system is under consideration to be deployed before the end of this decade. Japan reportedly is planning to build two new Aegis destroyers beginning in 2015, in part to expand its sea-based missile-defense capabilities, and to build two more BMD-capable destroyers by 2020. In early July 2014, Japan's government announced plans to ease the country's long-standing ban on participating in collective self-defense activities, a move that will allow Japanese Aegis-equipped ships to be more fully integrated into missile defense systems with the United States. Reports in September 2014 indicated that Japan may also be interested in acquiring Aegis Ashore capabilities. South Korea . South Korea has only recently begun to acquire advanced BMD capabilities. In the decade prior to the election of President Lee Myung-bak in 2008, South Korean leaders prioritized harmonious relations with North Korea over acquisition of missile defense technologies that could provoke Pyongyang. The South Korean Navy now has three KDX-III Sejon-Daewon class cruisers equipped with Aegis tracking software—but no interceptors. However, Seoul has announced plans to implement an indigenous Korean Air and Missile Defense (KAMD) system to counter aircraft, cruise missiles and ballistic missiles launched by North Korea. As part of its ongoing effort to upgrade its missile defense system, South Korea's arms procurement agency in April 2014 approved a $1.3 billion plan to upgrade the ROK's PAC-2 air defense system and buy PAC-3 missiles by 2020. The commander of U.S. Forces Korea in June 2014 recommended that the United States deploy a THAAD system in South Korea; this potential deployment and South Korea's plans for its own KAMD system became a subject of controversy in 2014 (see section below for further discussion). Australia . Australia has long maintained several early warning radar sites in cooperation with the United States, but currently has no BMD intercept capability. The Australian Navy plans to procure two Aegis-equipped vessels, which could be fitted with BMD capabilities against SRBMs and MRBMs in the future. Such capabilities would be useful primarily to Australia for defending others in a force projection capacity. Due to the great distance from Northeast Asia, Canberra is faced with a unique threat profile: Australia is only at risk from ICBMs but has no plans to counter such missiles with BMD. Australia relies on the U.S. nuclear umbrella for deterrence, with a treaty-based security guarantee. THAAD Deployment in South Korea Reportedly, the U.S. military is considering deployment of a THAAD system to South Korea to defend U.S. forward-deployed forces and South Korean territory from North Korean ballistic missiles. The possible deployment has sparked controversy in Korea, largely because of the Chinese government's public opposition. The THAAD deployment has also raised broader questions about Seoul's BMD policy. China has complained that the radar capabilities of the THAAD system could be configured to allow the United States to monitor airspace over Chinese territory, and in February 2015 the Chinese Minister of Defense lodged a protest with his counterpart in South Korea. In March 2015, China's Assistant Foreign Minister publicly warned South Korea to "importantly think about Beijing's attention to and concerns over the deployment of THAAD to the peninsula." U.S. defense officials assert that the THAAD system will be configured in "terminal mode" (or "engagement mode") to optimize its ability to identify ballistic missile launches in North Korea and intercept them before they reach targets in South Korea. This mode has a shorter radar range and would therefore not have much coverage over Chinese territory, except perhaps for areas near the border with North Korea. Beijing appears to be concerned that the U.S. military may—even for short periods—configure the THAAD radar in "look mode" and rotate it to greatly increase its coverage over Chinese territory, which some Chinese consider a form of "spying." U.S. officials point out that this configuration would nullify the ability of the THAAD system to intercept missiles from North Korea, the purpose of this potential deployment. Despite Chinese objections, South Korean Minister of National Defense Han Min-Koo praised a potential U.S. deployment of THAAD, saying it "will be helpful in ... strengthening the security posture on the peninsula." Many South Koreans were upset that China would urge South Korea to forgo an effective defensive measure to protect their country from possible aggression by North Korea. The ROK Ministry of Defense spokesperson responded firmly to the Chinese admonition in March 2015, saying, "A neighboring country can have its own position about the U.S. Forces Korea's deployment of THAAD. But it should not attempt to exert influence on our defense security policies." In one sense, the proposed THAAD deployment has become a litmus test for Seoul's alignment between Beijing and Washington. Some observers in Seoul are concerned that angering China in this dispute would have negative ramifications for ROK-China relations. Yet, South Korea has other concerns surrounding this issue, such as the affordability of buying its own THAAD system from the United States and the effectiveness of THAAD against North Korean missiles. Although the U.S. government has not proposed that South Korea purchase THAAD, some political opposition figures in Korea nevertheless claim that a potential U.S. deployment is part of a campaign to convince the ROK government to bear some of the costs. Seoul may also be wary of THAAD as a backdoor into the U.S.-led regional BMD system, in which some Korean leaders are reluctant to participate fully. Bilateral, Trilateral, and Multilateral BMD Cooperation The persistent threat of a missile attack from North Korea has led U.S. policymakers to seek deeper BMD cooperation with Asia-Pacific allies. This trilateral and multilateral approach remains the major emphasis of U.S. officials and can be viewed as aligning with the goals of the strategic rebalancing to the Asia-Pacific region. The "Joint Integrated Air and Missile Defense: Vision 2020" policy guidance document, which DOD released in December 2013, urges the U.S. military to integrate air and missile defense capabilities with partner countries and to leverage partners' contributions. U.S.-ROK. Although U.S.-South Korea alliance relations have been closely coordinated in recent years, Seoul resisted cross-national integration of BMD systems. The two countries share intelligence and sensor data and in 2013-2014 deepened their bilateral missile defense discussions. Reportedly, the United States has urged South Korea to develop advanced BMD capabilities that are more integrated with U.S. and allied BMD systems in the region. Seoul has announced its intention to develop its indigenous KAMD system instead, but—in a compromise that could enhance alliance capabilities and regional security—South Korean BMD systems will be interoperable with U.S. systems. It appears that this basic agreement will enable efficient bilateral BMD cooperation without infringing on South Korean sensitivities. For years, Seoul has been resistant to the concept of an integrated BMD system for several reasons: the desire, especially strong among progressive Koreans, for more strategic autonomy; a reluctance to irritate China, which has consistently voiced opposition to U.S. BMD deployments; and a disinclination to cooperate with Japan. U.S.-ROK-Japan. Japan-South Korea defense cooperation remains extremely limited due to long-standing historical disputes. In July 2012, South Korea and Japan came to the brink of signing a military information-sharing agreement, but domestic political considerations led the South Korean government to walk away from the agreement at the last minute. The two countries eventually arranged a more limited Memorandum of Understanding (MOU) on trilateral intelligence-sharing with the United States in December 2014. This agreement enables Japan and South Korea to share information on North Korea nuclear and missile programs through the United States and could be valuable for detecting and tracking North Korean missile launches. U.S.-Australia. As a staunch U.S. ally, Australia signed a BMD Framework MOU with the United States in July 2004, facilitating policy collaboration and information sharing. Australia relays missile launch and tracking sensor data from its early warning radar and satellites. Such information would likely be highly useful to BMD platforms. U.S.-Australia-Japan. The United States, Australia, and Japan have established a working group on BMD as part of their regular trilateral security consultations. U.S.-Japan. The United States and Japan have researched BMD technology since 1987 and currently are making progress in the joint development of the SM-3 Block IIA interceptor. Initiated in 1998, this bilateral research and development program paved the way for deeper cooperation on BMD. The U.S. Navy and the Japan Maritime Self-Defense Force (JMSDF) manage the program, and the two governments share the costs. In 2011 and 2013, Japan relaxed its prohibitions on the export of defense technology, opening the door for future sales of SM-3 Block IIA interceptors, PAC-2 interceptors, and other BMD systems to third parties under certain conditions. The mature U.S.-Japan BMD partnership has already served as a key driver of improvements to alliance interoperability. Both nations feed information from a variety of sensors to create a common operating picture at the Bilateral Joint Operating Command Center at Yokota Air Base, located outside Tokyo, and at U.S. Pacific Command (PACOM) Headquarters in Hawaii. A Center for Strategic and International Studies report stated in June 2012 that the United States and Japan "have essentially created a joint command relationship ... from the perspective of any possible adversary." This information sharing arrangement improves the effectiveness of each nation's target identification, tracking, and interceptor cueing. Japan and the United States hold an annual command exercise called "Keen Edge," which examines potential conflicts centered on Japan and simulates BMD responses. The JSDF is the only partner with which the U.S. military has conducted kinetic BMD exercises, primarily as testing for the Aegis system and SM-3 Block IA interceptors. BMD Exercises and Training. PACOM and U.S. Air Forces Pacific established the Pacific Integrated Air and Missile Defense (IAMD) Center in October 2014 to increase multinational integrated IAMD capabilities in the Asia-Pacific region and to serve as a hub for related training and education. A U.S. officer affiliated with the Pacific IAMD Center wrote, "The center would be the medium to build and improve operational plans, defended assets lists and integrated command and control, and discuss new challenges and methodologies." At the global level, the United States conducts biennial, multilateral computer-simulation exercises, called "Nimble Titan," with partner countries to study the possible role and effects of BMD in a conflict. These exercises include representatives from Japan, Australia, and numerous European countries. In April and December 2012, North Korea launched three-stage Taepodong-II ballistic missiles (called Unha-3 by North Korea), providing opportunities for the United States, Japan, and South Korea to test their sensors' tracking capabilities operationally. The missile tests reportedly revealed gaps in sensor coverage and flawed communications protocols, which Japanese defense officials subsequently rectified. Also, the U.S. Navy deployed its sea-based X-band radar to the theater before both launches. Japanese, South Korean, and Taiwanese officials all declared that they would intercept a missile if it endangered their territory. In the weeks leading up to the April launch, the Japanese government formed several task forces and held multiple meetings with high-level U.S. defense officials. Japan mobilized three Aegis destroyers and deployed PAC-3 units on the island of Okinawa and on three smaller islands close to the announced trajectory of the rocket. These statements and deployments echoed Japanese actions prior to North Korea's 2009 Taepodong-II missile launch. Opposition to BMD in East Asia The efforts of the United States and others to defend themselves from the threat of ballistic missiles have elicited opposition in East Asia as well as in Europe since President Reagan first announced the Strategic Defense Initiative (often referred to as "Star Wars") in 1983. The United States formally withdrew from the 1972 Anti-Ballistic Missile (ABM) Treaty in June 2002, a step that allowed it to pursue BMD programs without restriction. Russia has strongly criticized U.S. BMD deployments in Europe as targeted, at least partially, at Russia, and thus a danger to the strategic stability of nuclear deterrence. In the Asia-Pacific region, North Korea and China have been the most vocal opponents. China, like Russia, argues that U.S. BMD programs are a threat to strategic stability. Both North Korea and China also argue that U.S. BMD policies are evidence of hostile intentions. North Korean Perspective The North Korean state-run media have repeatedly castigated U.S. and allied BMD deployments, calling related activities examples of hostile policies toward North Korea. Articles in September 2012, for example, described BMD as a pretext for aggressive Japanese warmongering and for an American missile attack network aimed at Eurasia. More commentary in 2013 and 2014 accused the United States of using BMD to contain China and Russia militarily and provoking a regional arms race. A North Korean spokesman stated that the placement of a new missile defense radar in southern Japan would compel North Korea to bolster its nuclear deterrent. The statements emanating from Pyongyang may be attempts to stake out a bargaining position for North Korea, not merely hostile rhetoric. In bilateral and multilateral negotiations covering its nuclear program, North Korea has sought to define "denuclearization of the Korean Peninsula" to mean that the United States would withdraw its extended deterrence guarantee from South Korea when North Korea eliminated its nuclear weapons. In this context, North Korean criticisms of BMD are possibly signals directed at the other countries in the Six-Party Talks on North Korean denuclearization. Chinese Perspective The Chinese government has long been highly critical of U.S. and allied BMD efforts in East Asia. Chinese President Xi Jinping signaled continuity in China's stance on the issue during his first trip abroad as president, a visit to Russia in March 2013. In a joint statement issued in Moscow, the two governments called on the international community "to act cautiously" in deploying and cooperating on BMD, and voiced their opposition to "the unilateral and unchecked buildup of anti-missile capabilities by a country or a group of countries to the detriment of strategic stability and international security." China's criticisms of U.S.-led BMD efforts in East Asia have focused on the perceived potential threat that they pose to China's nuclear deterrent. As noted above, China has a "no first use" policy for its limited arsenal of nuclear weapons. In the words of a leading U.S. expert on China's nuclear program, Gregory Kulacki of the Union of Concerned Scientists, "the size and capabilities of China's nuclear force are calibrated to assure Chinese decision makers have enough nuclear weapons to survive a first strike, engage in limited retaliation, and preserve future deterrence." Yet the most recent edition of an influential Chinese military text, The Science of Military Strategy , published in December 2013, asserts that the United States has identified China as its "principal strategic opponent" and that U.S. BMD construction in East Asia is "creating increasingly serious effects on the reliability and effectiveness of a Chinese retaliatory nuclear attack." The Science of Military Strategy also identifies U.S. development of a conventional prompt global strike (CPGS) capability as a threat to China's nuclear retaliatory capability. A leading Chinese expert on nuclear issues, Wu Riqiang of Renmin University of China, has raised specific concerns about forward-based radars in BMD systems in Asia being able to detect Chinese strategic missiles: Equipment such as the forward-deployed radars that can greatly increase the effectiveness of BMD systems are unacceptable to China. Beijing's biggest concern is that such radars will be deployed close enough to China to register the decoy-deployment processes of strategic missiles.... Decoys and other countermeasures are much lighter than the re-entry vehicle, so the BMD system can identify the real warhead by detecting changes in velocity caused by the deployment of each object. This prevents missile-defence systems from being susceptible to mid-course countermeasures, and should be seen as China's red line, which the United States should not cross. Wu states that although the United States has not yet clearly delineated its BMD system in the Asia-Pacific, he believes it "would probably utilize" the AN/TPY-2 X-band radars deployed in Japan; the SBX radar; the PAVE PAWS early-warning radar in Taiwan; two Green Pine radars in South Korea; and other X-band radars that could be deployed in Southeast Asia. He acknowledges that Taiwan's PAVE PAWS radar is not currently considered part of the U.S. BMD system, yet he writes, "But from Beijing's perspective, because the United States could covertly connect the radar to the system with ease, it must be regarded as such." In a March 2015 paper, Kulacki highlights an apparent adjustment of China's nuclear deterrence policy that he characterizes as a "response to perceived U.S. threats against the survivability of China's nuclear forces ... ," such as BMD and CPGS. Kulacki notes that the 2013 edition of The Science of Military Strategy for the first time raises the possibility that China might launch a retaliatory nuclear attack after China has confirmed that a nuclear attack has been launched against it, but before the enemy nuclear warheads have reached their targets in China. Kulacki raises concerns about the dangers inherent in such a shift to a "launch-on-warning" posture: China's land-based nuclear missiles are currently kept off high alert with the warheads and the missiles separated and under different commands. It is unclear whether this long-standing practice would change as China begins to field new early warning capabilities. If the PLA did decide to increase readiness to launch rapidly by mating warheads to missiles during normal peacetime operations, that would, in combination with procedures to launch on warning, significantly increase the risk of an accidental or erroneous launch of a Chinese nuclear weapon. Other areas of Chinese concern about U.S. BMD programs in East Asia include the following: The potential for BMD programs to undermine China's conventional deterrent against Taiwan. China has stationed approximately 1,000 conventional SRBMs opposite Taiwan with the goal of deterring Taiwan from formalizing its separation from China. Chinese military scholars have warned that U.S. BMD programs, and particularly the sale of BMD systems to Taiwan, send "wrong signals to the 'Taiwan independence' forces." The implication is that BMD programs may give Taiwanese a sense of greater security, emboldening some to ignore the Chinese missile threat and actively resist China's efforts to unify with Taiwan. The United States has been unsympathetic to this set of Chinese concerns, and it has sold Taiwan limited missile defense infrastructure. In the 1990s, for example, the United States sold Taiwan three Patriot missile defense fire units with PAC-2 Guidance Enhanced Missiles (GEM). In 2008 and 2010, Presidents George W. Bush and Barack Obama respectively notified Congress of additional sales to Taiwan of PAC-3 systems. The United sold to Taiwan the PAVE PAWS early-warning radar system, which reportedly became operational in 2012. The potential for BMD programs to undermine the effectiveness of other Chinese uses of conventional ballistic missiles. China has not made this argument prominently, possibly out of an unwillingness to highlight potential offensive uses of its ballistic missiles outside of a Taiwan context, and perhaps because it tacitly recognizes a U.S. right to develop tactical BMD systems that do not undermine strategic stability. Wu Riqiang notes that China's conventional ballistic missile capability "gives the United States a reasonable motivation to develop tactical BMD systems. But certain tactical BMD assets can be used for strategic purposes, thereby undermining Sino-American strategic stability." A 2013 CSIS report asserts that U.S. BMD programs are not intended to compromise China's long-range nuclear deterrent, but "China's significant shorter-range missile capability, especially those missiles that threaten U.S. military forces in the region as well as U.S. allies and partners, are, however, a legitimate and necessary target for U.S. theater missile defense." The potential for BMD programs in East Asia to strengthen the United States' alliance relationships in the region, which Beijing fears could be turned against China. China appears to be particularly anxious about the implications of integration of command and control systems between the United States and Japan. Beijing also worries about strengthened U.S. alliances with Korea, Australia, and the Philippines, and the potential for them to be turned against China. Russian Perspective87 Since the United States first sought to deploy regional BMD capabilities in Europe against the threat of Iranian ballistic missiles, Russia has remained steadfast in opposition. Russia has long stated that U.S. and allied BMD could be used, especially as its capabilities evolved, to threaten Russia's strategic nuclear deterrent. The United States and its allied partners in Europe have held numerous discussions and briefings with Russian counterparts over the years to attempt to dispel the notion that allied BMD deployments would affect Russia in this regard, with little tangible effect. Russia remains concerned about U.S. BMD cooperation in Europe, and although the Russian perspective resonates among some Europeans, U.S. allies in Europe largely support the effort to deploy regional BMD capabilities in Europe. Although Russia has been relatively muted regarding U.S. and allied BMD cooperation in the Asia-Pacific region today, Russia has expressed some concern about progress toward a global BMD system and has complained to Japan and South Korea in bilateral settings about this development. It is possible that Russian opposition to the European Phased Adaptive Approach could at some point be echoed in East Asia. China has closely followed Russian objections to U.S. BMD programs, with China's state-controlled media regularly carrying reports on Russian statements on the subject. Challenges, Risks, and Opportunities Arising from Increased BMD Cooperation At present, U.S.-allied cooperation on BMD in the Asia-Pacific region follows the hub-and-spokes model of bilateral alliance relationships centered on the U.S. military. The United States and its allies share information and have commitments to mutual defense on a bilateral basis, but the multilateralism that underpins the European BMD architecture is largely absent. Statements by senior U.S. defense officials indicate that the U.S. military is encouraging greater integration of command, control, computers, and communications (C4) functions among U.S. allies. As BMD systems and related sensors become more sophisticated, observers argue that the opportunities and the potential benefits of inter-service and international linkages are growing. The U.S. military has the technical capacity to operate a multinational, integrated BMD architecture in the Asia-Pacific region—based on its experience in Europe—but there are political challenges and risks as well. Potential Benefits and Costs of Systems Integration There are both potential benefits and costs to deeper integration of BMD systems between countries. The primary potential benefits are enhanced effectiveness (in range, coverage, and targeting accuracy), cost efficiency, burden sharing, and the signaling effects of a collective organization. DOD's "Joint Integrated Air and Missile Defense: Vision 2020" policy document emphasizes the importance of collecting information from all sources and sharing it with partners. A 2006 CSIS study on BMD in East Asia found that "recent operational studies have shown that regional netting of sensors can cut the requirement for fire units (i.e., weapon-launching sites or platforms) to defend a given area by two-thirds." The same report states, "Sharing technologies, development costs, data, and more through a regional approach to defense would make defenses both more effective and more quickly deployable... [A] regional approach would also ease diplomatic pressures on any individual nation moving toward BMD." The primary potential costs are the expense and difficulty of multilateral coordination and the classic "alliance dilemma" of entrapment in a potential conflict that might be against the national interest. In South Korea, the affordability of U.S.-produced BMD systems reportedly is a concern. Asia-Pacific leaders would also face the risk that participation in a regional BMD architecture may sour relations with Beijing. The establishment of a collective, interoperable, regional BMD architecture anchored by the U.S. military would be a significant shift from the current approach. Information sharing among the United States and its East Asian allies could necessitate modifications to the C2 relationships of the countries involved, and collective action would call for even greater changes. Participants would need to resolve difficult questions such as who is in command of the intercept—the country targeted by missiles, the country firing the interceptor, or a particular authority established for this purpose. An integrated BMD network might be the forerunner of more institutionalized collective security in the region, though numerous, significant political hurdles would have to be cleared by all parties involved before serious discussion could begin. U.S.-Japan-South Korea Triangle Robust trilateral military cooperation with South Korea and Japan could be a major force multiplier for the United States, in missile defense as least as much as in other areas of security. A trilateral partnership could improve defense policy coordination to shape the regional security environment and share the burdens of crisis response. From a technical perspective, the expanded sensor and interceptor coverage of a trilateral C4 network could enhance BMD effectiveness against North Korea by tracking missiles from multiple angles at multiple points in their flight trajectory. However, South Korea might not benefit as much, because it is so close to North Korea that incoming missiles would likely fly on a lower trajectory and could arrive in a matter of minutes. At present, unresolved hostility between Japan and Korea based on historical issues continues to thwart a strategic partnership and may inhibit certain aspects of a future APPAA. The Commander of U.S. Pacific Command in July 2012 expressed his desire for Tokyo and Seoul "to find a way past the political divide that stops them from recognizing the importance of information sharing as it relates to the security environment." The intelligence-sharing MOU that Japan and South Korea signed in December 2014 was a significant step for trilateral defense cooperation with the United States, but it was not as comprehensive as an agreement that Tokyo and Seoul nearly consummated in 2012, before political backlash in South Korea scuttled that deal. Domestic politics in South Korea and Japan will, however, continue to have a large effect on the degree of military cooperation. Many South Koreans distrust Japan because of what they see as an unrepentant attitude toward the misdeeds of Imperial Japan in the early part of the 20 th Century. The Abe Administration's reinterpretation of Japan's constitution (in the Cabinet Decision of July 1, 2014) removed an obstacle to participation in a collective BMD system, provided that the Japanese government addresses this issue with changes to its domestic laws. This move by Japan to allow for collective self-defense could open doors to greater trilateral security cooperation, but many South Koreans are wary of defense cooperation with Japan. On the other hand, an expansion of security cooperation centered on BMD could have a positive effect of dulling this anxiety about Japan's military intentions. For example, in a journal article in early 2012, a South Korean Vice Admiral extolled the strategic benefits of trilateral cooperation in naval missile defense, in part on these grounds. A South Korean security expert argued in 2014 that Seoul should join the U.S.-led regional BMD system to ensure that South Korea has a voice in the development and operation of this new defense arrangement. U.S.-China Relations The U.S.-China relationship has long been complicated by high levels of strategic mistrust. Beijing asserts that the issue of U.S. BMD programs contributes to its mistrust of Washington. To allay stated Chinese concerns and improve transparency about both countries' nuclear programs, the United States has sought to engage China in senior-level dialogue on nuclear issues and BMD. So far, however, such dialogue has been limited. The two countries held a single round of an official nuclear dialogue in the final year of the George W. Bush Administration, in April 2008, but China declined to hold follow-up meetings. Two high-profile bilateral dialogues, the Strategic and Economic Dialogue and the Strategic Security Dialogue, have touched on nuclear issues. The most sustained discussion of nuclear issues and BMD between the two countries so far has occurred in "Track 1.5" dialogues, defined as dialogues attended by some officials and military officers in an unofficial capacity, and "Track 2" dialogues, defined as unofficial meetings among experts. In early 2015, a senior U.S. State Department official emphasized the importance of open dialogue and stated, "To encourage that dialogue, we have taken and will continue to take steps to keep China informed about developments in U.S. BMD policy." U.S. and Chinese experts have made a variety of recommendations to address tensions between the United States and China over BMD programs. In March 2015, two experts with Pacific Forum CSIS, a host of unofficial nuclear dialogues with China, proposed that the United States step up its efforts to launch an official dialogue with China on strategic nuclear issues. In a 2013 article, Chinese nuclear expert Wu Riqiang proposed a solution to the two countries "BMD dilemma" whereby "the United States commits to maintaining a low level of BMD effectiveness—enough to counter North Korea's unsophisticated ICBMs without threatening China's more advanced strategic missiles. In return, Beijing will agree to refrain from expanding its nuclear arsenal." In 2013, the CSIS Project on Nuclear Issues Working Group on U.S.-China Nuclear Dynamics made the following recommendations: The U.S. government should implicitly accept China's second strike capability. To do so would mean that the United States would "plan, procure, and posture its forces and base its own policy on the assumption that an attempted U.S. disarming first strike, combined with U.S. missile defenses, could not reliably deny a Chinese nuclear retaliatory strike on the United States." Among the advantages of such a position: "The credibility of U.S. assurances about BMD ... would likely be augmented with such an acknowledgment," even if the acknowledgement were not made publicly. The U.S. government should make its BMD program "as transparent as prudence and security allow" and make it clear "that the United States has no intention of using its ballistic missile defenses to negate China's long-range nuclear deterrent capability." The United States should explore such confidence-building measures as reciprocal visits to national missile defense sites, reciprocal notification of BMD and hypersonic vehicle test launches, and the dispatching of observers to national BMD exercises and tests. In 2011, Ambassador Linton F. Brooks, a former administrator of the Department of Energy's National Nuclear Security Administration, proposed that government technical experts from China and the United States conduct a joint analysis of the U.S. national BMD system and its capabilities against Chinese missiles and a joint analysis of the North Korean missile threat. At the geopolitical level, the U.S.-China disconnect over BMD may have had the consequence of helping bolster China's relations with Russia. China's and Russia's shared antipathy toward U.S. BMD is an important point of commonality in their bilateral relationship, although Russia is also wary of the program of nuclear modernization that China says it is carrying out partly in response to U.S. BMD. Deterrence and Dissuasion of North Korea Some argue that enhanced BMD cooperation could negate the coercive value of North Korean ballistic missiles. A robust, cooperative BMD effort could improve defense and deterrence for South Korea and, especially, Japan against North Korean ballistic missiles. Australia, though an unlikely target, would benefit from an earlier intercept point against ballistic missiles launched from Northeast Asia. A former senior defense official argues that BMD improves deterrence in several ways: BMD makes North Korea uncertain about the success of a missile attack, reduces the vulnerability of the United States and its allies to coercion; reduces the pressure for pre-emptive strikes by the United States and its allies; and enhances the strength of any U.S. and allied counterattack. Another benefit may be the dissuasion effect of a coordinated BMD response to North Korea's missile program: Pyongyang might decide that its development of missiles and WMD is in fact counterproductive and could conceivably reduce its investment in those capabilities. China's discomfort regarding U.S. and allied BMD deployments might cause Beijing to discourage North Korea's continued investment in ballistic missile development. On the other hand, some Chinese observers argue that these BMD efforts increase North Korea's sense of insecurity and encourage investments in asymmetric capabilities such as ballistic missiles. BMD Program Evolution Stated U.S. BMD policy is designed to defend the U.S. homeland against limited ballistic missile attack by rogue states and to defend against regional threats to U.S. forces, allies and partners; it is not intended to affect the strategic balance with Russia and China. But some observers believe that U.S. BMD systems over the coming decade may be on a trajectory to become increasingly capable against Chinese and Russian ballistic missiles. Although the United States dropped its plan for Phase 4 of the EPAA, which would have included a limited capability against first generation ICBMs from Iran, efforts to improve ICBM defenses are likely to continue. These trends raise important questions. If such efforts proceed, how might Russia and China respond? Will Russia or China or both further expand their ballistic missile forces, or develop ballistic missiles capable of evading U.S. BMD systems? How might evolving U.S. BMD capabilities against ICBMs affect prospects for regional BMD capabilities over time? The 2013 DOD report to Congress on military and security developments involving China states that China is "working on a range of technologies to attempt to counter U.S. and other countries' ballistic missile defense systems." According to the summary of the 2012 DOD-sponsored Track 2 academic dialogue with China, American participants "repeatedly warned their Chinese colleagues" that if China were to share such technologies with North Korea or other so-called rogue states, the United States would view such a development as "highly escalatory." Congressional Actions Regional BMD in the FY2015 NDAA The FY2015 NDAA ( P.L. 113-291 ) includes three sections directly relevant to the subject of this report, and many other sections that are indirectly relevant. Section 1666 states, It is the sense of Congress that—(1) the regional ballistic missile capabilities of countries such as Iran and North Korea pose a serious and growing threat to forward deployed forces of the United States, allies, and partner countries; (2) given this growing threat, it is a high priority for the United States to develop, test, and deploy effective regional missile defense capabilities to provide the commanders of the geographic combatant commands with capabilities to meet the operational requirements of the commanders, and for allies and partners of the United States to improve their regional missile defense capabilities; ... (5) the United States should continue to work closely with its allies in Asia, particularly Japan, South Korea, and Australia, to improve regional missile defense capabilities, particularly against the growing threat from North Korean ballistic missiles." The section also required DOD to submit a report to Congress on regional missile defense, including a detailed description of BMD capabilities and cooperation in the Asia-Pacific region. Section 1255 states the Sense of the Congress that "increased cooperation on missile defense among the United States, Japan, and the Republic of Korea would enhance the security of allies of the United States in Northeast Asia, increase the defense of forward-based forces of the United States, and enhance the protection of the United States with regard to threats from the Korean Peninsula." The section calls on DOD to identify opportunities and challenges for increased trilateral cooperation on missile defense and to brief Congress on its findings. Section 1059 mandates an independent assessment of U.S. military strategy and force posture in the PACOM area of responsibility, including an examination of capability shortfalls in BMD, among other areas. Issues for Congress Funding for an Asia-Pacific Phased Adaptive Approach Congress has consistently authorized and appropriated funding for BMD as a core component of U.S. defense policy in countering ballistic missile threats from rogue states. There have been exceptions for programs deemed unlikely to deliver capabilities in the near- or medium-term, but the overall level of funding support for BMD programs in Congress to date has remained steady. It is possible that an APPAA will require additional funding, beyond that for which DOD has planned. Costs could include funds for more BMD systems, sensors, C4 infrastructure, bases, and/or military construction. As part of any agreement to deploy BMD capabilities in the region, U.S. allies might want additional, non-BMD related weapons systems. In a congressionally-mandated independent assessment of U.S. force posture strategy in the Asia-Pacific region, the Center for Strategic and International Studies (CSIS) recommended that the United States deploy THAAD and additional PAC-3 units to protect forward deployed forces. Considering the current threats from ballistic missiles, potential issues for Congress are whether DOD is expanding BMD programs at an appropriate level, and whether current and planned BMD capabilities are the best and most cost-effective approach for addressing ballistic missile threats. Other observers believe the stated threats are exaggerated and that the U.S. BMD program, especially the U.S. GMD system, does not work. Foreign Military Sales The United States has sold to allies several types of BMD capabilities: Aegis tracking software, PAC-2 and PAC-3 batteries, and SM-3 Block IA interceptors (the last to Japan only). There is a potential for significant further sales if South Korea and Australia decide to emphasize BMD in future budgets, or if Southeast Asian countries such as Vietnam, the Philippines or Singapore begin to view ballistic missiles as a threat to their security. Even if these countries do not participate in a regional BMD system, some analysts have suggested that "reliance of non-U.S. assets on American hardware and software in systems like Aegis goes a long way toward syncing allied capabilities and interoperability [at the technical level]." A potential issue for Congress is what role, other than those already defined in statute, Congress would play in overseeing Foreign Military Sales (FMS) of these BMD systems. Outlook for Near Term As the executive branch further develops U.S. BMD policy in the Asia-Pacific region, Congress has the opportunity to shape this development. The budget allocated to these BMD efforts will affect U.S. defense posture and capabilities in the region, and potential FMS financing of U.S. arms exports could help determine allied approaches to BMD. Through the power of the purse, oversight, legislation, or other tools, Congress may choose to encourage the evolution of an Executive Branch-led APPAA or other formal, collective BMD architectures, or it may choose to slow or thwart this current development. The degree of multilateral integration of BMD assets, accommodation of Russian and Chinese concerns, strategic focus, and technical foundation of BMD capabilities are just several of the critical issues that may merit congressional attention going forward.

The growing number and modernization of ballistic missiles in the Asia-Pacific region poses a security challenge for the United States and its allies and is thus a concern for many in Congress. The United States has made ballistic missile defense (BMD) a central component of protection for forward-deployed U.S. forces and extended deterrence for allied security. The configuration of sensors, command-and-control centers, and BMD assets in the region has slowly evolved with contributions from treaty allies, primarily Japan, Australia, and South Korea. Observers believe that North Korea has an arsenal of hundreds of short-range ballistic missiles and likely dozens of medium-range Nodong missiles; the extended-range Nodongs are considered capable of reaching Japan and U.S. bases there. Longer-range North Korean missiles appear to be under development but remain unreliable, with only one successful test out of five in the past 15 years. The U.S. intelligence community has not yet concluded that North Korea can build nuclear warheads small enough to put on ballistic missiles, but there is significant debate among experts on this question. Congress has maintained a strong interest in the ballistic missile threat from both North Korea and Iran and in BMD systems to counter those threats. The National Defense Authorization Act (NDAA) for FY2013 noted that East Asian allies have contributed to BMD in various ways, and it called on the Department of Defense (DOD) to continue efforts to develop and formalize regional BMD arrangements. Similarly, the FY2014 NDAA and FY2015 NDAA encourage the United States to cooperate with regional allies on BMD issues to enhance the security of all partners. The United States and its allies in the Asia-Pacific region have responded to the North Korean missile threat by deploying BMD assets and increasing international BMD cooperation. The United States and Japan have deployed Aegis-equipped destroyers with Standard Missile 3 (SM-3) interceptors, Patriot Advanced Capability 3 (PAC-3) batteries, early warning sensors, and advanced radars to meet the threat. South Korea and Australia have relatively basic BMD capabilities with plans to improve those in the near future. Cooperation on BMD follows the hub-and-spokes model of U.S. bilateral alliance relationships in the region; the multilateralism that underpins the European BMD arrangement is largely absent. Working-level coordination is especially close among the United States, Japan, and Australia, but senior U.S. defense officials have called for greater integration of U.S. and allied BMD efforts in East Asia to improve effectiveness. The stated focus of U.S. BMD policy is to defend against limited missile strikes from rogue states, not to alter the balance of strategic nuclear deterrence with the major nuclear-armed states. Nonetheless, Russia and China have strongly criticized U.S. BMD deployments as a threat to their nuclear deterrents, and thus a danger to strategic stability. Chinese officials and scholars make several other criticisms: that BMD is antagonizing North Korea and thus undermining regional stability; that the United States is using BMD to strengthen its alliance relationships, which could be turned against China; and that BMD is undermining China's conventional missile deterrent against Taiwan, and thus emboldening those on Taiwan who want to formalize the island's separation from China. Specific issues for Congress raised by BMD cooperation in the Asia-Pacific include appropriations for BMD programs; the potential for Foreign Military Sales financing of BMD technology to allies; the role of BMD cooperation in shaping alliance relationships and overall U.S. strategy in the region; the effect of U.S. BMD cooperation on U.S. relations with China, North Korea, and Russia; and the possible role of U.S. BMD cooperation in shaping military developments in those countries.

President Bush's Andean Regional Initiative Request for FY2002 In April 2001 budget submissions, President Bush requested $882.29 million in FY2002economic and counter-narcotics assistance for Colombia and regional neighbors in an initiativecalled the "Andean Regional Initiative," with $731 million of the counter-narcotics assistance calledthe "Andean Counterdrug Initiative." According to the Administration, there are two distinctivefeatures of this program, compared to Plan Colombia assistance, (1) both of which aim to promotepeace and to stem the flow of cocaine and heroin from the Andean region. The differences are thatthe assistance for economic and social programs is roughly equal to the assistance forcounter-narcotics programs, and that more than half of the assistance is directed at regional countriesthat are experiencing the spill-over effects of illicit drug and insurgency activities. (2) In the presentation of the International Affairs budget, the Administration noted that the Andean Counterdrug Initiative would build upon the resources provided in the FY2000 EmergencySupplemental Appropriations for Plan Colombia and ongoing regional funding. It set ascounter-narcotics goals to reduce Colombian coca production by 30% in 2000-2002, to eliminate allillicit coca production in Bolivia by the end of 2002, to negotiate revised coca and poppy controlgoals with the new Peruvian Government, and to set aggressive and achievable goals by mid-August2001 with other countries in the region. In presenting the broader Andean Regional Initiative to Andean regional leaders at Summit of the Americas III in Quebec City, Canada, in mid-April 2001, President Bush said: "The United Statesis responsible to fight its own demand for drugs. And we will expand our efforts to work withproducer and transit countries to fortify their democratic institutions, promote sustainabledevelopment, and fight the supply of drugs at the source .... The United States appreciates thedifficult challenges [Andean countries] face in fighting drugs - and stands ready to be their partner." (3) Requested ARI funding of $882.29 million for FY2002 is to be distributed as follows, taking into account only international affairs funding: Colombia: $399 million Socio-economic aid: $146.5 million for programs such as alternativedevelopment, judicial reform, human rights, anti-corruption measures, and support for the peaceprocess. Counter-narcotics aid: $252.5 million for aviation and infrastructure supportfor air assets provided under Plan Colombia, training and equipping security forces, and interdictionand eradication efforts. Peru: $206.15 million Socio-economic aid: $128.15 million for alternative development, promotionof democracy, health and education programs. Counter-narcotics aid: $78 million for upgrading helicopters and riverineinterdiction efforts, eradication, and demand reduction and policydevelopment. Bolivia: $143.48 million Socio-economic aid: $88.48 million for programs such as alternativedevelopment, judicial reform, poverty alleviation, health and environment. Counter-narcotics aid: $55 million for ground-based and air interdictionsupport, eradication efforts, counter-narcotics training, and narcotics awareness and preventionprograms. Ecuador: $76.48 million Socio-economic aid: $56.48 million for border area development, povertyreduction, judicial reform, and environmental programs. Counter-narcotics aid: $20 million for northern border security, lawenforcement and border checkpoints, and sea and airport control efforts. Brazil: $26.18 million Socio-economic aid: $11.18 million for health and environmental programs. Counter-narcotics aid: $15 million for training and equipping bordercounter-narcotics forces, and for drug awareness and demand reductionprograms. Panama: $20.5 million Socio-economic aid: $8.5 million for judicial reform, watershed management,and economic growth opportunities. Counter-narcotics aid: $12 million for upgrading interdiction and lawenforcement forces, and for modernizing criminal justice institutions. Venezuela: $10.5 million Socio-economic aid: $0.5 million for legal and judicialreform. Counter-narcotics aid: $10 million for law enforcement and interdictionreforms, efforts to counter money-laundering, and demand reduction. Another aspect of the Andean Regional Initiative is U.S. support for the extension and broadening of the Andean Trade Preferences Act (ATPA), expiring in December 2001, that givesduty free or reduced-rate treatment to the products of Bolivia, Peru, Ecuador and Colombia. Thiswas the centerpiece appeal of Colombian President Pastrana at his mid-April 2001 meeting with thePresident Bush, and the U.S. President replied that he favored extension of the Act and would workwith Congress to broaden the coverage. President Bush repeated that pledge when he met withAndean leaders at the Summit of the Americas meeting in Canada. Colombia especially wantstextiles and apparel to be covered, while Ecuador wants tuna to be covered. The countries arelooking for parity with Central American and Caribbean preferences, provided in the U.S.-CaribbeanTrade Partnership Act approved in 2000, in order to prevent a diversion of trade and investment fromthe Andean region to Mexico, Central America, or the Caribbean. (4) In a mid-May 2001 briefing on the Andean Regional Initiative, Administration spokesmen noted that democracy is under pressure in all regional countries, that economic development is indoubt, and that Andean countries pose a direct national security threat because they produce virtuallyall of the world's cocaine and increasing amounts of heroin. The policy makers suggested threeoverarching goals in the Andean Ridge that could be called the three D's - democracy, development,and drugs. The first goal is to promote and support democracy and democratic institutions bysupport for judicial reform, anti-corruption measures, human rights improvement, and the peaceprocess in Colombia. The second goal is to foster sustainable economic development and tradeliberalization through alternative economic development, protection of the environment, and renewalof the Andean Trade Preference Act (ATPA). The third goal is to significantly reduce the supply ofillegal drugs to the United States at the source, while simultaneously reducing U.S. demand, througheradication, interdiction and other efforts. (5) The Administration's Andean Regional Initiative if enacted as requested will significantly increase funding to some Latin American drug producing countries. It would place Colombia, Peru,and Bolivia among the top eight U.S. foreign aid recipients in FY2002, with Colombia in thirdplace, Peru in fifth place, and Bolivia in eighth place. (6) Critics of the Andean Regional Initiative argue that it is a continuation of what they regard as the misguided approach of Plan Colombia approved in 2000, with an overemphasis on military andcounter-drug assistance, and with inadequate support for human rights and the peace process inColombia. They argue that support for the military will weaken and undermine the peace processas the only viable solution, particularly if the military's ties to the para-military groups and humanrights abuse are not ended. They also argue that forced eradication of crops through aerial sprayingwill cause environmental damage and internal displacement in the entire region, and is likely to failultimately as new sources of supply emerge elsewhere. Supporters argue that the Andean RegionalInitiative continues needed assistance to Colombia when Plan Colombia assistance is just beginningto take effect, while providing more support for endangered regional neighbors and more assistancefor social and economic programs. (7) Situation in Colombia and Neighboring Countries The Andean Regional Initiative is designed to provide assistance to seven important countriesin the broadly defined Andean region (8) , or what theAdministration has called the Andean Ridge: Colombia (the major producer of cocaine and the central challenge); Peru and Bolivia (where pastsuccesses in reducing cocaine production could be threatened by expected progress in Colombia);Ecuador (the most exposed neighbor because of its proximity to Colombian areas controlled by drugproducers and guerrillas); and Brazil, Venezuela and Panama (where the threat is primarily confinedto common border areas with Colombia). This area has some of the most heavily populated countries in Latin America, including the first (Brazil), third (Colombia), fifth (Peru), sixth (Venezuela), and eighth (Ecuador) most populous. Itincludes three major drug producing countries (Colombia, Bolivia, and Peru) where virtually all theworld's cocaine, and more than two thirds of the heroin consumed in the U.S. East Coast areproduced. It also includes two major oil producing countries (Venezuela and Ecuador) which supplysignificant quantities of oil to the United States and are members of the Organization of PetroleumExporting Countries (OPEC). While the designated countries have diverse trading relationships, theUnited States is the major trading partner by far for all of them. For the five traditional Andeancountries (Colombia, Venezuela, Ecuador, Peru, and Bolivia) the Andes mountain range that runsthrough South America poses geographical obstacles to intra-state and inter-state integration, but thecountries are linked together in the Andean Community economic integration pact. While Colombiaand Venezuela have largely European-Indian mixed race (mestizo) populations, Bolivia, Peru, andEcuador have significant indigenous populations. Colombia With a population of 42.8 million, Colombia is the third most populous country in Latin America after Brazil and Mexico, with a largely mixed race (mestizo) population, and a spaciousterritory separated by three parallel mountain ranges. It is known for a long tradition of democracy,but also for continuing violence, including guerrilla insurgency dating back to the 1960s, andpersistent drug trafficking activity. Negotiated settlements were achieved with some of the guerrillagroups in the 1980s, but fell apart by 1990 when former guerrillas participating in political activitieswere assassinated. Recent administrations have had to deal with a complicated mix of leftistguerrillas, rightist para-military forces, and drug traffickers associated with both forces. President Andres Pastrana was elected and inaugurated in 1998 for a four year term largely on the basis of pledges to bring peace to the country by negotiating with the guerrillas, strengtheningthe Colombian military and counter-narcotics forces, and seeking international support for theseefforts and other reforms to address the country's unusually serious economic difficulties. (9) In 1999, President Pastrana, with U.S. assistance, developed a $7.5 billion plan called Plan Colombia, with $4 billion to come from Colombia and $3.5 billion to come from internationaldonors, although funding from Colombia and the international community has been lagging. Inresponse to Colombian requests, the Clinton Administration developed and the U.S. Congressapproved a $1.3 billion package of assistance in 2000, also called Plan Colombia assistance. Some$860.2 million or 67% of this assistance was to support programs in Colombia, with $416.9 millionfor helicopter, training, and other assistance to three Colombian Army counternarcotics battalions. This plan was targeted mainly at Colombia and expenses for big ticket items were weighted towardsupport for military and counter-narcotics activities, although there was funding for alternativedevelopment, governance, and human rights programs, and conditions to encourage an improvementin the military's human rights performance. (10) President Pastrana is approaching the end of his term, which expires in August 2002, and the selection process to determine his successor is under way. While peace talks had been reinvigoratedby President Pastrana's direct talks with Revolutionary Armed Forces of Colombia (FARC) guerrillaleader Manuel Marulanda in February 2001, prospects are still very uncertain. Although manyelements of Plan Colombia counter-drug assistance were just beginning to be put in place, the StateDepartment reported in March 2001 that Colombian production of cocaine had increased 11% in theyear 2000. Despite the FARC's murder in late September 2001 of the popular former Minister ofCulture, President Pastrana decided in early October 2001 to extend the demilitarized zone throughJanuary 20, 2002, after the FARC agreed to stop random highway kidnappings and to discuss aceasefire. Shortly thereafter, however, the Army accused the FARC of kidnapping six people on ahighway in Narino province, and killing four others in an attack on a small town there. While international support for Plan Colombia had been lagging, with European countries previously pledging only about $200 million for social development (not military) projects, the shiftin focus of the U.S. Andean Regional Initiative gained wider diplomatic support. In part becauseof the change in emphasis, the international community pledged an additional $580 million at thethird meeting of the International Support Group for the Peace Process in Colombia on April 30,2001, although some double counting may be involved. The European Union pledged $297 million,the United States pledged $146 million, the Andean Development Corporation pledged $100 million,and other countries pledged $37 million. Under the FY2002 Andean Regional Initiative request, Colombia would have received $399 million, with $146.5 million in socio-economic aid for programs like alternative development,judicial reform, human rights, anti-corruption measures, and support for the peace process; and$252.5 million in counter-narcotics aid for aviation and infrastructure support for air assets providedunder Plan Colombia, training and equipping security forces, and interdiction and eradication efforts. Under final allocations for FY2002, Colombia received $380.50 million, with $137 million ineconomic and social programs, and $243.50 million in counter-narcotics aid. Peru With a population of 25.7 million (45% Indian, 37% mestizo, 15% European), Peru is the fifth most populous country in Latin America. It has been in flux since the constitutionally questionablethird term re-election in June 2000 of President Alberto Fujimori. Although President Fujimori hadconsiderable support during his presidency (1990-2000) for restoring the economy, defeating theguerrilla insurgency, and reducing drug trafficking activity, he was criticized for corruption, humanrights violations, and authoritarian tendencies. The political uncertainty in Peru was compoundedwhen President Fujimori suddenly resigned and fled into exile in December 2000, followingallegations of corruption associated particularly with security chief Vladimiro Montesinos. Peru was governed by Acting President Valentin Paniagua during a transition period until president-elect Alejandro Toledo was inaugurated as President on July 28, 2001, following the wellregarded two-round presidential elections in April and June 2001. Toledo, a longtime anti-Fujimoriopposition leader, was elected on June 3, 2001, with 53% of the valid vote, against formerleft-leaning Peruvian President Alan Garcia with 47% of the vote. (11) President Toledo has promisedto end corruption and to stabilize the economy, and most observers worry that the expectations ofthe populace, especially poor, indigenous groups, are almost impossible to achieve. Representatives of Peru and the United States launched an investigation into the circumstances and procedures leading to an accident on April 20, 2001, when a Peruvian military plane shot downa small plane, killing an American missionary woman and her infant daughter, after a CIAsurveillance plane indicated that the small craft might be involved in drug trafficking activities. Asa result of this accident, U.S. surveillance of drug-related flights in Peru and Colombia weresuspended pending clarification of procedures. The State Department released the report of theU.S.-Peruvian investigative team on August 2, 2001, concluding that "communications systemsoverload" and "cumbersome procedures" played a role in the accident. Peru is viewed as a success story in counter-narcotics efforts because six years of joint U.S.-Peru air and riverine interdiction operations, aggressive eradication efforts, and promisingalternative development programs have reduced coca production by 70%. However, Peruvianspokesmen have worried about spillover effects of illicit drug activities from Colombia into Peru,and a possible increase in coca production. They have denounced Colombian plantings of coca andpoppies in Peru, and international trafficking of arms through Peru to FARC guerrillas in Colombia. Because of these threats, Peru has moved a fleet of MI-17 helicopters from its border with traditionalrival Ecuador, where tensions have diminished, to the border with Colombia. As part of the FY2000 Plan Colombia emergency supplemental funding, Peru received $25 million for KMAX helicopters for the Peruvian National Police, and benefitted from regionalinterdiction funding . Under the FY2002 Andean Regional Initiative request, Peru would have received $206.15 million in assistance, with $128.15 in socio-economic aid for alternative development, promotionof democracy, health and education programs; and $78 million in counter-narcotics aid for upgradinghelicopters and riverine interdiction efforts, eradication, and demand reduction and policydevelopment. Under final allocations for FY2002, Peru received $194.87 million, with $119.87million in economic and social programs, and $75 million in counter-narcotics aid. Bolivia With a population of 7.9 million (roughly 60% indigenous and 40% mestizo and European), Bolivia is the eleventh most populous country in Latin America. It has been governed by PresidentHugo Banzer, elected and inaugurated in 1997, who was serving the second time as President, thistime as a democratically elected President, following his earlier period of military rule in the 1970s. In late June 2001, President Banzer was diagnosed with lung and liver cancer and flew to the UnitedStates for treatment. Banzer resigned on August 6, and Vice President Jorge Quiroga becamePresident on August 7, 2001, vowing to continue the economic reforms and to rid the country of cocaproduction in line with his predecessor's promises. With a large indigenous population, Bolivia experienced a significant social revolution under one party in the 1950s with sweeping land reform, universal suffrage, rural education, andnationalization of the country's important tin mines. The period of military control ran from themid-1960s to the mid-1980s and was followed by a series of ineffective and largely corruptgovernments with linkages to drug traffickers. Beginning in the mid-1990s, reformist governmentsin Bolivia carried out major privatization programs and put the country on a sound economic footing. President Banzer continued the economic reforms and set the goal of eliminating illegal cocacultivation and narco-trafficking during his five year term. While Bolivia is actively involved withthe Andean Community, it is an associate member of the Southern Common Market (Mercosur)formed by Brazil, Argentina, Paraguay and Uruguay. In support of Bolivia's counter-narcoticsefforts, the United States has provided significant interdiction and alternative development assistanceand it has forgiven all of Bolivia's debt for development assistance projects, and most of the debtfor food assistance. Bolivia, like Peru, is viewed by many as a counter-narcotics success story, with joint air and riverine interdiction operations, successful eradication efforts, and effective alternative developmentprograms reducing coca cultivation to the lowest level in five years, with a net reduction ofapproximately 70%. Bolivia does not have a common border with Colombia, but the principalconcern in Bolivia is that the successes of the last few years could be turned back and cocacultivation and drug trafficking could return to Bolivia to meet world-wide demand ifcounter-narcotics efforts are successful in Colombia. Some critics have also charged that, whileeradication has been successful in dramatically reducing coca cultivation, it has hurt the overall economy. As part of the FY2000 Plan Colombia emergency supplemental funding, Bolivia received $25 million for regional interdiction assistance and $85 million in alternative development assistance. Under the FY2002 Andean Regional Initiative request, Bolivia would have received $143.48 million. This would have included $88.48 million in socio-economic aid for programs such asalternative development, judicial reform, poverty alleviation, health and environment; and $55million in counter-narcotics aid for ground-based and air interdiction support, eradication efforts,counter-narcotics training, and narcotics awareness and prevention programs. Under final allocationsfor FY2002, Bolivia received $122.96 million, with $74.46 million in economic and socialassistance, and $48.50 million in counter-narcotics aid. Ecuador With a population of 12.6 million, Ecuador is the eighth most populous country in Latin America. While more than half of the population is mixed race mestizo, about a quarter of thepopulation is indigenous. Ecuador is the most exposed neighbor in the region because it is situatedadjacent to southern Colombian areas that are guerrilla strongholds and heavy drug producing areas. Ecuador is led by President Gustavo Noboa, the former Vice President who took office in January2000, after an uprising by elements of the military and indigenous groups. He is the fifth presidentin five years, with several of the previous presidents leaving as a result of corruption charges. Thecountry has experienced hyperinflation for several years in the past, and is still struggling witheconomic austerity following dollarization of the currency in early 2000. According to press reports, Colombian guerrillas pass into Ecuadoran territory for rest, recuperation, and medical treatment, and there are reports that Colombians are buying ranches andfarms in the Ecuadoran border region, possibly for drug cultivation. Ecuadoran officials say theyhave uncovered and destroyed several small cocaine processing labs in the area. The Ecuadoranborder region is experiencing a constant flow of Colombian refugees into the poor areas, and fighterswith Colombian paramilitary organizations have been arrested for running extortion rings inEcuadorian border regions. The FARC has been accused of kidnaping people in Ecuador, althoughthe FARC denies the allegations. (12) As part of the FY2000 Plan Colombia emergency supplemental funding Ecuador received $20 million in U.S. assistance, of which $12 million was to support drug interdiction efforts, and $8million was for alternative development assistance. Another $61.3 million has been allocated forthe construction of a Forward Operating Location in Manta, Ecuador for counter-narcotics aerialsurveillance. There have been numerous press reports that Ecuadoran officials have been requestingsignificantly increased U.S. assistance for some time. Under the FY2002 Andean Regional Initiative request, Ecuador would have received a total of $76.48 million in assistance, with $56.48 million in socio-economic aid for border areadevelopment, poverty reduction, judicial reform, and environmental programs; and $20 million incounter-narcotics aid for northern border security, law enforcement and border checkpoints, and seaand airport control efforts. Under final allocations for FY2002, Ecuador received $46.86 million,with $31.85 million in economic and social programs, and $15 million in counter-narcotics aid. Brazil With a population of 170 million (of European, African, and mixed stock), Brazil is the largest and most populous country in Latin America, with most of the population concentrated in the moredeveloped southeastern areas of the country and along the Atlantic coast. The country is led byPresident Fernando Henrique Cardoso who is approaching the end of his second and final term. Heis credited with leading the country into a period of growth after ending years of inflation with hisReal Plan and after weathering the international financial crisis with IMF assistance in late 1998 and1999. New presidential elections are approaching in 2002, with doubts about whether the governingcoalition can hold together and carry out needed reforms. Brazilians have long been concerned aboutthe sparsely populated territory in the huge Amazon region, and they have been fearful historicallyof foreign designs and intervention in this territory. In an effort to exercise control over this vast territory Brazil has constructed a $1.4 billion radar project called the Amazon Vigilance System, or SIVAM from its acronym in Portuguese, and it hasoffered to share data from this system with neighbors and the United States. It has established amilitary base at Tabatinga, with 25,000 soldiers and policemen, with air force and navy support, todeal with spillover effects from Colombia. Press accounts suggest evidence of Colombian drugtraffickers encouraging indigenous communities in Brazil to plant coca, and the threat of FARCincursions along the border. In one example in late 1998, the FARC captured a city on theColombian border, forcing Colombian troops to withdraw into Brazilian territory, before recapturingthe city. In another example, a plane from Suriname with arms for FARC guerrillas was discoveredwhen it was forced to make an emergency landing in Brazil. Brazil is not an illicit drug producing country, but it is a growing transit area for cocaine moving from the Andean Ridge to Colombia. Although Brazil was not designated as a recipient of PlanColombia assistance, under the FY2002 Andean Regional Initiative request, it would have received$26.18 million. This would have included $11.18 million in socio-economic aid for health andenvironmental programs; and $15 million in counter-narcotics aid for training and equipping bordercounter-narcotics forces, and for drug awareness and demand reduction programs. Under finalallocations for FY2002, Brazil would receive $18.63 million. Venezuela With a population of 23.5 million (of largely mestizo stock), Venezuela is the sixth most populous country in Latin America. The country is presently led by President Hugo Chavez, aformer disgruntled military leader and a populist, who was initially elected in late 1998 on acampaign to rewrite the constitution, rid the country of corruption, and more adequately meet theneeds of the people. During 1999, at Chavez's request, Venezuelan voters approved the creationof a National Constituent Assembly, elected members of the new assembly, and approved the newlywritten constitution which lengthened and expanded presidential powers. On July 30, 2000, in aso-called mega-election, President Chavez easily won election to a new six year term of office. (13) Because of his previous attacks on the legislature and other institutions, many observers fear that hehas authoritarian tendencies somewhat like those of disgraced former President Fujimori in Peru. Chavez has established close ties with Fidel Castro and other leftist leaders, and he often employsanti-U.S. rhetoric. He has denounced Plan Colombia as a U.S.-dominated military strategy, and hehas denied the United States overflight rights over Venezuela territory. Reports persist that he hasestablished friendly relations with Colombian guerrillas. At the April 2001 Summit of the Americas in Quebec City, President Chavez reserved the position of Venezuela in the Declaration of leaders committing to move forward to achieve a FreeTrade Area of the Americas (FTAA) by January 2005, and he also expressed alternative views onU.S. policy and Plan Colombia. Venezuela is not an illicit drug producing country but it is a transit route for cocaine and heroin from neighboring Colombia to the United States and Europe. Despite various policy disagreementswith the United States, the Chavez government has cooperated with the United States incounter-narcotics efforts. While Venezuela was not designated specifically as a recipient of PlanColombia assistance, under the FY2002 Andean Regional Initiative request, it would have received$10.5 million. This amount would have included $0.5 million in socio-economic aid for legal andjudicial reform; and $10 million in counter-narcotics aid for law enforcement and interdictionreforms, efforts to counter money-laundering, and demand reduction. Under final allocations forFY2002, Venezuela would receive $5.5 million. Panama With a population of 2.8 million (of largely mestizo and West Indian stock), Panama is the twentieth most populous country in Latin America. Its history has been heavily influenced by itsstrategic location and the transit of commerce through the Panama Canal in the center of the countrywhere the major cities are located. It is led by Mireya Moscoso, elected and inaugurated in 1999,who has been dealing with economic difficulties in Panama, and Panamanian responsibilities for thePanama Canal since the U.S. withdrawal on the last day of 1999. Despite considerable effort in theperiod leading up to the U.S. withdrawal, Panama was unwilling to allow the United States to retaina formal military presence in Panama for counter-narcotics surveillance purposes. (14) This forced theUnited States to develop the Forward Operating Locations in El Salvador, Aruba/Curacao andEcuador as substitute locations for such activities. Panama has been the scene of cross-borderincursions by Colombian guerrillas and by Colombian paramilitary groups, and there is someevidence that paramilitary groups are being founded in Panama, with support from Colombiangroups, because of the perception that the Panamanian government has left some areas unprotected. Panama is not an illicit drug producing country, but it is a major transshipment point for illicit drugs, especially cocaine, smuggled from South America. In recent years Panama has cooperatedwith the United States in bilateral counter-narcotics efforts, seizing significant amounts of illicitdrugs and passing anti-money laundering legislation. While Panama was not designated as arecipient of Plan Colombia assistance, under the FY2002 Andean Regional Initiative request, itwould have received $20.5 million. This would have included $8.5 million in socio-economic aidfor judicial reform, watershed management, and economic growth opportunities; and $12 millionin counter-narcotics aid for upgrading interdiction and law enforcement forces, and for modernizingcriminal justice institutions. Under final allocations for FY2002, Panama is to receive $13.50million. Major Legislative Activity in 2001 on Andean Regional Initiative Issues Foreign Operations Appropriations, FY2002 House Action. On July 10, 2001, the House Appropriations Committee approved H.R. 2506 , with a reduction of $55 million in theACI portion of the ARI, after defeating several amendments to reduce the funding even more. OnJuly 24, 2001, the House approved H.R. 2506 , reducing counter-drug assistance by anadditional $1 million, and approving amendments relating to caps on personnel in Colombia and arequired report on the April 20 accidental shootdown of a missionary plane in Peru. As passed bythe House, the bill provides $826 million for the ARI, of which $675 million is for the ACI, areduction of $56 million from the President's request. Subcommittee Action. On June 27, 2001, the House Appropriations Committee's Foreign Operations Subcommittee marked up and passed a $15.2billion FY2002 foreign operations funding bill, which contained funding for the BushAdministration's Andean Regional Initiation (ARI). The subcommittee action funded the entire billat the level requested by the President, but considerably reduced funding for the Andean CounterdrugInitiative portion of the ARI. The subcommittee action would provide $55 million less than the President's $731 million request for the State Department's International Narcotics Control "Andean Counterdrug Initiative"portion, funding that account at $676 million. The subcommittee did not specify which among theinitiative's programs were to be affected by the funding reduction. This would reduce funding forthe total ARI from $882 million to $827 million. Two amendments regarding Colombia were offered and withdrawn during the subcommittee mark-up. The Pelosi amendment would have limited funding for Colombia's military to no morethan $52 million, and transferred the other approximately $100 million of funding requested for theColombian military to a Child Survival account for infectious diseases. The Rothman amendmentwould have placed a temporary moratorium on U.S. supported fumigation efforts in Colombia untilthe State Department presented Congressional appropriations committees with conclusive evidencethat the United States and Colombian governments had commenced implementation of viablealternative development plans in 75% of all communities that have signed alternative developmentpacts. Committee Action. On July 10, the House Appropriations Committee passed H.R. 2506 , retaining the subcommittee-approved$827 million funding level for the ARI, with the $676 million funding level for the AndeanCounterdrug Initiative. The Committee provided no explanation in the report ( H.Rept. 107-142 ) forits action, but recommended there that the $55 million reduction "should be evenly distributedamong all programs, projects, and activities referred to in the Administration's request for theAndean Counterdrug Initiative." The bill itself recommends a limit of $14.24 million foradministrative expenses. As reported by the committee, the bill also would exempt any programssupported through the ACI funds from the cap of 300 on civilian contractors established by the PlanColombia legislation (Section 3204(b)(1)(B), P.L. 106-246 ). (It does not, however, exempt the capof 500 on the number of U.S. military personnel in Colombia established by the same legislation.)The bill would also exempt ACI funds from the prohibition under Section 482 (b) of the ForeignAssistance Act of 1961, as amended, on the use of funds for the procurement of weapons andammunition, with exceptions for counternarcotics activities. The exceptions, requiring an advancenotification to Congress, apply to the defensive arming of aircraft used for counternarocticsactivities, and the provision of firearms and related ammunition for defensive purposes toDepartment of State employees or contract personnel engaged in such activities. The Section 482(b)exemption was also contained in the Plan Colombia legislation. The full committee rejected two Colombia-related amendments: (1) the Pelosi amendment, which had been withdrawn in subcommittee, to transfer approximately $100 million from theColombian military to the Child Survival account, failed 22 to 39; and (2) the Obey amendment, towithdraw all Andean counter-drug funding and shift it to domestic drug treatment and preventionprograms, failed 18 to 43. In H.Rept. 107-142 , however, the Committee adopted language requiring the Secretary of State to report to the appropriations committees by January 1, 2002, and quarterly thereafter, on the humanhealth and environmental effects of the materials used in aerial eradication of coca and opium poppyin Colombia, and of the spraying of those illegal narcotic crops in Colombia. "Such reports shallinclude a description of the areas sprayed, materials and methods used, compliance with the sprayguidelines, and the human and environmental impacts of such spraying." The Committee also requested two semi-annual reports from the Secretary of State, both beginning March 1, 2002. One would provide information on all aircraft, vehicles, boats, and lethalequipment transferred to military and police forces under the ACI. This report is also to include thenumber of U.S. military personnel deployed or assigned to duty in the Andean region or othercountries using fund provided under the ACI during the previous 180 days, and the length, purpose, costs, and risks of their deployment or assignment. Another would provide information on "thespecific efforts being made by AID, the State Department and the Colombian government to expeditethe delivery of non-cash assistance to communities in Colombia that have signed pacts to voluntarilyeradicate their coca crops." This report is to include the percentages of available alternativedevelopment funds disbursed to Colombian communities that have signed such pacts. The Appropriations Committee report also contains extensive language on Colombia and other Andean countries. On Colombia, the Committee stated that it believes that a negotiated settlement"offers the only viable resolution to the complex conflict" in Colombia, and that efforts to reducethe cultivation of illegal crops "will continue to face enormous challenges" until a peace accord isreached. The Committee strongly urged the Secretary of State "to work with all parties in the talksto encourage rapid progress toward a firm and lasting peace." Noting that "stronger trade betweenColombia and the United States is crucial to managing the vulnerabilities of the Colombianeconomy," the Committee urged the President "to seek renewal and expansion of the Andean TradePreference Act (ATPA)." It expressed concern that alternative development projects were not beingimplemented in a timely fashion in Southern Colombia. For the Andean region in general, the Committee report called on the Department of State to ensure that all U.S. laws regarding human rights, including Section 556 of the bill, "are strictlyapplied in Colombia and each of the Andean nations." Regarding Bolivia, the Committee took"special note" of the country's progress in counternaroctics efforts, and stated that its "enormoussuccess" was due "in large part, to the support of the U.S. Government." It urged the Administrationto continue to strongly support Bolivia "when deciding on its allocation of aid." Floor Action. On July 24, the House adopted H.R. 2506 , by a vote of 381-46. It reduced the ACI account by $1 million from thelevel approved by the Appropriations Committee, to $675 million, despite efforts to reduce it bymuch larger amounts, and altered committee provisions regarding the cap on civilian contractors. (See the first bullet under approved amendments, below.) In floor action on July 24, three amendments pertaining to the ARI were approved, two were defeated, and two were withdrawn. Nine others, which had been printed in the record and thereforewere eligible for debate under the initial rule were barred from debate under an order of procedureadopted in the course of floor consideration. The three amendments approved were: An amendment offered by Rep. Conyers to allow the President to waive the 300 person cap on civilian contractors set by the Plan Colombia legislation, provided that thePresident certifies that the aggregate ceiling of 800 personnel (for military personnel and civiliancontractors combined) set by that legislation would not be exceeded, and if Congress is informed ofthe extent to which the 300 civilian contractor limitation is exceeded. Agreed to by voicevote. Amendment 44 offered by Rep. Hoekstra to withhold $65 million of ACI funds until the Secretary of State submits to Congress a full report on the April 20, 2001, aircraftshootdown by the Peruvian Air Force in which U.S. missionary Veronica "Roni" Bowers and herdaughter were killed. Agreed to by voice vote. A substitute Kolbe amendment (to amendment 12 offered by Rep. Crowley) to transfer $1.0 million from the ACI to the International Disaster Assistance account. (The Rep.Crowley amendment would have transferred $10 million.) The two amendments defeated were: Amendment 26, offered by Rep. Lee, to transfer $60 million to the Child Survival and Health Programs fund, where it was to be available for HIV/AIDS programs. Of the$60 million, $38 million would be taken from the ACI. Failed 188-240. Amendment 27, offered by Rep. McGovern, to reduce ACI funding by $100 million, and transfer half of that funding to the infectious diseases account to combat tuberculosisand the other half to the child survival and maternal health account. (In a floor speech, Rep.McGovern stated that the intent of the amendment was that the full $100 million should be cut fromfunding for the Colombian military.) Failed 179-249. The two amendments withdrawn were: Amendment 47 offered by Rep. Jackson-Lee to transfer $100 million from the ACI to the Child Survival and Health Programs Fund. Withdrawn by unanimousconsent. Amendment 11 offered by Mr. Conyers to prohibit the use of funds provided as part of Plan Colombia and the ACI for aerial fumigation to eradicate illicit crops in Colombia. Withdrawn by unanimous consent. On July 19, during the first day of consideration of H.R. 2506 , two amendments regarding Colombia were offered and withdrawn after points of order were raised. Rep. Souder offered and withdrew Amendment 35 to earmark $27 million of International Narcotics Control and Law Enforcement funds for the purchase of two Buffalotransport/supply aircraft for the Colombian National Police, $12 million for the purchase of six HueyII patrol helicopters for the Colombian Navy, and $5 million for assistance in purchasing operatingfuel for drug interdiction along Colombia's north coast and its on rivers. In effect, this wouldsupplement funding for Andean regional counterdrug efforts that would be made available throughthe ACI. Rep. Delahunt offered and withdrew Amendment 17 to require quarterly reports from the Secretary of State on the implementation of the Colombian national securitylegislation passed by the Colombian Congress on June 20, 2001. According to Rep. Delahunt, thatlegislation "contains ambiguous provisions that could threaten civilian oversight of the military inColombia and place at risk the progress that has ben made toward reforming the military..." Senate Action. The Senate Appropriations Committee marked up its version of the Foreign Operations Appropriations bill on July 26, andreported out H.R. 2506 , with an amendment in the nature of a substitute ( S.Rept.107-58 ) on September 4, 2001, reducing ACI funding by $164 million, and imposing conditions onthe safety of aerial fumigation programs in Colombia, and requiring reports on human rightsconditions in the country. The Senate passed H.R. 2506 on October 24, 2001, afterdefeating on a point of order an amendment to fund the ACI and the ARI at the level requested bythe President, and approving two amendments that transferred $20 million from the ACI to otherprograms. As passed by the Senate, the bill provides $698 for the ARI, of which $547 is for the ACI,a reduction of $184 million from the President's request, and includes conditions on the safety ofaerial fumigation and the implementation of alternative development programs.. Committee Action. In the July 26 mark-up, the Senate Appropriations Committee cut $164 million from the President's requested ACI funding, andearmarked not less than $200 million of the total of $567 million that would remain in that accountfor direct apportionment to the U.S. Agency for International Development (AID) for economic andsocial programs. The ACI cut would bring total ARI funding down to $718 million. The committee bill would condition the release of funds to purchase chemicals used for the aerial coca fumigation program. To release those funds, the Secretary of State, in consultation withthe Secretary of the Department of Health and Human Services and with the Surgeon General, wouldhave to determine and report to Congress on the human health and safety effects of the chemicalsand the manner of their application. Specifically, the Secretary would have to report that 1) "thechemicals used in the aerial fumigation of coca, [and]...the manner in which they are being applied,do not pose an undue risk to human health or safety;" and 2) that the fumigation "is being carriedout according to the health, safety, and usage procedures recommended by the EnvironmentalProtection Agency, the Centers for Disease Control and Prevention, and the manufacturers of thechemicals." The Secretary would also have to report that "effective mechanisms are in place toevaluate the claims of local citizens that their health was harmed or their licit agricultural crops weredamaged by such aerial coca fumigation, and provide fair compensation for meritorious claims." In contrast to House action, the Senate Appropriations Committee incorporated by reference in its bill the Plan Colombia legislation's cap of 500 on the number of U.S. military personnel and300 on the number of U.S. civilian contractors in Colombia (Section 3204(b) of P.L. 106-246 ). TheCommittee also included a Plan Colombia human rights restriction, requiring the immediate returnto the United States of any helicopter purchased with ACI funds that "is used to aid or abet theoperations of any illegal self-defense groups or illegal security cooperative." Like the House,however, it would waive the restrictions of Section 482(b) of the Foreign Assistance Act of 1961. The Committee would limit by law funding for Department of State administrative expenses to$14.24 million, whereas the House bill merely recommends that limit. In the report accompanying the bill ( S.Rept. 107-58 ), the Committee stated that it "recognizes some progress on human rights" in Colombia, but also expressed concern about "the surge inparamilitary violence, persistent reports of cooperation between the military and the paramilitaries,and the impunity of military officers who order or commit atrocities." It stated that the U.S.government should make it a priority to promote "far more aggressive action...by the ColombianGovernment and the military, to thwart it." Deploring the "ongoing abuses by the FARC," theCommittee called on other nations, "particularly Mexico and the Scandinavian countries, to exertgreater influence on the FARC to repudiate these tactics and participate seriously in negotiationstoward a settlement of the conflict." The Committee also called for the Secretary to State to submit to the appropriations committees reports containing information on several areas of human rights and other concerns. The Committeewould expect the first report within 60 days of enactment and every 120 days after that. This report would include information on two human rights topics for which reporting was also required by the Plan Colombia legislation. These are: the extent to which the Colombian armed forces have suspended members credibly alleged to have committed gross violations of human rights, and are providing civilianprosecutors and judicial authorities requested information on the nature and cause of suspension;and the extent to which the Colombian armed forces are cooperating with civilian authorities, including providing access to witnesses and relevant military information, in prosecutingand punishing in civilian courts those members credibly alleged to have committed gross violationsof human rights or aided or abetted paramilitary groups. Two other human rights topics are also to be included: the extent to which the Colombian armed forces are severing links, including intelligence sharing, at the command, battalion, and brigade levels, with paramilitary groups, andexecuting outstanding arrest warrants for members of such groups; and the extent to which attacks against human rights defenders, trade unionists, and government prosecutors, investigators and civilian judicial officials are being investigated, andalleged perpetrators brought to justice. The report would also be expected to provide information on the actions taken by the United States, Colombia, and other governments to promote and support peace negotiations, and on financialsupport for Plan Colombia provided by the Colombian government and the international community. A second report including information on other areas of human rights concerns would be expected only if national security legislation passed by the Colombian Congress on June 20, 2001,were to become law. In that case, the Secretary of State would be expected to submit a report within90 days of enactment of the security law and 120 days thereafter on incidents of and any rising trendin arbitrary and prolonged incommunicado detention by members of the Colombian armed forcesand police; an assessment of the effectiveness of investigations conducted by military personnelunder the new security law compared to investigations by civilian authorities; and an analysis of thesecurity law's implications for Colombia's commitments under international treaties. The Committee also expressed concern in its report about the spill-over effects of the Colombian narcotics trade into Bolivia, Ecuador, and Peru. Floor Action. After considering H.R. 2506 for two days, the Senate approved the measure on October 24, 2001, largely retaining the basicfeatures of the bill relating to the ARI as reported by the Senate Appropriations Committee. Fiveamendments relating to the ARI were approved, with the last two reducing ACI funding by $20million; and one amendment, seeking to restore funding cuts, was defeated on a point of order. The five amendments that were approved were: Senate Amendment 1929 by Senator Leahy that not less than $101 million of ACI funds be made available for Bolivia, and not less than $35 million of ACI funds be madeavailable for Ecuador. Senate Amendment 1942 by Senator Helms that up to two million of ACI funds be made available to support democracy-building activities inVenezuela. Senate Amendment 1951 by Senators Feingold and Wellstone that added another condition relating to aerial fumigation upon which the Secretary of State is to report, namelythat alternative development programs be in place in areas where fumigation is beingimplemented. Senate Amendment 1960 by Senators Hutchison and Inouye that reduced ACI funding by $10 million, and made those funds available for the prevention, treatment, and controlof tuberculosis. Senate Amendment 1961 by Senator Bingaman that reduced ACI funding by $10 million, and made those funds available for relief and reconstruction assistance for victims ofearthquakes and drought in El Salvador and elsewhere in Central America. The amendment that was defeated on a point of order was Senate Amendment 1950 by Senators Graham, Hagel, and Dodd to increase funding for the Andean Counterdrug Initiative to$731 million, the amount of the President's request, which would have effectively overridden theCommittee-reported cut of $164 million in that portion of the ARI. Proponents of the amendmentargued that full support was necessary to assist troubled Colombia and to deal with the flow of drugsto the United States. Opponents argued that extensive assistance was being provided to the region,that needs elsewhere in the world were great, and that evidence of progress was lacking despite themajor contribution of resources in recent years. A point of order was raised by Senator Leahy thatthe amendment was in violation of the Congressional Budget Act for failing to identify offsets forthe proposed $164 million increase in funding, and a motion by Senator Graham to waive therequirements of the Budget Act was defeated 27-72, thereby defeating the amendment. Conference Action. The conference version of H.R. 2506 ( H.Rept. 107-345 ) was passed by the House on December 19, and by theSenate on December 20, 2002. It was signed into law ( P.L. 107-115 ) on January 10, 2002. Itincludes $625 million for the "Andean Counterdrug Initiative" (ACI) portion of the Andean RegionalInitiative. (This is $50 million less than the House's $675 million, but $78 million more than theSenate's $547 million in ACI funding.) Of the conference version amount, $215 million isearmarked for U.S. Agency for International Development (AID) economic and social programs, andno more than $14.2 million may be used for administrative expenses of the Department of State, andno more than $4.5 million for AID's administrative expenses. Authority is also provided to transfer up to $35 million to the ACI from other International Narcotics Control and Law Enforcement funds in this and in prior foreign operations appropriationsacts, subject to regular notification procedures. The managers' statement of the conference report( H.Rept. 107-345 ) notes that, "In the event of such a transfer, the managers intend for the funds tosupport interdiction, alternative development, or other economic assistance to the Andean countries. The managers emphasize that there are other funds for Andean nations in this Act that may be madeavailable for the Andean Regional Initiative (ARI)." The conference version of H.R. 2506 contains several conditions on the use of funds. These include the following. Fumigation and Alternative Development . No funds can be used for aerial coca fumigation programs until the Secretary of State reports to the Appropriations Committees onfour matters: the first, after consultation with the heads of the Environmental Protection Agency(EPA), the Department of Agriculture, and if appropriate, the Center for Disease Control andPrevention, is that such programs are being carried out according to EPA regulatory controls thatpertain to programs in the United States; the second, after consultation with the Colombiangovernment, is that such programs are in accordance with Colombian laws; the third is that thechemicals used in the fumigation programs and the manner in which they are applied do not poseunreasonable risks or adverse effects to human beings or to the environment; and the last is thatprocedures are in place to provide fair compensation for valid claims by local citizens that theirhealth was harmed or their licit agricultural crops were damaged by such spraying. (As of the dateof this report, these funds are on hold awaiting the Secretary's report. The status of this hold willbe tracked in CRS Report RL31383(pdf) , Andean Regional Initiative (ARI): FY2002 Supplemental andFY2003 Assistance for Colombia and Neighbors .) The funds are not to be available after six monthsfrom the date of enactment unless alternative development programs have been put in place inconsultation with communities and local authorities. Peruvian Interdiction. No funds can be used for a Peruvian air interdiction program until 30 days after the Secretary of State and the CIA Director certify to Congress thatenhanced safeguards and procedures are in place for any air interdiction program that permits theshootdown of aircraft. Limitations on Personnel in Colombia. Limits on U.S. personnel in Colombia established for previous Plan Colombia funding are modified, with a cap of 400 set on both thenumber of U.S. military personnel and U.S. civilian contractors supported by funding from the ACIaccount. Helicopters. Any helicopter procured with this funding is to be immediately returned to the United States if it is used to aid or abet the operations of any illegal self-defensegroup or illegal security cooperative. Human Rights . Section 567 (a) of the bill provides that the Secretary of State must determine and certify to Congress that the Colombian armed forces are meeting three humanrights criteria before any of the funds by this act or prior foreign operations appropriations acts canbe made available to Colombia's armed forces. These criteria are: (1) that the ColombianCommander General is suspending soldiers and officers credibly alleged to have committed grossviolations of human rights or to have aided or abetted paramilitary groups ; (2) that the Colombianarmed forces are cooperating with civilian prosecutors and judicial authorities in prosecuting andpunishing in civilian courts any members credibly alleged to be involved in such offenses; and (3)that the Colombian armed forces are taking steps to sever links with paramilitary groups and toexecute outstanding orders for the capture of their members. (As of the date of this report, thesefunds are on hold awaiting the Secretary's certification. The status of this hold will be tracked in CRS Report RL31383(pdf) , Andean Regional Initiative (ARI): FY2002 Supplemental and FY2003Assistance for Colombia and Neighbors .) After such a determination and certification, no more than60% of such funds can be made available to the Colombian armed forces through May 31, 2002. After June 1, 2002, the balance of such funds may be obligated if the Secretary determines andcertifies that the Colombian armed forces are continuing to meet those criteria. Every 120 days afterthe bill's enactment, the Secretary must report to the appropriations committees regarding theColombian armed forces' observance of these criteria. Denial of Visas to Supporters of Colombian Illegal Armed Groups. No alien shall be issued a visa if the Secretary of State has determined that he or she (1) has willfullyprovided any support to either of Colombia's two major leftist guerrilla groups (the FARC and theELN) or to the rightist illegal self-defense group (the AUC), or (2) has committed, ordered, incited,assisted, or otherwise participated in the commission of gross violations of human rights inColombia, unless the issuance of such a visa is necessary to support the Colombian peace processor for urgent humanitarian reasons. Foreign Relations Authorization, FY2002-FY2003 House Action. The House International Relations Committee reported out H.R. 1646 on May 4, 2001, with four reporting requirementson Colombia and a prohibition on the issuance of visas to illegal armed groups in Colombia. Thebill was passed by the House on May 16, 2001, without additions or modifications in that area. Therequired reports relate to the elimination of Colombian opium, the effects of Plan Colombia onEcuador, alternative development and resettlement programs, and the Colombianization ofcounter-narcotics activities. Committee Action. H.R. 1646 was introduced by Representative Hyde on April 27, 2001, with two reporting requirements concerningthe elimination of Colombian opium poppy crops and the effect of Plan Colombia on Ecuador (seebelow for details). The measure was referred to the House Committee on International Relations. When the Committee marked up the bill on May 2, it adopted by voice vote two amendments offeredby Representative Delahunt: the first imposed reporting requirements on Department of Stateactivities and on the "Colombianization" of counternarcotics activities; the second prohibited theissuance of visas to supporters of Colombian illegal armed groups (see below for details). The billwas reported out amended ( H.Rept. 107-57 ) by the Committee on May 4. Floor Action. After floor consideration on May 10 and 16, with no additional amendments on Colombia or the Andean region, H.R. 1646 was approved by the House on May 16, and sent to the Senate on May 17, with the followingprovisions relating to the Andean Regional Initiative: Reporting Requirement Concerning Elimination of Colombian Opium. Sec. 204 requires the Secretary of State, through the Bureau of International Narcotics and LawEnforcement, to submit, not later than 60 days after enactment, a report which outlines acomprehensive strategy to address the crisis of heroin in the United States due to opium originatingfrom Colombia, including destruction of opium at its source. Reporting Requirement Concerning Effect of Plan Colombia on Ecuador. Sec. 211 requires the Secretary of State, through the Bureau of International Narcotics and LawEnforcement, to submit, not later than 60 days after enactment, a report which outlines acomprehensive strategy to address the spillover effect of Plan Colombia onEcuador. Reporting Requirement on Department of State Activities. Sec. 213 (a) requires the Secretary of State to submit within 180 days of enactment, and every 180 days thereafter,a report on State Department funded and authorized activities to promote alternative development,recovery and resettlement of internally displaced persons, judicial reform, the peace process, andhuman rights. This report would include summaries of activities undertaken during the previous 180days, estimated timetables for the next period, an explanation of any delays in meeting plannedtimetables, and an assessment of steps to be taken to correct such delays. Reporting Requirement on the "Colombianization" of U.S. Funded Counternarcotics Activities . Sec. 213 (b) states that U.S. policy "encourages" the transfer ofcounternarcotics activities in Colombia now carried out by U.S. businesses under agreements withthe State Department to Colombian nationals, "in particular personnel of the Colombianantinarcotics police, when properly qualified personnel are available." It also requires the Secretaryof State to report within 90 days of enactment and subsequently not later than March 1 on thecounternarcotics activities carried out by U.S. businesses under State Department agreements. Thereport must include the names of such businesses, the total State Department payments to eachbusiness, a statement justifying the agreement, an assessment of risks to personnel safety andpotential involvement in hostilities incurred by employees of each such business, and a plan toprovide for the transfer of these activities to Colombians. Denial of Visas to Supporters of Colombian Illegal Armed Groups . Sec. 236 prohibits the issuance of visas to any alien who the Secretary of State determines has wilfullyprovided direct or indirect support to either of the two leftist guerrilla groups (the RevolutionaryArmed Forces of Colombia, i.e., the FARC, and the National Liberation Army, i.e., the ELN) or tothe rightist United Self-Defense Forces of Colombia (the AUC); or "has wilfully conspired to allow,facilitate, or promote the illegal activities of any of those groups. A waiver is provided for caseswhere a visa "is necessary to support the peace process in Colombia, for urgent humanitarianreasons, for significant public benefit, or to further the national security interests of the UnitedStates." Senate Action. The Senate Foreign Relations Committee approved the Senate version of the Foreign Relations Authorization for FY2002-FY2003( S. 1401 ) on August 1, 2001, and reported out the bill on September 4, 2001, with arequirement for a report outlining a strategy to eradicate opium in Colombia. Committee Action. The Committee on Foreign Relations reported out S. 1401 on September 4, 2001, with a provision in section 606,similar to a provision in the House version of the bill, requiring the Secretary of State to submit toappropriate congressional committees within 60 days after enactment a report that outlines acomprehensive strategy to eradicate all opium at its source in Colombia. National Defense Authorization Act, FY2002 House Action. The House Armed Services Committee marked up H.R. 2586 on August 1, 2001, and reported out the bill ( H.Rept.107-194 ) on September 4, 2001, with a provision containing a cap on U.S. military personnel inColombia, and this was retained when the House approved the bill on September 25, 2001. Committee Action. As reported by the House Armed Services Committee, the FY2002 defense authorization bill, H.R. 2586 , would cap thenumber of U.S. military personnel on duty in Colombia that could be supported from Departmentof Defense funding at 500. This provision, Section 1208, would exclude any military personnel inColombia (1) serving tours of duty of 30 days or less for the purpose of rescuing or retrieving U.S.military or government personnel, (2) serving with the U.S. Embassy in Colombia as an attache oras part of the security assistance office or Marine Corps security group, (3) participating in naturaldisaster relief efforts, or (4) traveling through Colombia but not involved in operations there. Floor and Conference Action. After floor consideration on September 20, 24-25, the House approved H.R. 2586 on September25, 2001, with the Committee-reported cap on military personnel in Colombia. The Senate bill, S. 1438 , had no corresponding provision. This House provision was not retained in theconference version of S. 1438 ( H.Rept. 107-333 ), which passed by both chambers onDecember 13, 2001. Extension of Andean Trade Preference Act (ATPA) House Action. On October 5, 2001, the House Ways and Means Committee ordered reported H.R. 3009 , the Andean Trade Promotionand Drug Eradication Act, that would extend the ATPA through December 31, 2006. On November16, 2001, the House passed H.R. 3009 , the Andean Trade Promotion and DrugEradication Act, which would offer expanded trade benefits to the Andean region through December31, 2006. Committee Action. On October 5, 2001, the House Ways and Means Committee approved and ordered reported H.R. 3009 , the AndeanTrade Promotion and Drug Eradication Act, that would extend the ATPA through December 31,2006, and provide duty-free treatment to selected apparel, tuna, and other products previouslyexcluded. The bill would also expand the conditions countries would have to meet to remain eligiblefor program benefits. Floor Action. On November 16, 2001, the House passed H.R. 3009 , the Andean Trade Promotion and Drug Eradication Act, whichwould offer expanded trade benefits to the Andean region through December 31, 2006. Senate Action. The Senate Committee on Finance reported out a version of H.R. 3009 on November 29, 2001, but no floor actionhas been taken thus far. Committee Action. On November 29, 2001, the Senate Committee on Finance reported out an amendment in the nature of a substitute to H.R. 3009 (containing the substance of S. 525 ). This version would extendthe ATPA through February 28, 2006, and provide expanded benefits, but more limited benefits thanthe House-passed version. Appendix A. Map Showing Andean Regional Initiative Countries Appendix B. Bush Administration's FY2002 Andean Regional Initiative (ARI)Request by Purpose and Functional Accounts Source: ARI Reference Sheet, 150 Account, provided by the Department of State, May 14, 2001. Appendix C. FY2000-FY2001 U.S. Assistance to Colombia Note : For detail on Plan Colombia and pre-Plan Colombia funding, see CRS Report RL30541 , Colombia: Plan Colombia Legislation and Assistance(FY2000-FY2001). Sources: General Accounting Office (GAO -01-26), Department of State, CongressionalBudget Justification for Foreign Operations for FY2001; U.S.Agency for International Development Budget Justification for FY2001, Annex IV; and information provided byDepartment of State and Departmentof Defense officials. This chart includes direct U.S. foreign assistance (i.e., the categories usually counted as U.S.foreign aid, which are in italics), aswell as the costs of goods and services provided to Colombia from other U.S. government programs supportingcounternarcotics efforts in Colombia. The United States also provides a small amount of DOD Excess Defense Articles (EDA) to Colombia. Other fundsare spent in Colombia oncounternarcotics and other activities that are considered part of U.S. programs: for instance, the Drug EnforcementAdministration (DEA) spends its ownfunds on joint operations in Colombia. Figures on FY2000 and FY2001 State Department INC funding providedJanuary 10-11, 2001. Figures on DODSections 1004, 124, 1004/124, and 1033 funding provided June 29, 2001. DOD Sections 124, 1004, and 1033funding is taken from regional accountsand the tentative allocations for Colombia can be shifted to respond to developing needs in other areas. (Section124 covers U.S. operated radar systemsin Colombia and elsewhere, and other costs of U.S. detection and monitoring of drug flights.) a FY2000 non-DOD Plan Colombia supplemental funds were all assigned to the State Department INC account; the State Department is transferring themto the other agencies carrying out programs in Colombia with those funds. The AID FY2000 and FY2001 figuresare all ESF. These AID figuresdo not include funds provided to AID from the INC account. Appendix D. Controversy over Spray Eradication Efforts in SouthernColombia The following discussion of the controversy over spray eradication (i.e.,fumigation) of illegal coca crops in southern Colombia was prepared in response tothe controversy over this effort in southern Colombia. This short synopsis of available information on the effects of fumigation of coca crops in Colombia is onlymeant to provide a summary of various claims; it is not a judgment on their validity. In its U.S.-supported coca eradication program, the government of Colombia sprays coca crops from aircraft with a mixture of the herbicide glyphosate,manufactured by the U.S. company Monsanto and marketed as "Roundup," and twoadditives or "adjuvants." (15) According to the StateDepartment (in its report ofJanuary 23, 2001, submitted to Congress consistent with the provisions of theStatement of Managers accompanying Title III, Chapter 2 of the EmergencySupplemental Appropriations Act. P.L. 106-246 , which provided funding for PlanColombia), the Environmental Protection Agency (EPA) has found that "the use ofglyphosate, as labeled for use in the U.S., is acceptable provided that the regulatorycontrols required by the EPA - the labeled instructions - are followed." The StateDepartment also claims that the ingredients in the two additives (COSMOFLUX-411F, a surfactant, and COSMO-iN-D, an anti-foaming additive (16) ), bothproduced in Colombia, are on an EPA list of acceptable chemicals "for use on foodcrops when the label instructions are followed." This report states an EPA review of "adequate scientific studies" shows that when properly used glyphosate "will notcause adverse effects in humans," and "does not cause risks of concern for birthdefects, mutagenic effects, neurotoxic effects, reproductive problems, or cancer." Itdoes, however, state that "splashes" of glyphosate "can cause transient irritation toskin and eyes,"although at the same level of irritation as baby shampoo according toone cited study. For its conclusion that there are "no grounds to suggest concern forhuman health" from the spray mixture used in Colombia, the State Department citeda recent study published in Regulatory Toxicology and Pharmacology. (17) Since spraying began in December 2000 in Colombia's Putumayo province (where it is now indefinitely suspended), however, there have been many allegationsthat the spray mixture has caused extensive harm to humans, other crops, andlivestock. The ill health effects on thousands of children and adults most commonlyreported in the areas of Putumayo fumigation include fever, eye and gastrointestinalirritation, and skin and bronchial irritation and infections. There have also beenallegations of increased incidence of brain damage in children in these areas sincefumigation was started. In addition, critics claim, many crops other than coca havebeen sprayed, depriving peasants of food crops and other sources of income, andlivestock reportedly have suffered ill effects, including hair loss in cattle frommoderate exposure, abortion among pregnant cows (possibly due, one source notes,from stampedes caused by the noise of overhead helicopters) and the death of fowlfrom spraying or drinking contaminated water. (The effects on livestock and fowlare taken from the "Counter-Fact Sheet" of February 9, 2001, prepared by AcciónAndina, which is a non-governmental organization, and posted online at http://usfumigation.org/Literature/FactSheets/ContraDoS/AA-IPS-RAPAL%20Fact%20Sheet%20-English.htm .) Supporters of aerial fumigation, however, state that negative health and environmental effects can be attributed to drug producersthemselves, whom, they claim, also use Roundup to suppress weeds around cocabushes, and who pollute Colombian rivers with chemicals used in processing andrefining coca into cocaine in their drug labs. Some U.S. officials assert that many of the complaints come from those with an interest in continuing coca production, especially as aerial spraying of coca crops hastaken place for many years in other areas of Colombia without the outcry that thespraying in Putumayo has produced. However, according to a Washington Post article of January 7, 2001, about the spraying in Putumayo: "Until recently, sprayingfocused almost entirely on remote industrial-sized coca and poppy plantations....Nowthe planes are targeting more populous farming areas ... where coca ... is often grownside by side with corn, yucca, pineapple and livestock. Often it shares a plot next tothe farmer's tin-roofed shack." ("Aerial Attack Killing More than Coca," by ScottWilson.) Regarding crop damage, the Post reporter stated that his "inspection offields in the area suggested that food crops have been hit at least as hard as coca." Critics have attributed food crop damage to the side-by-side plantings of legal andillegal crops in Putumayo, but also charge that spray planes fly higher than normal for crop dusting operations elsewhere in order to avoid ground fire, and underunacceptable wind conditions, thus leading to the dispersion of spray beyondintended targets. (18) Some analysts, however, have noted that complaints of ill effects to humans and animals may not be entirely inconsistent with State Department assertions of safetyunder controlled circumstances as the health and environmental effects could varydepending on the exact formulation of the spray mix, the manner of its application,and the conditions under which it was used. Some critics have argued that Roundupis not being applied in a manner consistent with U.S. usages and with themanufacturer's recommendations, and that not all issues related to ingredients usedin the mixture applied in Colombia have been explored. The World Wildlife Fund, in an October 30, 2000 statement, "Comments on Glyphosate," states that existing studies "may not be adequate toassess the impacts resulting from Plan Colombia's actual use of glyphosate (aerialapplications, product formulation, frequency and rate of application, etc.), especiallygiven the soils, topography, climatic conditions (temperature, rainfall, etc.) plant andanimal species found in Colombia." (Available online from the WWF at: http://www.ciponline.org/colombia/103001.htm ). In a February 9, 2001 statement calling for the end of aerial eradication, representatives of three non-governmental organizations claimed that"there is evidence that herbicide concentrations much higher than ones recommendedare being applied in Colombia" and that "there are no toxicological studies ...regarding the effects of mixing the Cosmoflux-4111F surfactant with pesticides." (19) The statement also noted that Roundup Ultra (which opponents say is the actualvariety of Roundup being used in Colombia, although the State Department reportcited above does not refer to either trade name) "contains other ingredients besidesglyphosate and the two adjuvants." The World Wildlife Fund, in the October 2000statement cited above, found that studies on the effects of Roundup "focus on thepesticide active ingredient alone, not the combination of inert ingredients actuallyapplied, thereby giving an incomplete assessment of the toxic threat," and assertedthat "the inert ingredients mixed with the Roundup to increase its effectiveness canbe as, or more, toxic to humans, wildlife and foodwebs than the pesticide itself." TheMonsanto website states that the "new ingredients" in Roundup Ultra are on an EPAapproved list (#4B), but the specific "new" ingredients are notnamed. An analysis by agronomist Elsa Nivia, identified as associated with the non-governmental Red de Acción en Plaguicidas y Alternativas - AméricaLatina , RAP-AL. PAN-Colombia (Pesticide Action Network), claims that the aerialfumigation of illegal crops in Colombia with Roundup is "very different from therecommended agricultural use in the United States," citing the concentration as 26times greater than that recommended, with negative effects intensified by the use ofCosmoflux 411F. Even though the authors of the report cited by the StateDepartment had found glyphosate and Roundup to be at most mildly toxic, Ms.Nivia's conclusion from their discussion of the effects of accidental and occupationalexposures to higher concentrations, and of the doses that proved lethal in peopleattempting suicide, is that higher than recommended concentrations or applicationscould help to explain the severe ill effects reported in the fumigated areas. (See Lasfumigaciones aéreas sobre cultivos ilícitos si son peligrosas - Algunasaproximaciones , by Elsa Nivia. Paper given at a conference on The Wars inColombia: Drugs, Guns and Oil, held at the University of California at Davis, May17-19, 2001, accessible through http://www.usfumigation.org .) The State Department is funding a study, with design assistance supplied by the Center for Disease Control (CDC) and the EPA, of the health effects of aerialeradication in Putumayo Department. Results are anticipated by late 2001. Appendix E. Bush Administration's Andean Regional Initiative (ARI) FY2002 Request and FY2002 Allocations by Purpose and by FunctionalAccounts Source: Office of the Secretary of State. International Affairs Function 150 Fiscal Year 2003 Budget Request Summary and Highlights. February 2002. The ARI does not include International Military Education and Training (IMET) funds. These will range in FY2002from an estimated $170,000 forPanama to an estimated $1,180,000 for Colombia. Prepared by [author name scrubbed], Specialist in InternationalSecurity Affairs, CRS, February 12, 2002. * The ARI for FY2002 also did not include Foreign Military Finance Funding (FMF). The small amount for Bolivia is included here, even though it wasnot specifically for counternarcotics purposes, in order to facilitate comparisons with the FY2003 request, whichincludes FMF for Andean RegionalInitiative countries. **NA = Not Available. A breakdown by purpose is not available for Brazil, Panama and Venezuela as the INLfigures for those countries was not brokendown by purpose. Appendix F. Andean Regional Initiative (ARI) FY2002 Allocations and FY2003 Funding Request by Purpose and FunctionalAccounts Source: Office of the Secretary of State, Resources, Plans and Policy. International Affairs Function 150 Summary and Highlights, Fiscal Year 2003Budget Request. The ARI totals do not include International Military Education and Training funds, which rangein the FY2003 request from $200,000for Panama to $1,180,000 for Colombia. Prepared by [author name scrubbed], Specialist in International Security Affairs,February 12, 2002. * Includes funds previously cited under Child Survival and Diseases.

In April and May 2001, the Bush Administration proposed $882.29 million in FY2002 economic and counter-narcotics assistance, as well as extension of trade preferences and othermeasures, for Colombia and regional neighbors in an initiative called the "Andean RegionalInitiative" (ARI). Critics of the Andean Regional Initiative argue that it is a continuation of what they regard as the misguided approach of Plan Colombia assistance approved in 2000, with an overemphasis onmilitary and counter-drug assistance, and with inadequate support for human rights and the peaceprocess in Colombia. Supporters argue that it continues needed assistance to Colombia, whileproviding more support for regional neighbors and social and economic programs. In action on the FY2002 Foreign Operations Appropriations bill ( H.R. 2506 ), the House passed the bill on July 24, 2001, with $826 million for the ARI, of which $675 million is forthe counter-narcotics "Andean Counterdrug Initiative" (ACI) portion, a reduction of $56 millionfrom the President's ACI request. The Senate passed the bill on October 24, 2001, with $698 millionfor the ARI, of which $547 million is for the ACI, a reduction of $184 million from the President'sACI request. The conference version of H.R. 2506 , as approved by the House onDecember 19, and the Senate on December 20, includes $625 million for the ACI, $106 million lessthan the President's ACI request, with $215 million earmarked for AID programs and a variety ofconditions, including an alteration of the cap on military and civilian contractors serving inColombia. In February 2002 budget submissions, the Bush Administration allocated $645 millionto the ACI account for FY2002, including $20 million transferred from the general InternationalNarcotics Control account. In action on the Foreign Relations Authorization Act for FY2002-FY2003, the House passed H.R. 1646 on May 16, 2001, with four reporting requirements on activities in Colombiaand a prohibition on the issuance of visas to illegal armed groups in Colombia. The Senate ForeignRelations Committee reported out S. 1401 on September 4, 2001, with a requirementfor a report that outlines a comprehensive strategy to eradicate all opium cultivation at its source inColombia. No further action occurred on either of these bills in the first session of the 107thCongress. In action on the National Defense Authorization Act for FY2002, the House passed H.R. 2586 on September 25, 2001, with a cap of 500 on the number of U.S. militarypersonnel in Colombia, with some exceptions. This provision was not retained in the conferenceversion of S. 1438 which was passed by both chambers on December 13, 2001. In action on the Andean Trade Preference Act, on November 16, 2001, the House passed H.R. 3009 , the Andean Trade Promotion and Drug Eradication Act, which wouldextend and expand the ATPA through December 31, 2006. The Senate Finance Committee reporteda more limited version, S. 525 , on November 29, 2001, in the context of otherlegislation.

Overview of Pre-Disaster Mitigation Program Purposes The purpose of the original pre-disaster hazard mitigation pilot program, known as Project Impact, as well as the successor Pre-Disaster Mitigation (PDM) program, has been to implement hazard reduction measures prior to a disaster event. Those measures are similar to those actions taken following a disaster under the authority of the Section 404 Hazard Mitigation Grant Program (HMGP). The range of eligible projects might include retrofitting public buildings against hurricane-force winds or seismic damage, acquiring and relocating properties out of a flood plain, elevating structures in a flood plain, flood-proofing public buildings, managing vegetation to mitigate against wildfires, or constructing or converting public spaces into "safe rooms" in tornado-prone areas. While there would appear to be general agreement among analysts and practitioners on successful mitigation measures, there is debate on where the line is drawn between preparing to respond to the next disaster and mitigation measures to lessen its impact. A common distinction frequently drawn is between structural and non-structural mitigation. Structural mitigation is the building of levees to protect communities from flooding, such as those constructed by the U.S. Army Corps of Engineers. A non-structural mitigation project would be establishing new land use patterns, and possibly removing structures from a flood plain that has repeatedly experienced flood damage. The essential difference is that the structural projects tend to construct barriers to protect communities, while non-structural projects tend to remove structures and citizens from harm's way. Context and Trends When Congress first appropriated funds in FY1997 for mitigation activities before disasters occur, FEMA established the pilot program and called it Project Impact. The communities participating in the initial pilot program were selected by FEMA based on factors such as their experience with natural disasters, the ongoing risk the community faced, and the degree of collaboration among local, county and state officials. Project Impact placed most of its emphasis on community efforts to mitigate those hazards that made the community vulnerable to future damage. This emphasis on community-based efforts included the required commitment of the local governments, nongovernmental organizations, the local business community, as well as the development of an educational component for community awareness. This approach grew out of experience which demonstrated the necessity of community "buy-in" and active involvement with mitigation activities. The study of elite attitudes and opinions with respect to disaster mitigation policies demonstrates the relatively low priority placed on natural hazards as political issues in local communities and even at the state level. It further demonstrates the relative unpopularity of nonstructural mitigation measures as compared to structural solutions to disaster problems or to traditional relief and rehabilitation policies. While noting the reported reticence toward nonstructural mitigation, some in the field were also turning a critical eye toward structural mitigation as a panacea for the risks posed by natural hazards. One observer spoke to the gaps in the policy area as follows: Structural mitigations, for example, encourage people to move into hazardous areas. Post-disaster relief tends to socialize risks, lets people be insensitive to hazard risk when they build structures, and so forth. The current emphasis on nonstructural or land use approaches reflects a concern that previous policy emphases may well have increased, rather than decreased, the level of population at risk from hazards. The concept of disaster mitigation had been favorably discussed for several decades among some in the emergency management field. But absent serious disaster damage during most of the 1980s, it was difficult to advance the concept. As one observer explained: With the comparative absence of major disasters during the Reagan years, priorities shifted and commitment to proactive measures requiring time and money waned. But in the early 1990's, that attitude dramatically changed. Massive losses between 1989 and 1993 from five major hurricanes, earthquakes, and river floods resulted in mitigation making more sense to more people than at any time previously. As noted above, the relative quiescence of the Reagan years from an emergency management perspective was followed by years with disasters of great scale in both human costs and financial losses. The disasters included Hurricane Hugo (1989); the Loma Prieta earthquake (1989); Hurricane Andrew (1992); the 1993 Midwest floods; the Northridge, California earthquake (1994); and Hurricanes Fran and Floyd (1996 and 1999) along the eastern coast of the nation. The confluence of these events helped to support those in favor of proactive work to lessen the impact of disasters, but little organized research had been done up to that point to demonstrate the benefits of pre-disaster mitigation. Without such studies (later mandated by the Disaster Mitigation Act of 2000 - DMA2K ), Congress approached the PDM concept cautiously and provided funding at lower levels until the benefits of such spending were proven. The two most recent catastrophic events have produced mixed results in mitigation due to differing circumstances. However, they both generated large amounts of HMGP funds which can have an impact on Congress' considerations for PDM funding. Hurricane Katrina and its aftermath presented many possible mitigation opportunities. But the mitigation program, particularly in Louisiana, got off to a slow start due to disputes between FEMA and the state regarding the use of mitigation funds for the state's "Road Home" housing repair program. The mitigation efforts for Hurricane Sandy have not been subject to disputes, but have moved slowly. In the spring of 2014, FEMA had obligated over $3 billion in assistance to New York for both public infrastructure repair and aid to families and individuals. Of that total, only $15.7 million was obligated by the HMGP program. Mitigation is not a rapid response program, but the small amounts obligated would appear to indicate that federal and state governments could improve their approach to accelerating the administration of the program. While these examples are for post rather than pre-disaster mitigation, such problems arguably tend to undercut arguments for mitigation planning and projects that make up the PDM program. PDM Legislative and Appropriations History Pre-disaster hazard mitigation activities were initially funded through a pilot program first provided for in the conference report that accompanied the 1997 appropriations legislation. The pertinent report language follows: The conferees agree to up to $2,000,000 for FEMA's participation in appropriate pre-disaster mitigation efforts. The conferees agree with FEMA's Director that mitigation activities can ultimately save significant sums from post-disaster clean-up and response actions and that the Agency should be taking an increasingly active role in developing and participating in pre-disaster mitigation programs. Such programs range in scope from the development and/or funding of mitigation plans for communities to participation with industries, insurers, building code officials, government agencies, engineers, researchers and others in developing systems and facilities to test structures in disaster-like circumstances. The conferees understand that these activities will require an infusion of considerable up-front financial support as well as the possible movement over time of disaster relief funds to pre-disaster programs, and the Agency is expected to use up to the $2,000,000 provided herein in an appropriate manner to begin the process of movement toward a meaningful pre-disaster mitigation program. Expenditure of these funds may not, however, be made until submission to the Committees on Appropriations of an appropriate pre-disaster mitigation spending plan. Subsequent appropriations measures for fiscal years 1998, 1999, 2000, and 2001 provided $30 million for 1998 and $25 million per year for the next three years. Following four years of funding through appropriations statutes, Congress authorized the program from 2000 to 2003 in the Disaster Mitigation Act of 2000 (DMA2K) which placed the PDM program in the Robert T. Stafford Disaster Relief and Emergency Assistance Act as Section 203. The original Project Impact, the first PDM program, was closely identified with then-FEMA Director James Lee Witt. Witt was appointed by President Clinton in 1993 and gained a high profile in the course of leading FEMA's disaster response and recovery efforts. Witt described Project Impact as "a program designed to break the damage-repair, damage-repair cycle and instead help communities become disaster resistant." While the initial funding amounts were relatively small for a national program, Project Impact was generally considered a success. One author observed, for example, that "the money was said to have worked wonders." In part, this reflected FEMA's intent to concentrate on outstanding communities, from the mitigation initiative perspective, that could then serve as mentors to others. However, some observers maintained that if funding were provided through a competitive process the criteria could recognize areas with the greatest risk and where mitigation measures could produce the most beneficial results, rather than areas that may have experienced random disasters but, despite the strength of community involvement, did not necessarily face as grave an ongoing threat. Early in the George W. Bush Administration, Project Impact was eliminated from the FY2002 budget on the same day that the Mayor of Seattle was praising the program for preventing further damage due to the Nisqually earthquake. In 2002, in light of Congressional action FEMA chose to rebrand Project Impact as the Pre-Disaster Mitigation (PDM) program. While this title conformed to the legislative language it also was intended to send another message as then-FEMA Director Joe M. Allbaugh explained: I want to take the "concept" of Project Impact and fold it in to the program of mitigation. Project Impact is not mitigation. It is an initiative to get "consumer buy-in." In many communities it became the catch-phrase to get local leaders together to look at ways to do mitigation. For FY2003 and FY2004, Congress increased funding for pre-disaster mitigation to $150 million from the previous $25 million level. Also, Congress had inserted legislative language in the FY2003 Appropriations Act, which became law on February 20, 2003, stating that PDM funds "shall be awarded on a competitive basis." FEMA adhered to the direction from Congress and made part of PDM a competitive grant program thereafter. In its FY2003 and FY2004 budget requests, the Bush Administration proposed consolidating all mitigation funds in the PDM program. "Adoption of this proposal would have terminated funding provided through the Hazard Mitigation Grant Program (HMGP) after a major disaster is declared." This referenced Section 404, the HMGP program of the Stafford Act that generally provides 15% of all disaster costs in the form of a cost-shared mitigation program. Congress did not wish to entirely eliminate the post-disaster mitigation help but did devote more resources to the pre-disaster mitigation program. In order to shift the resource balance between post-disaster mitigation and pre-disaster mitigation, Congress reduced the HMGP amount in the Stafford Act for post-disaster work from 15% of the total amount spent on the disaster (less administrative costs) to 7.5%. While the post-disaster mitigation pot would shrink, the PDM program would grow. However, this shifting of resources would be short lived. Over its history, the funding levels for PDM have varied at times and are now falling again. During the early years the program was given its own separate line item account within the DHS/FEMA budget but outside of the Disaster Relief Fund. The changes in the funding levels represented differing approaches not only to PDM but to the mitigation concept as a whole. The 111 th Congress passed legislation which became P.L. 111-351 that sought to increase funding by authorizing the appropriation of $180 million for 2011, and $200 million for fiscal years 2012 and 2013. When the PDM authorizing legislation (DMA2K) was passed, Congress addressed some of the same themes used in Project Impact but placed the responsibility on the Governor of each state to suggest up to five communities to be considered for pre-disaster mitigation assistance. While the Governor nominated potential grantees, FEMA made the final selections. In addition, under the statute, FEMA had the discretion under "extraordinary circumstances" to award a grant to a local government that had not been recommended by a Governor. While the authorization of PDM in FY2000 had recognized, at a minimum, the potential benefit of mitigation prior to disaster events, the substantial funding increase beginning in FY2003 was one component of a different overall approach. This new approach was targeted not only to pre-disaster mitigation but to mitigation in general. It represented a shift in thinking regarding the most appropriate time to devote resources to mitigation in disaster-prone communities. Some had suggested that the Hazard Mitigation Grant Program (HMGP) in the Stafford Act (Section 404), which provides funding to a state following a major disaster to mitigate future disaster damage, was taking the wrong approach, or, more precisely, was in the wrong sequence. Since the funds arrive after the disaster event, and are only available to states that have suffered the impact of a disaster, they cannot be targeted at areas that might have a greater risk of a more costly disaster that has not yet occurred. Pre-disaster mitigation, they argued, would be more effective. However, others contended that only communities that have had recent disaster experience have the immediate incentive, in the form of a community commitment borne of experience, to take the steps necessary to reduce the risk of future disasters. As one writer in the field has noted, it is imperative to garner community support around a specific action: This is especially true when those mitigation measures involve cranking up the machinery of government, which, some contend, is especially prone to inertia.... Mitigation measures are also most effective when they have the broad support from the greatest number of people across a broad section of the community. Mitigation Funding and Studies Following Hurricane Katrina, Congress chose to reinstate the HMGP to its previous level of 15% for the majority of disasters and established a new graduated scale for larger events. With that change, smaller amounts were requested and appropriated on an annual basis for the PDM program. In FY2006, the appropriated amount was $50 million. However, Congress then appropriated larger sums for the PDM program, equal to or above requested levels from F2008 up to FY2010. These increases coincided with studies released in 2005 and 2007, each of which pointed to savings of $3 to $4 in disaster relief spending for each $1 spent on mitigation. The findings of these studies were thought to be important to the PDM program since the studies: provide independent evidence to support what nearly every member of the hazards community knows anecdotally—generally, FEMA mitigation grants are highly cost-effective. One study, Natural Hazard Mitigation Saves: An Independent Study to Assess the Future Savings f rom Mitigation Activities , in accordance with the directive from P.L. 106-390 , was completed by the Multi-Hazard Mitigation Council (MHMC). The MHMC study defined a broad number of benefits that reached into not only direct FEMA disaster costs but also assessed corollary and indirect savings from mitigation at the local level and within the business sector with an impact, or "ripple effect" on the surrounding communities. The study weighed damages that were not always previously considered when calculating savings, such as business interruption and environmental costs. The study, released in 2005 before the hurricane season, provided a foundation for mitigation that was previously based on anecdote and conjecture. The MHMC study listed areas of savings within communities from mitigation and also focused on the long-term beneficial effects that mitigation activities would have on the federal treasury on an annual basis. Building on the MHMC study, in 2007 the Congressional Budget Office (CBO) issued its report on pre-disaster mitigation cost savings. While using slightly different assumptions and cognizant of federal spending time lines, that report also noted a proportional savings derived from the PDM program. The CBO study explained that PDM savings would likely benefit two FEMA programs. Any federal savings from PDM-funded mitigation projects would occur largely in FEMA's disaster relief programs (which are funded from discretionary appropriations) and in its National Flood Insurance Program (which ordinarily is not funded through the appropriation process). These findings provided a justification for increased PDM funding, which followed in FY2007 and continued through FY2010. Post-Katrina Funding—Competitive and Formula Grants For FY2007 Congress increased PDM funding to $100 million, raised that amount to $114 million for FY2008, and for FY2009 reduced that amount to $90 million (but still above the requested level). In recognition of the larger appropriated levels, Congress directed FEMA to implement the state minimum of $500,000 specified in the Stafford Act for eligible projects. With the passage of P.L. 111-351 , the state minimum amount has been raised to $575,000 or no less than 1% of the amount appropriated for PDM. This formula, in effect, made PDM both a competitive and a formula-driven program. The implementation of the state minimum also serves to retain interest in mitigation for states that may not have been competitive, nor experienced recent disasters. The overall change in the formula created a new kind of hybrid program, in which grants would continue to be awarded through a competitive process and also through guaranteed formula amounts for each state with eligible projects or plans. The congressionally directed spending for FY2008 PDM grants, the first earmarks for the PDM program, accounted for over $50 million or 44% of the funding. After factoring in state minimums, the available amount for open competitive grants was reduced from three quarters to just over a third of the total funds. The directed grants for FY2009 total $25 million, or just over 27% of the appropriation. Taken together, the earmarks combined with the state minimums total $50 million or 55% of the total appropriated program funds. In reaction to this trend of directed funding, amendments were offered in each chamber, during consideration of the FY2010 appropriations bill, to curtail the earmarks. The Senate amendment would have eliminated the earmarks from the FY2010 appropriations. The provision eliminating congressionally directed spending was added to the legislation that became P.L. 111-351 . In addition to congressionally directed spending, Congress established in the Stafford Act the limits of the size of respective, individual grants and for total amounts to individual states. States and territories that submitted less than $500,000 in applications received the amount requested, provided those applications are determined to be eligible. The maximum PDM award for any one State shall not exceed $17 million. There is a $1 million cap on the federal share available for plans and a single federal share cap of $3 million for projects. The Bush Administration requested $75 million for FY2009. Congress funded the program at the $90 million level. The budget justification submitted to Congress for the FY2009 budget noted the $39 million reduction from the FY2008 level did not offer any comment or explanation for the change. Some have suggested that the carryover amount within the program between FY2007 and FY2008 of more than $65 million may have contributed to the conclusion that additional funding was not needed. FEMA has noted that since PDM funds are no-year funds with a great amount of state and local participation in the process, the lag time on the expenditure of funds is a practical and inevitable part of program administration. FEMA has also emphasized that funds being carried over are funds dedicated to projects that have been selected and are only awaiting final clearance. It can also be noted that the proportionality of planning grants vs. project grants tends to reflect the amount of funding available and has changed as the amount has fluctuated (see Table 4 ). As funding levels grew more projects were selected but as the funding was reduced in FY2011 and FY2012 the funds then went back to "basics," the planning grants that assist states and localities and tribes to have an updated mitigation plan in place. Having a plan in place prior to the next disaster event is important for an effective recovery but also, having a plan in place that does not have to be updated for five years means the jurisdiction can then consider possible mitigation projects as well. Funding levels proposed for the PDM program during the Obama Administration have swung greatly. While the FY2010 request of $150 million matched the second highest previous request in program history, the FY2011 request dropped down to $100 million. (See Table 1 .) This was a precursor for the subsequent years (FY2012 through FY2015) which have requested no funds for the program. The explanations offered for this reversal in policy included the existing balance of funds in the program but also that the PDM program duplicated other mitigation programs such as the HMGP program and the FMA program. However, the HMGP program cannot be used in advance of any events but only after the disaster has occurred. The FMA (as part of NFIP) can be used at any time but can only be used for flood mitigation projects that involve NFIP-insured structures. Those programs may arguably overlap with or address similar projects eligible under PDM, but those programs also appear to be distinct from the PDM program in their structure and intent. Grant Applications and Categories Given the authorizing language that requested that each Governor submit "not fewer than five local governments to receive assistance under this section" it is not surprising that the program would have a large number of grant awards (a total of 149 grants were awarded for FY2008 and 443 applications were received for FY2009). The total number of grant awards is amplified by the significant number of planning grants. In FY2008, planning grants accounted for 79 percent of the awarded grants. These are usually awards for much smaller amounts than project applications, and planning grant awards are distributed to many more communities. The interest in planning may derive from the fact that a mitigation plan is a prerequisite for receiving both PDM and HMGP funding. Although changes have impacted the program, such as the earmarks and the reduced funding levels of recent years, the number of awards has been relatively consistent. While 149 grants were made in FY2009, three years later 131 grants were awarded for FY2013. Grants have been awarded for a variety of hazards being addressed by states and communities. The Government Accountability Office (GAO) reviewed the FY2003 projects and found that more than half of the projects identified flooding as the primary hazard being mitigated by the grants. That same review found that 12% of the grants were based on hurricane projects, just under 7% sought to mitigate the effects of an earthquake, and 4% listed tornadoes as the primary hazards to be addressed. The PDM projects funded at the direction of Congress for FY2008 also sought to accomplish a variety of purposes. Some appear to be traditional PDM projects such as the acquisition and relocation of properties and wildfire mitigation activities. However, other projects listed among the earmarks appear to be for purposes listed as ineligible in the PDM program guidance materials. Examples of those projects include funding for equipment, fire suppression activities, dams, and emergency alert and notification systems. These projects reflect the preparedness vs. mitigation debate that, as the " Program Purposes " and " Funding Criteria " sections of this report explain, has been with the PDM program since its inception. While the direction of funding, that is the hazards addressed by grants, have been relatively consistent, there has been recent attention directed at the program's relative paucity of wildfire mitigation grants. According to FEMA's Mitigation Division as of 2012: In the last 10 years roughly 0.5% of all projects funded by the FEMA Hazard Mitigation Assistance (HMA) programs are wildfire projects, those projects make up roughly 0.5% of overall HMA dollars obligated. In 2008 a new wildfire policy was developed which refined eligible activities included in a wildfire project. That policy is currently being updated to fit the changes in the HMA programs since its conception. More than 50% of the wildfire projects funded have come from California and Colorado. Issues for Congressional Consideration As Congress considers reauthorization of the PDM program, there are several issues that have emerged as points of discussion. These issues include the pace at which grant awards are made, the best methods for funding awards, the priority uses for PDM funds, the amount of resources devoted to the program, the length of authorization for the program, and, most importantly, the direction of pre-disaster mitigation and where it may be best realized given recent Presidential action. Also, new initiatives emerged from the 2010 budget and authorizing legislation that suggested new directions for the PDM program. Funding Criteria The authorizing legislation for PDM sets forth an array of funding criteria. The criteria focus on elements such as the nature of the hazard, the degree of commitment of and coordination by the state and local governments (including consistency with appropriate mitigation plan), and the "extent to which prioritized, cost-effective mitigation activities" can produce clear results. Along with the statutory funding criteria, FEMA, in its PDM program guidance, lists ineligible activities for PDM planning and project activities. FEMA staff noted that they have derived many of the suggested changes from the eligibility listings from the peer review panels, composed of local practitioners in the mitigation/emergency management field, that review applications. It is the intent of the program staff to provide more clarity on eligible activities for applicants by providing such a list. Due to the small amounts appropriated for the program in recent years, FEMA has not consistently assembled those peer review panels so such insights are not as available to the program management as in previous years. The ineligible activities list for FY2008 contained eight items related to PDM planning and 23 ineligible activities for the PDM project grants. (For the latter category, this was an increase; for FY2007, the number of ineligible activities was 16.) The list broadly supports compliance with practices such as environmental and historic preservation and the Coastal Barrier Resources Act (CBRA). But other excluded items (such as the construction of levees or flood mapping) are arguably seeking to ensure that PDM planning or project funds do not duplicate similar efforts funded by other programs. In 2010 FEMA released unified guidance for all mitigation programs, including PDM. This guidance was updated in 2013. While the format and presentation differed slightly, the same general categories were covered with seemingly fewer restrictions specifically directed toward planning guidance. However, some observers argue that the FEMA interpretation of eligible PDM projects has grown overly restrictive, particularly with regard to equipment purchases to address different hazards. For example, some observers believe that the purchase of warning or alert notification systems should be an eligible expense for PDM. (It should be noted that warning systems and other "gray areas" can be funded through the HMGP program's "5% initiative" that was put in place over a dozen years ago. This was established to allow some flexibility for actions that may or may not meet cost-effectiveness criteria.) Others suggest that the purchase of generators under the PDM program should be eligible beyond the standards for such purpose in the program guidance. The arguments over individual categories and projects are symbolic of the overarching effort to differentiate the concepts of preparedness and mitigation. Project Eligibility There are a number of project activities that are ineligible under FEMA's program guidance for the PDM program. This is the unified guidance first established in 2010 and still in use. Some of the ineligible activities include costs of maintenance to structures (e.g., levees and dams); the purchase of generators for facilities that are not a part of a larger mitigation project; and the broadest category—projects for which benefits "are available from another source for the same purpose." A particular example at the crux of this debate concerns warning systems. Many communities have sought to use PDM funds to purchase warning systems such as sirens to protect their citizens against sudden disasters. FEMA considers such alert notification systems as eligible under disaster preparedness grants but not under the PDM program. Similarly, FEMA has previously determined that the purchase of stand-alone generators is a preparedness effort to address the likely results of a disaster rather than mitigating its effect. One exception is the purchase of generators that will power a mitigation effort. For example, a generator providing power to activate hurricane storm shutters would be eligible. Generators that provide power for critical public facilities may also be eligible. For FY2008, some of the congressionally earmarked projects for PDM included some of the activities listed as ineligible in FEMA's program guidance such as fire suppression activities and the purchase or enhancement of emergency alert and notification systems. Such designations do not involve differences over the location of grants but their purposes. (The FY2009 and the FY2010 listings of earmarks did not list the type of project or purpose.) Congress may wish to express its disagreement with FEMA's guidance or it may direct FEMA to adhere to the PDM program's current eligibility criteria when making PDM grant awards. However, the FEMA mitigation division (both in the regions and at headquarters) have tried to work with communities when ineligible projects were directed. Rather than remove funding the goal has been to find other eligible mitigation projects in the community. The Pace and Breadth of PDM Funding Distribution As previously noted, in FY2008 the PDM program was earmarked for the first time. The PDM program was earmarked again in the FY2009 and FY2010 appropriations. The only previous earmarks of mitigation projects in general appeared in the FY1999 Appropriations bill that earmarked unspent and prospective HMGP funds for several projects. Due to congressional actions, earmarks are no longer a part of the program. Although exact amounts of funding and the rate at which such grant funds are disbursed can be difficult to discern, the broad geographic distribution of recipients has been a constant in the PDM program. The funds have been distributed widely, but not always rapidly. While the earmarks were relatively new to the program, some have pointed to the lags in PDM spending, such as the carryover of funds previously from FY2007 to FY2008, as an explanation for the earmarks. Others have suggested that the same lag in funding, interpreted as a lack of interest in or need for the program, may have resulted in a reduced request by the Administration for FY2009 PDM funding. One consideration in the pace of the program is that mitigation projects can be complicated to put together since their impact may be spread across various sectors of communities and can also require local consensus and a contribution of resources. The state and local cost share is 25%. Another possible factor in the arguably slow pace is that PDM funds are available until expended. Since, under the PDM program's guidance, the funds can be used for up to three years from the date of the award some may contend there is less urgency to get funds out immediately and more time for communities to develop effective projects and plans and more time for FEMA, through a peer review process, to carefully review the submitted projects and plans. The perception of slow distribution of PDM funds has continued in later years as evidenced in the pace of awards made. However, this is also a problem that can be traced to the congressionally directed funding which took up greater shares of total funding while lengthening the process as communities receiving awards sought to justify their expenditures. This stood in contrast to communities that sought competitive awards which would already have had such justifications in place as part of the application process. Also, when assessing funds not allocated to awarded grants it is helpful to understand how the unallocated program dollars are used. Some of those funds are devoted to ongoing expenses for each program year including FEMA administrative costs, technical assistance contracts to assist applicants and sub-applicants, management costs awarded to states, and other costs associated with the award amounts. FEMA also holds back a small amount of funding for "reconsideration" which allows for the review of projects and the correction of possible errors in program administration, grant selection, and the calculation of funding amounts. All of these factors, from FEMA's perspective, are reasonable uses for unexpended funds. FEMA has recently issued a chart that identifies the broad uses of program funds. The reserved funds and other costs can be problematic, however, when they are not identified in program lists of award amounts and are estimated as a percentage of annual program costs. Similarly, FEMA's approach to batching together several years of project funding may be a reasonable approach to multi-year projects, but is not explained in the fiscal year totals currently available to the public. These kinds of issues, in terms of how funding awards and other spending are reported, can be problematic as Congress assesses the program as a whole. Given the remaining grant funds that may be available to the program, DHS/FEMA, in the FY2015 budget, requested legislative authority to award those funds, particularly those from previously congressionally-directed funding. The proposed language included in the budget appears below. The FEMA Administrator may make grant awards at his discretion pursuant to Section 203 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5133) with funds otherwise designated as congressionally directed spending and appropriated in any fiscal year under FEMA National Pre-disaster Mitigation Fund", if either: (a) the intended applicant for such earmarked funding informs FEMA in writing that no application will be submitted to use the funding; or (b) no application for such earmarked funding is submitted to FEMA within two years of the date of the respective appropriation for such funds; Provided, that amounts appropriated under "National Pre-disaster Mitigation Fund" in any fiscal year shall be available for necessary and reasonable costs to administer and to close out Pre-disaster Mitigation grants. Terrorism and Pre-Disaster Mitigation Some have questioned whether the PDM funding should be available to mitigate the effects of terrorist events. The response of some PDM advocates is one that applies not only to purpose but particularly to the overall balance of resources between mitigation and preparedness programs. Some participants in this debate have noted that while some projects may arguably be considered preparedness or mitigation, there is little similarity between funding amounts available for those two purposes, nor for the programs addressing terrorism. While funding for the PDM program previously exceeded $100 million, the amounts for preparedness efforts for all-hazards, including terrorism, under DHS/FEMA grants has totaled in the billions at DHS/FEMA in previous years. Among those preparedness programs at FEMA, several of the grant programs permit the purchase of equipment such as warning systems and other preparedness projects sometimes requested, but not eligible, under the PDM program. Perhaps most importantly, the authorizing language for the PDM program specifically makes clear that the state and local governments interested in participating in the program are expected to identify "natural disaster hazards" in areas under their jurisdiction for mitigation work. So, while some DHS/FEMA preparedness grants funding may be spent on all-hazard efforts (including some of those that overlap with PDM), PDM dollars are statutorily restricted to natural hazards. (See also discussion under " Funding Criteria " earlier in this report.) Projects and Plans As noted earlier, grants for protecting or alleviating the natural hazard threats to public buildings or private residences are the awards most closely associated with PDM. Projects tend to be costly and relatively large in scale when allocated for the purposes of relocating neighborhoods, building large safe rooms, or undertaking similar expensive, structural work. However, another significant category of eligible work under the PDM program is the creation or improvement of hazard mitigation plans for a community or state. With the passage of P.L. 106-390 , the Disaster Mitigation Act of 2000 (DMA2K), planning took on much greater significance. In addition to authorizing PDM, DMA2K also required local mitigation plans as a condition of eligibility for FEMA hazard mitigation grants. DMA2K also authorized increasing the share of HMGP grants from 15% to 20% of total disaster spending for states with an "enhanced mitigation plan." The complementary nature of the Stafford Act hazard mitigation authorities is arguably evident when states use PDM funds to develop the "enhanced plans" that, when approved, result in higher levels of HMGP funding. The mitigation plans are a prerequisite for other FEMA grants and have to be updated on a five-year cycle: Local mitigation plans must be updated at least once every five years in order to continue to be eligible for FEMA hazard mitigation project grant funding. Specifically, the regulation at 44 CFR 201.6(d)(3) reads: A local jurisdiction must review and revise its plans to reflect changes in development, progress in local mitigation efforts, and changes in priorities, and resubmit it for approval with five (5) years in order to continue to be eligible for mitigation project grant funding. Such planning grants are a major component of the PDM program. In FY2006 the planning grants comprised 47% of total grants selected for further review; in FY2007 59% of such grants selected for further review were for planning efforts; and, in FY2008, of the 149 proposed projects, 117 were identified as planning grants. It can be argued that in the use of PDM funds, states have concentrated on ensuring that their own plans are updated over selecting new projects for funding. These updated plans also offer the potential of more efficient use of HMGP funds following a disaster declaration within that state. However, the actual funding amounts for planning grants are relatively low. During FY2006, projects selected for further review projected grant spending of $42.8 million while planning grants selected for further review totaled $3.9 million out of a total of $50 million. Similarly, in FY2007, the large majority of planning grants (135 of the grants selected for further review) totaled only $16.5 million while project grants selected for further review (75 grants) were awarded $67.1 million out of $100 million available for awards. Given the nature of project grants and the large undertakings they represent (such as property acquisitions and similar commitments), they are far more expensive than planning grants. The remaining $20 million for the FY2007 awards includes awards still being made, administrative costs, technical assistance for applicants, state management costs, and funds held back for reconsideration. The totals in recent years (particularly FY2010) show the impact of congressionally directed spending which was generally aimed at projects rather than state or local planning grants. But the most recent record (FY2012) again shows planning grants at the highest percentage (79% represents 104 of 131) of PDM selected applications. The emphasis on planning is partly due to the requirement that plans be updated every five years. Also, given the smaller amount of funding that has been available in recent years, planning grants may be considered more practicable by local governments. These grants have had a nationwide impact in communities' readiness to implement mitigation strategies at the local level. As one researcher pointed out: Using its financial incentives and a requirement that mitigation plans to be updated every five years, DMA 2000 has triggered an unprecedented local hazard mitigation capacity building initiative. By July 2008, over 17,000 jurisdictions had such plans. Resources vs. Requests The importance of the actual amount of funds appropriated to the program is apparent when reviewing the amounts available for PDM grants alongside the amounts requested by applicants. In FY2006 and FY2007, for example, the funding requested was nearly triple the amounts available. In FY2006, $50 million was available and FEMA received initial requests totaling $134 million. In FY2007, FEMA had $100 million available for grants and received requests for $292 million. Given the limit of five applications per state, it is reasonable to suggest that the amounts requested could have been even higher absent that limitation. In FY2012 when FEMA's appropriation was just over $35 million it had requests for more than $270 million in federal mitigation funding. The recent budgetary communications for the last three fiscal years (FY2013, FY2014, and FY2015) that have suggested the phaseout of the program may have diminished the overall interest in the program and likely has raised questions on its availability for local communities. While reducing overall expenditures, these budget proposals can also unintentionally diminish the capacity of state and local governments to perform mitigation actions, whether planning or projects. Length of Authorization The PDM program has been reauthorized previously in six different pieces of legislation, initially for three years, then two one-year reauthorizations through appropriations bills, and then another three-year authorization from 2005 to 2008 followed by a one-year authorization for FY2009 and a one-year authorization through an appropriations bill for FY2010. P.L. 111-351 provided a three-year authorization through FY2013. This authorization has now expired. Legislation has been introduced in the 113 th Congress to reauthorize the program. H.R. 3282 would reauthorize the program through FY2018 with an authorized level of $200 million per year. Though not reauthorized currently, on March 28, 2014, a bipartisan group of 56 House Members sent a letter to the Appropriations Committee's Subcommittee on Homeland Security supporting continuing funding for the PDM program. The original sunset date of P.L. 106-390 (December 31, 2003) when the program was first authorized was intended to provide time for more information to be gathered on the efficacy of pre-disaster mitigation. Some of that information has been presented in both the Multi Hazard Mitigation Council Report as well as the report by the Congressional Budget Office. The recurrent sunset date, however, has set the PDM program apart from the rest of the Stafford Act which is a free-standing, no-year authorization. If the initial questions concerning the efficacy of the program are resolved, Congress might authorize the PDM program, like the rest of the Stafford Act, without a sunset date. It can be argued that some of the Stafford Act provisions are so vital to emergency situations (e.g., debris removal, temporary sheltering and lodging) that not having to seek reauthorization on a regular basis is a practical and effective approach to the disaster response and recovery aspects of the statute. Conversely, since the PDM program is a grant program not funded from the Disaster Relief Fund (DRF), some might contend, having a three to four year reauthorization cycle provides incentives to all participants to refine and improve the program in anticipation of Congressional oversight. Congress can also actively evaluate the PDM program accomplishments and expenditures through the annual appropriations process. Another factor to be considered is that, absent reauthorization, it can be argued that FEMA does not have the authority to grant programmatic extensions to recipients. Such extensions are often necessary for the completion of projects and the assembling of local and state funding to meet the cost-share. That consideration may argue for more consistent reauthorizations of the program. Methods of Awarding PDM Funds When the pilot program, Project Impact, was initiated in 1997 an emphasis was placed on the communities' disaster history, the involvement of community-based organizations in mitigation work, the participation of the local business community and the commitment of the state and local governments. There was some concern at the time on the part of state emergency management officials that they were not sufficiently involved during the project selection process. The switch to a competitive process in PDM reflected some of those factors that Project Impact employed, but also placed greater emphasis, through statutory language, on cost-benefit ratios. Also, since funding for planning was made eligible, the program opened up to many communities that desired an improved mitigation plan. For the overall awards process, Congress generally has come to direct the PDM program in annual appropriations law rather than through Congressional hearings specifically on the PDM program and resulting authorizing legislation. State emergency managers have stated their position that a competitive process may tend to limit smaller states' ability to access a program like PDM. Echoing the tenets of federalism, they would like funds made available to each state and decisions made at the state and local level concerning the hazards that pose the most significant threats and the areas that could benefit most from PDM funding. As one state emergency management director, speaking on behalf of the National Emergency Management Association (NEMA), testified: Attempting to prioritize limited predisaster mitigation funding on the national level is counterproductive to the establishment of state and local planning, therefore NEMA supports the distribution of predisaster mitigation funds by a base plus population formula rather than by competitive grants. The competitive system as it is presently funded creates more losers than winners: in an enterprise that seeks to encourage communities to engage to protect themselves, it seems counterproductive to pit good programs against good programs when the objective is that predisaster mitigation programs be undertaken. Since 2007, in addition to the competitive process, PDM administrators have implemented a $500,000 minimum per state for eligible projects or plans. Given the amount of recent appropriations, this minimum amount means that there will only be funds to implement the competitive process sporadically, if that. Congress may consider examining the PDM program to return to its initial form of award selection by Governors and the President, or establish a strictly competitive grant process. A third option is the present configuration of a hybrid program that is competitive but with some flexibility for awards for every state. Allocations vs. Competition Given the state minimum awards of $575,000 each and the Congressional earmarks, the remaining total funds to be distributed on a competitive basis have diminished to a much smaller amount. In reaction to this trend, the administration suggested, in its FY2010 budget submission, jettisoning the competitive formula (which requires a large peer group panel and a lengthy judging process) in favor of a risk-based allocation formula that would simply continue the distribution to states based on FEMA's assessment of the risk. This approach would have left discretion in the hands of the states to determine their priorities for individual projects. FEMA has done work in risk assessment, particularly its HAZUS program that estimates damage based on assorted disaster scenarios. FEMA defines HAZUS as a powerful risk assessment methodology for analyzing potential losses from floods , hurricane winds and earthquakes . In HAZUS-MH, current scientific and engineering knowledge is coupled with the latest geographic information systems (GIS) technology to produce estimates of hazard-related damage before, or after, a disaster occurs. FEMA suggested it would use other inputs as well to determine its risk-based allocations. While that budget suggested a new approach to the distribution of funds, the reauthorization legislation, P.L. 111-351 , wrote the competitive process into the law. Also, the reauthorization legislation increased the minimum amount per state to $575,000, further reducing the pool for a competitive process. In its subsequent budget submissions (from FY2011 through FY2015), the Administration has made no mention of the risk-based proposal to supplant the competitive process. Previously, the directives for a competitive process had been promoted in annual appropriations measures. This presented a question for Congress: whether to accept the Administration's initiative, which was only broached once, or continue with the competitive approach. One early indication that the new approach to risk-based allocations would not be adopted was the commentary in the House Homeland Security Appropriations Report: As part of the budget, FEMA requested to drastically change the distribution methodology used for awarding PDM grants. However, the agency was unable to adequately articulate to the committee the ramifications or benefits of their new approach and signaled that the proposal was still being developed. The House Appropriations Subcommittee for Homeland Security said it would not approve of the change. The argument may be moot since the Administration's subsequent budgets did not contain any reference to a risk-based funding approach. Perhaps more importantly, if the annual funding level for the PDM program remains at its lowest ebb, coupled with state minimums, it may not be practical to carry out a competitive grant program. However, since there is a substantial carryover balance in the fund from previous years, the competitive process could be used again to more efficiently distribute parts of that balance in combination with new appropriations. In FY2014 FEMA is using carryover funds to increase the amount of funds available. For FY2014, FEMA "increased the PDM funding from $23 million to $63 million" and announced that the award application period would be open until late July of 2014. FEMA has noted that while not using the panel process of outside practitioners, FEMA will review applications based on the Agency's priorities. A Different Approach to Mitigation An entirely different approach to mitigation administration would be to make a structural change in program delivery. Under this proposal, the PDM program and the HMGP program would move from FEMA either to a newly created Federal Mitigation and Recovery Authority or to a different Department, such as HUD. In the aftermath of Hurricane Katrina there had been criticism of FEMA's uncertain role in long-term recovery as opposed to its initial role in delivering emergency response programs such as temporary housing. (The latter also drew criticism, but FEMA's authority and responsibility for the housing mission was not in question.) Recently, in late 2012, the east coast was struck by Hurricane Sandy, which left a residue of damages and rebuilding challenges in it wake. The development of a separate Recovery Strategy for Hurricane Sandy, chaired by HUD, continued to raise questions regarding FEMA's role in long-term recovery work and in the mitigation required to reduce future damage. It is in this context that some have suggested that a separate authority/organization with expertise in the rebuilding cycle could be partnered with mitigation programs. In this way, two important phases—building back safer while also making communities more resilient to weather subsequent events—could receive separate but complementary attention. PDM requires planning and community-wide participation, as does recovery. The roles FEMA is expected to assume are diverse and require very different skills. Some experts have noted the differing roles may not be complementary. However, it is not clear to us that institutional arrangements that are appropriate for implementing emergency measures after a disaster has occurred (crisis response) are also the appropriate institutional arrangements for long-term forward planning of mitigation measures before a disaster has occurred (given the three levels of government with jurisdictional mandates in this context), which in turn may not be appropriate for planning the long-term recovery of devastated regions. This discussion has only been exacerbated in the response to Hurricane Sandy. Despite a long inter-governmental planning process led by FEMA that resulted in the National Disaster Recovery Framework (NDRF), when a large catastrophic event hit, the NDRF was not the organizing principal for the federal government toward the long-term recovery of the affected area. Instead, the Administration set up an ad hoc Recovery Strategy with the leadership tasked to the HUD Secretary. Similarly, the Disaster Resilience Competition, as with the post-Sandy competitions, being run by HUD, accentuates questions as to leadership in this area. It may be that any proposed separate authority for emphasis on mitigation and long-term recovery work may follow a similar path. Perhaps the recent unveiling of a new "Disaster Resilience Competition" provides some hint at the future direction of pre-disaster mitigation or mitigation overall. The competitive program, announced by the President in June of 2014, has $1 billion in funding; the last $1 billion of the initial $16 billion provided to HUD's CDBG program in the Hurricane Sandy supplemental. From the $1 billion total, $180 million is set aside for projects in Sandy- affected states. The remaining $820 million is available for other states that managed disasters during 2011, 2012, and 2013. One analyst summarized the program as a competition that will: support innovative resilience projects at the local level while encouraging communities to adopt policy changes and activities that plan for the impacts of extreme weather and climate change and rebuild affected areas to be better prepared for the future. Upgraded Codes and Zoning In a hearing on the reauthorization of the PDM program, then Subcommittee Chair Eleanor Holmes Norton queried panelists on evaluating the status and quality of local codes and zoning as part of the assessment of PDM grant proposals. It could be argued that appropriate codes would best reflect the "degree of commitment by a state or local government" that the Stafford Act lists as a consideration. While Representative Norton did not endorse that approach, she was interested in hearing from panelists representing state and local officials. Panelist Jim Mullen of Washington State noted the difficult and lengthy process in changing a code but also noted the need for local commitment to accomplish such changes. Other experts have pointed out the opposition that such proposed changes can generate within a community. Developers, builders, and other economic interests, including individual property owners, often oppose the adoption of strict land-use regulations and building standards and too often successfully prevent their adoptions. They argue that such regulations will increase the cost of building, reduce the value of property, limit the prerogatives of property owners in terms of what they can and cannot do with their property, and make it more difficult to sell the property to others. In large measure, their arguments are valid. The question, however, is whether those concerns outweigh the potential costs of not mitigating disasters. Local codes and zoning can arguably be considered the strongest commitment to mitigation that can be made by a governmental entity. That approach, the insistence on strong local codes, has been a part of the National Flood Insurance Program (NFIP) since its inception. NFIP regulations stipulate a criterion for participation in the flood insurance program. the adequacy of a community's flood plain management regulations. These local regulations must be legally enforceable, applied uniformly throughout the community to all privately and publicly owned land within flood-prone, mudslide (i.e. mud flow) or flood-related erosion areas, and the community must provide that regulations take precedence over any less restrictive conflicting local laws, ordinances, or codes. Shifting more of the PDM program to a code or zoning threshold could challenge communities to a greater mitigation commitment than required under current program criteria. As one observer has noted, a dominant federal role may appear logical in the context of overall disaster spending and in its purpose to save lives and protect property. However, the perceived federal leadership and funding also may come at a price beyond the budgetary implications. The perception of federal benevolence discourages responsible hazard mitigation among nonfederal interests, thus contributing to the potential for greater losses in future disasters. Shirking responsibility for hazard mitigation among states and local governments may take two forms: (1) unwillingness to expend their own funds for disaster planning and hazard mitigation and (2) avoidance of the political and fiscal burdens of regulating land use in areas subject to natural hazards. While strong and effective codes may reduce the impact of hazards, local officials, it may be argued, are weighing other considerations regarding economic growth for the community, which in turn contribute to the support of many other local governmental obligations. Additionally, the PDM program is voluntary. Communities participating in the program are taking the initiative to protect their citizens and their property. In most cases, these communities are also paying the 25% cost share for the project or plan. Another consideration is that for a program that has been criticized for its pace of expenditures, linking such spending to the development of codes or changes in zoning laws would likely create a far more lengthy application and award process. The 113 th Congress' continuing interest in this area can be noted in legislation that seeks to link mitigation concepts with zoning. The proposed legislation seeks to "enhance existing programs providing mitigation assistance by encouraging states to adopt and actively enforce state building codes." The bill links support for codes to both the Hazard Mitigation Grant Program (Section 404 of Stafford) and the PDM program. Multiple Mitigation Programs Another issue for Congress is consideration of the PDM program within the context of federal hazard mitigation policy as a whole. However, that whole is divided among varying approaches involving timing, targeted funding for particular hazards (notably flooding), and separate funding accounts within FEMA. Earlier in this report the relationship was noted between the PDM program and the post-disaster HMGP program. In addition to those two programs, FEMA also administers the Flood Mitigation Assistance (FMA) program, which is part of the flood insurance program. With the passage of Biggert-Waters 2012, two FEMA programs, the Repetitive Flood Claims Program (RFC) and the Severe Repetitive Loss Program (SRL), were collapsed as separate programs but their intended targets are now eligible under FMA as a whole. These mitigation grant programs have some differences, but generally can fund similar projects. The history behind the programs indicates Congressional intent to address specific problems and also provide discretion to state and local governments in the manner they choose to address specific hazards. In discussing the overall impact of its programs, FEMA's Mitigation Directorate reported that the existing mitigation grant programs awarded more than $827 million to 1,924 projects and plans nationwide in 2012. The majority of that funding came from the HMGP program, which receives its funding on a formula basis from the Disaster Relief Fund (DRF). The other programs, such as PDM, FMA, and the repetitive loss programs, are individual accounts funded through the annual appropriations process. The Mitigation Directorate at FEMA has taken steps to, if not totally blend the programs, make sure that the programs are complementary. A good example of this approach is that the guidance provided for grant applications stresses early on that it "does seek to integrate programs by allowing applications to be considered by other mitigation programs." For the FY2009 grant award period, FEMA issued a Unified Hazard Mitigation Assistance (UHMA) guidance. The 111 th Congress had expressed its interest in this issue. In a report accompanying the House Appropriations bill, the Committee included the following directive. The Committee notes that this program is one of several mitigation programs run by FEMA, including the Repetitive Flood Claims grant program, the Flood Mitigation Assistance program, the Hazard Mitigation Grant Program, and the Severe Repetitive Loss grant program. Each program has a different authorization, but all aim to mitigate losses from future disasters. The Committee directs FEMA to report to the Committee within six months of enactment of this Act on a mitigation strategy showing how each program contributes to mitigation goals. Similarly, the Committee report accompanying H.R. 1746 (which became P.L. 111-351 ) noted: FEMA's goal is to unify the administrative requirements of hazard mitigation assistance programs by using common systems and tools, and by simplifying and streamlining the application and eligibility determination process. FEMA expects this will improve program implementation, management and close-out. The focus is on simplifying the process for both FEMA and the communities they serve. The Committee supports these efforts. An issue for Congressional consideration is whether the programs should be combined for greater and more consistent impact, or whether mitigation is best accomplished through a mosaic of mitigation programs. In addition, another subject for consideration is that the damage reductions accomplished by these mitigation programs are reflected in smaller payments from the DRF for future disaster events. Given that fact, an argument can be made that funding for a combined mitigation program could come from the DRF through an annual allocation rather than for separate events and separate accounts. A combined program could address all hazards as is the case with the PDM and HMGP programs. An additional argument can be made that eventual savings from mitigation activities would accrue to not only the National Flood Insurance Program (NFIP) but also the private insurance industry as losses are reduced. For that reason, it might be argued, payments for at least one program, the FMA, should continue to come from the NFIP. This view of mitigation may also be an argument for the federal government and states to consider encouraging mitigation approaches through private insurers by insisting on the adoption and implementation of mitigation measures similar to the process the NFIP employs. The Biggert-Waters Act did address the mitigation programs under the NFIP. It made permanent some pilot programs and sought to combine the multiple mitigation programs in flood insurance into the FMA. Under FMA there is now a greater federal share available for severe and repetitive loss structures. Concluding Observations Over the last decade, the Pre-Disaster Mitigation program has developed and grown as mitigation itself has become accepted federal policy. Adoption and expansion of mitigation as a beneficial approach for government has been bolstered by studies that demonstrated cost reductions following disasters due to earlier mitigation investments. Appraisal of the PDM program is open to different interpretations and conclusions. While program staff at FEMA point to a program with flexibility and an appreciation of the regulatory challenges faced by communities carrying out mitigation projects, other observers see what appears to be the contrary, citing unspent funds and a perceived rigidity in program guidance that hinders the flexibility of local governments in accessing the PDM funding and in using it in a manner they choose. While the greatest portion of the program funds are spent on mitigation projects, an even greater number of selected proposals are those associated with the development and improvement of state and local mitigation plans. As funds have decreased, planning has become a more realistic use of funds for many jurisdictions rather than projects that may require more resources. The remainder of funds are spent for technical and administrative assistance or held back for "reconsideration" for some awards. In FY2008 and FY2009 Congress directed the funding of some PDM projects. The earmarks were broadly distributed as previous PDM funding has been. The congressional earmarks represented 44% and 27% of funds available for the competitive and set-aside PDM grants for 2008 and 2009, respectively. The congressionally directed grants also funded some projects that did not appear to be in accord with FEMA's program guidance. The earmarks have now ended but the lower appropriated levels leave the program with the same issues regarding its visibility and how best to distribute the funding that remains. The 111 th Congress last reauthorized the PDM program for three years and codified some program practices. That reauthorization has now lapsed. However, it is also worth noting that Congress's interest in mitigation remains. As previously noted, legislation has been introduced to reauthorize PDM. Recent legislation has been introduced in the 113 th Congress in both chambers to add a mitigation component to FEMA's Fire Management Assistance Grants (FMAGs) which are authorized under the Stafford Act in Section 420. Within this discussion it should also be noted that while mitigation found its footing over the last 10 years as evidence supported its cost-benefits, the terminology of "resilience" became fashionable and, it could be argued, confusing. This "rebranding" may have sought to broaden the concept, or simply to provide a new identity to this work to reinvigorate it. But changing the vocabulary also can sow confusion among potential recipients, causing them to ask: "Does mitigation contribute to resilience? Or is resilience a broader concept than addressing natural hazards?" Some have conjectured that resilience is a broader term than mitigation that reaches beyond engineered projects to human habits and desires. Considered in this fashion, mitigation would appear to contribute to overall resilience. One observer notes the way that resilience and mitigation can co-exist and be complementary: The National Preparedness Goal defines resilience as, "The ability to adapt to changing conditions and withstand and rapidly recover from disruption due to emergencies." The use of steel reinforcement to allow buildings to sway with an earthquake is an example of both mitigation and resilience. The ability of the Internet to allow information-packets to find multiple open channels and opportunistically use whatever is available is another example of resilient design that can mitigate the impact of a threat. To either further the confusion or bring some clarity to the argument, the President's most recent budget (FY2015) contained an Opportunity, Growth, and Security Initiative. That initiative suggested directing $400 million into the PDM program to promote resilience and mitigation measures. This was within the same budget that recommended zeroing out the PDM program. Recent budget submissions by the Administration, including the recent FY2015 budget, have staked out varying positions on PDM. Those positions, along with the issues discussed in this report, are some of the broader considerations the Congress may choose to take up regarding federal mitigation policy in the future and the PDM program's role in that policy.

Pre-Disaster Mitigation (PDM), as federal law and a program activity, began in 1997. Congress established a pilot program, within the Appropriations Act, which FEMA named Project Impact, to test the concept of investing prior to disasters to reduce the vulnerability of communities to future disasters. Several years later, P.L. 106-390, the Disaster Mitigation Act of 2000, authorized the PDM program in law as Section 203 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act. However, unlike the rest of the Stafford Act which has a freestanding authorization, the PDM program had a sunset provision and has required reauthorization in the ensuing years. For most of its history, the PDM program had grown in appropriated resources as well as the scope of participation nationwide. But that growth ceased in 2011 when funding was cut in half. The Administration has recommended no PDM funding for the past three budgets (including FY2015). However, Congress has chosen to maintain funding, albeit at a reduced amount. For FY2014 the appropriated level was $25 million. All of this has contributed uncertainty to the program at all levels and to the concept of disaster mitigation outside of Presidential declarations or the National Flood Insurance Program (NFIP). An interesting interregnum in the PDM program's history is its involvement in the debate over congressionally directed funding. Many projects, and a large portion of the program's funding, were earmarked for several years. These actions created questions of eligibility for some projects named but also meant that the lower level of remaining funds in the program could not justify the regimen of a competitive grant process. The FY2015 budget has offered a mixed message for pre-disaster mitigation efforts. Despite again zeroing out the PDM budget, the Administration also has sought to establish the "Opportunity, Growth, and Security Initiative" (OGSI) and pledged that $400 million derived from the OGSI would be placed in the PDM account for a renewed, competitive grant program. The PDM program's authorization (P.L. 111-351) expired at the end of FY2013. Legislation has been introduced, H.R. 3282, to reauthorize the program through 2018. In addition to the waning of funding and congressional retractions of earmarks, the current Administration has consistently suggested elimination of the program. Taken together these actions leave the program with a clouded future that may be confusing to current recipients as well as discouraging to potential applicants. In its rationale for eliminating PDM funding the Administration has pointed to remaining mitigation programs such as the Hazard Mitigation Grant Program (Section 404 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act) and the Flood Mitigation Assistance Program within the NFIP. While both of those are mitigation programs, the former is only available after major disaster declarations and the latter can only be used to address flood hazards on NFIP insured structures. In considering the PDM program's future, the recent decision by the Administration to place a new Disaster Resilience Competition Grant within the Department of Housing and Urban Development (HUD) further complicates the program's future. The new program was arguably placed at HUD since the funds are coming from the last $1 billion in the Hurricane Sandy Community Development Block Grant (CDBG) appropriation. But given FEMA's previous role in establishing mitigation plans at the state and local level, as well as its other mitigation programs, placing a new competitive program tied to climate change at a different department may cause some to question FEMA's role in future mitigation efforts. Combined, the actions noted at HUD and the new OGSI initiative, may hold out the promise of the highest funding levels in the history of pre-disaster mitigation. In light of these initiatives, Congress may wish to examine where the program's future course lies. This report will be updated as warranted by events.

Background Since its inception, the Higher Education Act (HEA) of 1965 has had a focus on increasing the postsecondary access and achievement of disadvantaged students, including low-income and first-generation college students. The two major approaches are financial support and supportive services. The Pell Grant program is the single largest source of federal grant aid supporting primarily low-income postsecondary education students. The Pell Grant program is estimated to provide approximately $30.1 billion to approximately 7.6 million undergraduate students in FY2019. The TRIO programs are the primary federal programs providing support services to disadvantaged students to promote achievement in postsecondary education. The Higher Education Amendments of 1968 (P.L. 90-575) consolidated a "trio" of programs under one overall program. The number of TRIO programs has since expanded to six, and they were funded at a total of $950 million in FY2017. Collectively, the TRIO programs are designed to identify qualified individuals from disadvantaged backgrounds, prepare them for a program of postsecondary education, provide support services for postsecondary students, motivate and prepare students for doctoral programs, and train individuals serving or preparing for service in the TRIO programs. TRIO services support the federal policy goals of secondary school completion, college preparation, college enrollment, undergraduate completion, and graduate school preparation. There are six main TRIO programs (in descending order of funding levels): TRIO Upward Bound (UB) Program, TRIO Student Support Services (SSS) Program, TRIO Talent Search (TS) Program, TRIO Educational Opportunity Centers (EOC) Program, Ronald E. McNair Postbaccalaureate Achievement (McNair) Program, and TRIO Staff Development (Training) Program. The Higher Education Opportunity Act (HEOA; P.L. 110-315 ) of 2008 made several changes most recently to the TRIO programs to increase accountability, rigor, and uniformity and to ensure that all disadvantaged students had access to the programs. In 2010, the U.S. Department of Education (ED) released the final regulations to implement the HEOA TRIO program provisions. This report serves as an introduction to the TRIO programs. The initial section describes the provisions of each of the programs, as reauthorized by HEOA. The subsequent section provides a brief overview of recent funding and participation trends for each of the programs. This is followed by a description of unique provisions and regulations that are common to the TRIO programs, highlighting key HEOA and regulatory changes. A concluding section presents the key findings and results of recent program evaluations and assessments. Pipeline of TRIO Programs The federal TRIO programs provide support services and some financial assistance primarily to low-income, first-generation college students to help them succeed academically and encourage them to advance through much of the educational pipeline. The TRIO programs work together to provide a pipeline of support services from secondary school through undergraduate education. Each of the TRIO programs is designed to serve a different target population of participants through a different level of education. The following subsections describe the purpose, eligible recipients, program participants, program intensity and activities, and outcome criteria of each of the TRIO programs and are ordered according to their sequence in the educational pipeline: UB primarily supports the college preparation of secondary students, TS primarily supports the postsecondary enrollment of secondary students, EOC primarily supports the postsecondary enrollment of adult students, SSS primarily supports the completion of undergraduate education, McNair primarily supports graduate school preparation, and Training supports TRIO staff development. For a comparison of eligible grant recipients, program participant requirements, and required program activities, see Table 1 , Table 2 , and Table 3 , respectively. TRIO Upward Bound (UB) Program8 The UB program is intended to provide intensive preparation and encouragement toward success in education beyond secondary school. UB has three types of projects: Regular UB to prepare secondary school students for programs of postsecondary education, UB Math and Science Centers (UBMS) to prepare high school students for postsecondary education programs that lead to careers in the fields of math and science, and Veterans UB (VUB) to assist military veterans to prepare for a program of postsecondary education. Compared to Regular UB projects, UBMS projects typically serve more students in their junior or senior years, serve students with stronger math and science skills, and emphasize the summer component more. Eligible Recipients Grants or contracts are available to institutions of higher education (IHEs); public and private agencies and organizations, including community-based organizations (CBOs) with experience in serving disadvantaged youth; secondary schools; and combinations of such institutions, agencies, and organizations. Program Participants All participants must have completed eight years of elementary education or be at least 13 years of age but not more than 19 years of age, unless the age and grade limitation defeats the purpose of the program. In addition, all participants must be in need of academic support to pursue education beyond secondary school successfully. At least two-thirds of the program participants must be low-income, first-generation college students. The remaining one-third of Regular UB and VUB participants must be low-income, first-generation, or at risk of academic failure. The remaining one-third of UBMS participants must be low-income or first-generation. Program regulations define a Regular UB participant who has a high risk for academic failure as an individual who is not at the proficient level on state assessments in reading or language arts; is not at the proficient level on state assessments in math; has not successfully completed pre-algebra or algebra by the beginning of the 10 th grade; or has a grade point average of 2.5 or less (on a 4.0 scale) for the most recent school year. Program regulations define a military veteran who has a high risk for academic failure as an individual who has been out of high school or dropped out of a program of postsecondary education for five or more years; has scored on standardized tests below the level that demonstrates a likelihood of success in a program of postsecondary education; or meets the definition of an individual with a disability. For each new grant competition after 2010, the Secretary identifies the minimum number of participants and the minimum and maximum grant award amounts in the Federal Register notice inviting applications. Program Intensity and Activities Historically, UB has been a relatively high-intensity program for precollege students. In FY2017 on average, Regular UB, UBMS, and VUB projects expended $4,458, $4,436, and $2,163 per participant, respectively. The Regular UB and UBMS per-participant spending is, on average, at least 10 times higher than TS and EOC projects, which may also serve secondary school students. The HEA requires each grantee to provide the following seven services: instruction in mathematics through precalculus, laboratory science, foreign language, composition, and literature, as part of the core curriculum in the third and succeeding years; academic tutoring to enable students to complete secondary or postsecondary courses; secondary and postsecondary course selection advice and assistance; assistance in preparing for college entrance examinations and assistance in completing college admission applications; information on student financial aid opportunities and assistance in completing financial aid applications; guidance on and assistance in methods for achieving a secondary school diploma or an equivalent or postsecondary education; and education or counseling services designed to improve financial and economic literacy. Per regulations, Regular UB and UBMS grantees must provide a summer instructional component. Regulations also require UBMS grantees to provide participants with opportunities to learn from mathematicians and scientists who are engaged in research and teaching and opportunities with graduate and undergraduate science and mathematics majors. Program statute lists permissible activities such as exposure to cultural events, academic programs not usually available to disadvantaged students, mentoring programs, and programs and activities designed specifically for special populations. Program regulations allow UB grantees, under certain conditions, to pay tuition for courses that will allow participants to complete a rigorous secondary school program of study and room and board for a residential summer instructional component. Regular UB and UBMS grantees may also provide such services as cultural or academic field trips, mentoring, work-study, or stipends. The Regular UB and UBMS stipends may not exceed $40 per month for the academic year component and may not exceed $60 per month for the three-month summer recess, except that youth participating in work-study may be paid $300 per month during the summer recess. Regular UB and UBMS stipends are for full-time, satisfactory participants only. VUB grantees may provide such services as short-term remedial or refresher courses, stipends, and assistance accessing veteran support services. The VUB stipend may not exceed $40 per month and is for full-time, satisfactory participants only. Outcome Criteria All UB projects must annually report the extent to which they meet or exceed the goals approved in their application for the following outcome criteria: the number of participants served; participant school performance, as measured by the percentage of participants with a specified cumulative grade point average (inapplicable to VUB grantees); participant academic performance, as measured by the percentage of participants scoring at or above the proficient level on state standardized tests in reading/language arts and math, or, in the case of VUB, receiving a better score on a standardized test after completing the program; secondary school retention and graduation of participants, as measured by the percentage of participants reenrolling at the next grade level or graduating with a regular high school diploma or, in the case of VUB, program retention or completion; completion of a rigorous secondary school curriculum (see box below), as measured by the percentage of current and prior participants expected to graduate who actually graduate with a regular high school diploma and complete a rigorous secondary school curriculum (inapplicable to VUB grantees); postsecondary enrollment of participants, as measured by the percentage of current and prior participants expected to graduate or, in the case of VUB, who have completed the VUB program and enrolled in an IHE within a specified timeframe; and completion of a postsecondary degree, as measured by the percentage of prior participants enrolled in an IHE within a specified timeframe who graduate with a degree within a specified period or, in the case of VUB, completion of postsecondary education. TRIO Talent Search (TS) Program17 The TS program also has the aim of high school completion and postsecondary enrollment. It encourages students to complete high school and enroll in postsecondary education; helps students apply for student financial assistance; and encourages older individuals who have not completed secondary or postsecondary education to enter, or reenter, and complete such programs. Eligible Recipients Grants or contracts are available to institutions of higher education (IHEs); public and private agencies and organizations, including community-based organizations (CBOs) with experience in serving disadvantaged youth; secondary schools; and combinations of such institutions, agencies, and organizations. Program Participants All participants must have completed five years of elementary education or be at least 11 years of age but not more than 27 years of age, unless the age and grade limitation defeats the purpose of the program. Individuals over 27 years of age may participate if they cannot be served by an area Educational Opportunity Centers (EOC) grantee. At least two-thirds of the program participants must be low-income, first-generation college students. Program Intensity and Activities Grantees must provide course selection advice and assistance, assistance in preparing for college entrance examinations, assistance in completing college admission applications, information on student financial aid opportunities, assistance in completing financial aid applications, and guidance on and assistance in methods for achieving a secondary school diploma or an equivalent or postsecondary education. Because TS is a less intensive program than UB, grantees need only provide connections to tutoring and connections to services designed to improve financial and economic literacy. The list of required services, as amended by the HEOA, requires TS grantees to provide a fuller range of services and more intensive services than prior to the HEOA. The average cost per TS participant increased from about $393 in FY2008-FY2010 to $434 in FY2011, the first year of a new grant cycle under the HEOA. For FY2017, the average cost per TS participant was $485. Examples of permissible activities are exposure to cultural events, academic programs not usually available to disadvantaged students, mentoring programs, tutoring, counseling, exposure to careers or higher education, and related programs and activities designed specifically for special populations. Program regulations permit grantees to pay for educational costs, such as tuition, transportation, meals, high school equivalency programs, and college applications, if necessary, for participants. Outcome Criteria All TS projects must annually report the extent to which they meet or exceed the goals approved in their application for the following statutory outcome criteria: the number of participants served; the secondary school retention of participants; the graduation of participants with a regular secondary school diploma in the standard number of years; the graduation of participants having completed a rigorous secondary school curriculum; the postsecondary enrollment of participants; and the postsecondary education completion of participants. TRIO Educational Opportunity Centers (EOC) Program21 Like Upward Bound (UB) and Talent Search (TS), the EOC program also supports high school completion and postsecondary enrollment. EOC provides information on financial and academic assistance available to individuals who want to pursue postsecondary education; provides assistance in applying for admission to postsecondary education and assistance in completing financial aid applications; and improves the financial and economic literacy of students. Eligible Recipients Grants or contracts are available to IHEs; public and private agencies and organizations, including CBOs with experience in serving disadvantaged youth; secondary schools; and combinations of such institutions, agencies, and organizations. Program Participants All participants must be at least 19 years of age, unless the age limitation defeats the purpose of the program. One prominent distinction between the TS and EOC programs is that EOC grantees generally serve an adult population; however, TS may serve adults and EOC may serve secondary-age students if the individuals cannot be appropriately served by the other program and if the individual's participation does not dilute the project's services. In addition, at least two-thirds of the program participants must be low-income, first-generation college students. Program Intensity and Activities EOC projects provide the least intensive services, as reflected by the $254 cost per participant in FY2017. Unlike the other student-serving TRIO programs, EOC statutory provisions do not establish activities required of all grantees. Grantees may provide such services as academic advice and assistance in course selection, tutoring, public information campaigns regarding postsecondary education opportunities, and counseling and guidance. The EOC projects may also provide programs and activities designed specifically for special populations. Program regulations allow spending on transportation, meals, and, with specific prior approval of the Secretary, lodging under limited circumstances because the EOC program is intended to have a low cost per participant. Program regulations also allow grantees to pay for college applications, college entrance examinations, and examination fees for alternative education programs. Outcome Criteria All EOC projects must annually report the extent to which they meet or exceed the goals approved in their application for the following statutory outcome criteria: the total number of program participants; the completion of a secondary school diploma or its recognized equivalent by participants that did not have a secondary school diploma or its recognized equivalent; the enrollment of secondary school graduates who were served by the program in programs of postsecondary education; the number of participants completing financial aid applications; and the number of participants applying for college admission. TRIO Student Support Services (SSS) Program26 The SSS program provides support services to college students with the aim of improving their retention, graduation rates, financial and economic literacy, and transfers from two-year to four-year schools. SSS programs are also intended to foster an institutional climate supportive of potentially disconnected students. Eligible Recipients Grants or contracts are available to IHEs and combinations of IHEs. Program Participants All SSS participants must be enrolled, or accepted for enrollment, at the grantee and be in need of academic support to pursue education successfully beyond secondary school. At least two-thirds of participants must be either students with disabilities or low-income, first-generation college students. The remaining one-third of participants must be low-income students, first-generation college students, or students with disabilities. Also, at least one-third of the participating students with disabilities must be low-income. Program Intensity and Activities In FY2017, SSS projects expended $1,500 per participant, on average. All TRIO SSS programs must offer academic tutoring, directly or through other institutional services; course selection advice and assistance; education or counseling services designed to improve financial and economic literacy; information on student financial aid opportunities and assistance in completing financial aid applications; and assistance in applying for admission to, and obtaining financial assistance for enrollment in, either graduate and professional programs to students enrolled in four-year IHEs or four-year programs of postsecondary education to students enrolled in two-year IHEs. In addition to the required services, grantees may also provide services such as academic or career counseling, exposure to cultural events, academic programs not usually available to disadvantaged students, mentoring programs, temporary housing for homeless and foster care youth, related programs and activities designed specifically for special populations, and student aid stipends. Program regulations allow grantees to provide transportation and, with prior approval of the Secretary, meals and lodging for participants and staff during approved educational and cultural activities sponsored by the project. Program regulations limit expenditures on professional development travel to no more than 4% of staff salaries. Projects may provide student aid stipends to program participants who are in the first two years of postsecondary education and who are receiving Pell Grants. If the needs of Pell-recipient SSS program participants in the first two years of postsecondary education are fulfilled, projects may also provide student aid stipends to Pell-recipient SSS program participants who have completed the first two years of postsecondary education and who are at high risk of dropping out. Student aid stipends must be greater than 10% of the total maximum Pell Grant award amount but no more than the total maximum Pell Grant award amount as determined for each student. Grantees may not use more than 20% of their SSS award for student aid stipends and must match at least one-half of the federal funds used for SSS student aid stipends, in cash, from nonfederal sources unless the IHE is eligible for Title III-A, Title III-B, or Title V of the HEA. Title III-A, Title III-B, and Title V of the HEA provide institutional aid to IHEs with lower-than-average educational and general expenditures and high enrollments of needy students and to historically Black colleges and universities (HBCUs). Outcome Criteria All SSS projects must annually report the extent to which they meet or exceed the goals approved in their application for the following statutory outcome criteria: the number of participants; participant postsecondary retention; the participants who remain in good academic standing; for two-year IHEs, the completion of a degree or certificate and the transfer to baccalaureate degree-granting IHEs; and for baccalaureate degree-granting IHEs, the percentage of students completing the degree programs in which enrolled. Ronald E. McNair Postbaccalaureate Achievement (McNair) Program34 The TRIO McNair program helps prepare disadvantaged college students for subsequent doctoral study by providing research opportunities, internships, counseling, tutoring, and other preparatory activities. Eligible Recipients Grants or contracts are available to IHEs and combinations of IHEs. Program Participants All participants must be enrolled in a nondoctoral degree program at the grantee. At least two-thirds of students served must be low-income, first-generation college students. The remaining one-third of participants must be from a group that is underrepresented in graduate education, including Alaska Natives, Native Hawaiians, and Native American Pacific Islanders. Program Intensity and Activities In FY2017, on average, McNair projects expended $8,766 per participant. All projects must provide academic tutoring, academic counseling, summer internships that prepare participants for doctoral study, opportunities for research or other scholarly activities, seminars and other educational activities designed to prepare students for doctoral study, and assistance in securing graduate program admissions and financial assistance. Projects may provide stipends of no more than $2,800 annually and the costs of summer tuition, summer room and board, and transportation to students engaged in summer research internships, provided that the student has completed the sophomore year before the internship begins. Projects may also provide services such as mentoring programs, exposure to cultural events and academic programs, and services designed to improve financial and economic literacy. Outcome Criteria All McNair projects must annually report the extent to which they meet or exceed the goals approved in their application for the following statutory outcome criteria: the total number of program participants; the provision of appropriate scholarly or research activities for participants; the acceptance and enrollment of participants in graduate programs; the retention of prior participants in graduate study; and the attainment of doctoral degrees by prior participants. TRIO Staff Development (Training) Program36 The TRIO Training program provides training to existing and potential TRIO program staff to improve project administration, operation, outcomes, and outreach. Eligible Recipients Two-year grants or contracts are available to IHEs and public and private nonprofit institutions and organizations. Program Participants Program participants are staff and leadership personnel employed in, participating in, or preparing for employment in, TRIO programs and projects. Program Intensity and Activities Grantees provide annual training through conferences, internships, seminars, workshops, and manuals designed to improve TRIO programs. Allowable costs include transportation and lodging of participants, staff, and consultants and honorariums for speakers. Training is designed specifically for new TRIO project directors and designed to cover specific topics such as legislative and regulatory requirements, the use of educational technology, or strategies for recruiting disconnected students. ED establishes absolute priorities to ensure the desired populations and specific topics are covered in each grant competition. At least one grantee will train new TRIO project directors. At least one grantee will cover the specific topics listed in the application notice. ED also ensures that training is offered in every geographic region and customized to local needs. Outcome Criteria Unlike the student-serving TRIO programs, there are no statutorily defined outcome criteria for the Training program. Program regulations require all Training projects to annually report the extent to which they meet or exceed the goals approved in their application for the following outcome criteria: the number of participants served; assisting participants in developing increased qualifications and skills to meet the needs of disadvantaged students; providing the participants with an increased knowledge and understanding of the TRIO programs; and the applicant meeting all administrative requirements. Comparison of Key Features of the TRIO Programs A comparison of program features and eligible participants across the TRIO programs follows. Program Appropriations and Project Participants The Higher Education Act (HEA), as amended, authorized a total of $900 million for FY2009 and such sums as necessary for each of FY2010-FY2014. Of the TRIO authorization, McNair was authorized at least $11 million for each of FY2009-FY2014. The authorization of appropriations was intended to provide guidance regarding the appropriate amount of funds to carry out the authorized activities of a program. The authorization was extended through FY2015 under the General Education Provisions Act (GEPA), although the programs have continued to receive appropriations. The annual discretionary appropriation is a single amount for all of the TRIO programs. The appropriation provides budget authority to the U.S. Department of Education to incur obligations and authorize payments for the specified programs. An examination of appropriations over the last decade shows that the annual appropriation increased from $828 million in FY2008 to $853 million in FY2010 before declining to $796 million in FY2013 and increasing to $950 million in FY2017. With the increased appropriation in FY2017, the actual FY2017 discretionary appropriation exceeds the FY2008 inflation-adjusted appropriation level of $943 million (in FY2017 dollars). The Secretary allocates the discretionary appropriation to the various TRIO programs. Table 4 displays appropriations and allocations over the latest 10-year period. Through the College Cost Reduction and Access Act (CCRAA; P.L. 110-84 ), ED received a mandatory appropriation of $57 million for each of FY2008-FY2011 to make four-year awards to 186 unsuccessful UB applicants from the FY2007 competition that scored above 70. The mandatory funding was appropriated, in part, to fund several historically Black colleges and universities that lost their awards in the FY2007 competition. The TRIO programs served over 820,000 participants in each of FY2008-FY2010 ( Table 5 ). In each of FY2011-FY2015, the TRIO programs served fewer than 790,000 participants primarily as a result of a reduction in the number of TS participants. The number of TS participants declined, in part, as a result of ED reducing the TS allocation from $142 million in FY2010 to $139 million in FY2011 and establishing $460 as the maximum cost per participant in the FY2011 competition in response to the HEOA amendments, which increased the intensity of TS services. In FY2016 and FY2017, with the increased appropriations levels, the number of participants also increased to more than 810,000 in each year. The FY2017 appropriations agreement instructed ED to increase grant amounts for continuation awards (TS, EOC, and SSS) and increase the number of grantees awarded in the FY2017 competitions (UB and McNair). TRIO participation data reflect the number of participants served by each program. The intensity of services received and the duration of participation differs for each program and among individuals in the same program. Major HEOA Amendments to Common TRIO Provisions Several statutory provisions common to most of the TRIO programs were amended or added by the Higher Education Opportunity Act (HEOA; P.L. 110-315 ) of 2008. The HEOA made several important changes to the grant-making process, which impact the way the Department of Education administers the programs and the way grantees implement their funds. Through the HEOA, Congress also attempted to standardize the grant cycle and maximize the numbers of disadvantaged students participating. Required Program Activities TRIO services support the goals of secondary school completion, college preparation, college enrollment, undergraduate completion, and graduate school preparation. Prior to the HEOA, statutory provisions identified only a list of permissible services for each of the programs. With the exception of EOC, the HEOA defined a list of required services and a list of permissible services for each program. The required services are expected to increase consistency across grantees, and it is hoped that this will increase program effectiveness. All of the required services must be made available to all program participants; however, not all participants may need or choose to avail themselves of the required services. In other words, the required services must be offered by the program, but participants have the ability to choose which services they receive. Grantees may offer services that are not listed explicitly as required or permissible as long as the services further the purpose of the program. The required activities are described in the relevant program sections above and presented for the student-serving programs in Table 3 . Prior Experience Points The TRIO programs have always been designed to reward successful grantees with new grants. In making new discretionary grants, ED employs peer reviewers who have relevant background and expertise to read and evaluate grant applications. The peer reviewers score each application up to 100 points based on a set of selection criteria. ED also calculates prior experience (PE) points based on each applicant's prior experience of service delivery. Student-Serving TRIO Programs For the student-serving TRIO programs, statutory provisions require ED to consider each applicant's prior experience of service delivery by allowing prior grantees to earn additional prior experience (PE) points. Grants are then awarded in rank order on the basis of the applicant's total score─peer review score plus PE points. PE points are awarded according to the extent to which a student-serving TRIO program grantee meets or exceeds the objectives in its prior application. Program regulations prior to passage of the HEOA required that grantees propose ambitious but attainable objectives for the outcome criteria that were defined in regulations. The outcome criteria were primarily based on measures related to the number of participants served and their academic achievements or the services of which they took advantage. The extent to which the grantee met or exceeded its prior grant objectives determined how many of the 15 possible PE points applicants received in the competition. Prior to the HEOA during the FY2006 TS and EOC competitions, several applicants charged that they were denied funding because ED did not apply PE points uniformly and according to its regulations. ED's Office of Inspector General (OIG) found that ED had improperly awarded PE points by not complying with its regulations, awarding PE points to applicants that did not meet minimum requirements, making execution errors, and changing the process. The OIG also found that ED did not have a well-defined, transparent process for reviewing grantee performance and did not hold grantees responsible for serving fewer participants than funded to serve. Congress through the HEOA desired to increase the rigor, quality, effectiveness, and accountability of the TRIO student-serving programs by establishing outcome criteria on which to base PE points for each of the student-serving programs (see Table 6 ). The Secretary and applicant agree upon targets/objectives for each of the outcome criteria, as defined by statute and refined in regulations and Federal Register notices. Statutory provisions also require that the outcome criteria measure the quality and effectiveness of projects annually and over multiple years. By regulation, prior grantees that failed to serve at least 90% of the approved number of participants do not receive any PE points. Some of the outcome criteria raised program expectations above those established in regulations prior to the HEOA. For instance, prior to the HEOA, TS outcome criteria focused on participant numbers, participant demographics, high school retention and completion, and postsecondary enrollment. The HEOA added criteria for the completion of a rigorous secondary school program of education and postsecondary completion. Also prior to the HEOA, the Secretary awarded PE points for UB based on the number of participants served; participants' improvement on standardized achievement tests and grade point averages (GPAs); UB program retention; postsecondary enrollment; and postsecondary education success. The HEOA and regulations revised the criterion of improvement on standardized tests to achievement on standardized tests, revised the criterion of postsecondary success to postsecondary completion, and added a criterion for participants' completing a rigorous secondary program of education. Grant competitions for FY2011 and beyond, following passage of the HEOA and final regulations, use the outcome criteria established by the HEOA. TRIO Training TRIO Training uses a different process for PE points, and it was not amended by the HEOA. ED awards Training applicants based on the peer review score ranking compared to other applicants that address the same absolute priority (see the section on " Required Program Activities "). ED uses PE points in case of a tie in the peer review scores. PE points are awarded per regulations to prior grantees on the basis of their established outcome criteria. Application Review Process (Appeal) Also in response to the OIG report finding that ED improperly awarded PE points and evidence of other errors by ED in processing applications, the HEOA added provisions allowing certain unsuccessful applicants to request a second review of their application, sometimes referred to as an appeal. To be eligible for a second review, the applicant must have evidence of a specific technical, administrative, or scoring error made by ED or a peer reviewer with respect to the scoring or processing of a submitted application, and the applicant must have otherwise met all of the application submission requirements. According to statute to the extent feasible based on the availability of appropriations, the Secretary will fund applications with scores adjusted as a result of a second review if the scores are equal to or exceed the minimum cut score for the competition. Per regulations, the Secretary reserves a portion of the appropriation to award grants under the second review. Under ED regulations, the only applicants eligible for a second review are those that were not funded under the first review but that had an application score that could be funded if the Secretary had reserved 150% of the appropriation actually reserved to fund under the second review. During the FY2012 Regular UB competition, the Secretary reserved almost $9 million (3.5%) of the over $260 million allocation for the second review. In the FY2015 SSS competition, the Secretary awarded approximately $270 million to 968 institutions in approximately July 2015, and following the second review awarded an additional $23.4 million to more than 100 institutions in approximately August 2015. Award Amounts and Numbers of Program Participants Statutory provisions establish a minimum grant award of $200,000 for the student-serving TRIO programs, unless the applicant requests a smaller amount, and $170,000 for the Training program. Per regulations for each new grant competition after 2010, the Secretary identifies the minimum number of participants and the minimum and maximum grant award amounts in the Federal Register notice inviting applications. For example, for the FY2011 TS grant competition, the Secretary required all applicants to propose serving at least 500 participants for no more than $460 per participant. N ew grantees were eligible to receive an award of up to $230,000. Prior grantees were allowed a maximum award of the greater of $230,000 or 103% of their prior award amount. Length of Grant Award The student-serving TRIO program grants are awarded for a period of five years. Training grants are awarded for a period of two years. Prior to the HEOA, student-serving TRIO program grants were awarded for a period of five years to applicants scoring in the highest 10% and for a period of four years for all other applicants. The HEOA allowed the Secretary a one-time, limited extension of grants to synchronize all of the grants on the same schedule. The Secretary extended the SSS projects scheduled to end in 2009 until 2010; the TS and EOC projects scheduled to end in 2010 until 2011; and the UB and McNair projects scheduled to end in 2011 until 2012. These extensions, however, did not synchronize the grant periods. Multiple Grants for Different Populations Some Members of Congress were concerned that ED regulations prevented the TRIO programs from serving the maximum number of disadvantaged students. The HEOA added a provision clarifying that grantees may receive more than one award if the additional awards serve different populations, target areas, target schools, or different campuses. The Secretary publishes the different populations for which an eligible entity may submit a separate application for each grant competition. Applicants that propose serving a different population from the prior grant do not receive PE points for the application serving a new population. Prior to the HEOA, this had been allowed to varying degrees by program regulations. In the FY2010 SSS grant competition, the Secretary defined six different populations: (1) participants who meet the minimum SSS requirements; (2) participants with disabilities exclusively; (3) English as a second language (ESL) participants exclusively; (4) participants receiving services in the science, technology, engineering, and mathematics (STEM) fields; (5) participants receiving services in the health sciences fields; and (6) participants receiving teacher preparation services. Training grantees may receive more than one award if the additional awards are intended to meet different absolute priorities established for the competition. ED includes an absolute priority in a grant competition to focus the competition on specific objectives or activities, and each applicant must address an absolute priority to be eligible for funding. Research, Evaluation, and Assessments Statutory provisions require the Secretary to report annually to Congress on the performance of the TRIO programs, including performance on the outcome criteria. In addition, the Secretary is expected to make grants to, or enter into contracts with, IHEs and other organizations for rigorous evaluations of effective practices of the programs. The results of such evaluations should be disseminated. Statutory provisions permit the Secretary to use no more than 0.5% of the TRIO appropriation for evaluations, the peer review of applications, grantee oversight, and technical assistance. This set-aside for evaluation and other activities has contributed to a large body of TRIO evaluations. This section will highlight recent independent evaluations, ED analyses of grantee annual performance reports (APRs), and ratings from the now out-of-use Program Assessment Rating Tool (PART). Between 2002 and 2008, the Office of Management and Budget (OMB) assessed the effectiveness of federal programs through the PART. OMB reviewed the program's purpose and design, strategic planning, management, and results/accountability. PART was expected to drive program improvement and inform federal appropriations and the legislative process. Through PART, OMB rated not performing programs as ineffective or results not demonstrated and performing programs as adequate , moderately effective , or effective . The results of the PART reviews are included in this report because they informed some of the HEOA amendments, which sought to improve program effectiveness. Also in partial response to the PART, ED published data based on APRs for 2013-2014 and earlier. The data provide grantee-level results for program performance measures such as participant retention, enrollment, and completion. The data are expected to inform improvements in ED program management and participant educational outcomes. ED cautions against comparing results between projects since differences in incoming student characteristics are not quantified. For the same reason, APR data do not allow simple comparisons to outcomes for students who did not participate in a TRIO program. As a result of issues with independent, rigorous comparative evaluations, ED has not published such an evaluation since 2010. One issue is the difficulty in establishing a comparison or control group and ensuring the control does not limit the applicability of the findings. For instance, the comparison or control group may not have a similar risk profile to the TRIO participants, or the comparison or control group receives a treatment that is similar to that of the TRIO participants. Support services that mimic those provided by TRIO projects may supplement the TRIO services provided to TRIO participants and may be provided to the comparison or control group. Another issue is that the evaluations require many years for data collection─following students through secondary and postsecondary education, analysis, and review. For example, an SSS evaluation initiated in 1991 was published in 2010. The evaluation timeframe and legislative cycle are often not in sync. Finally, in general, the evaluation results across a series of studies indicate that the TRIO programs or similar services have a statistically significant positive effect on various academic outcome measures of subpopulation(s) of participants and, in some instances, all participants. For example, the recent SSS evaluation found that receiving supplemental services, including those from an SSS project, was associated with higher postsecondary persistence and degree completion. Also, for example, the recent Regular UB study found that the rate of postsecondary enrollment and the likelihood of earning a postsecondary credential increased significantly for the subgroup of participants who entered the program with lower educational expectations, although the program "had no detectable effect on the rate of overall postsecondary enrollment" compared to the control group. SSS Independent Evaluations AY1991-1992 Freshman SSS Participants ED contracted a six-year longitudinal evaluation of AY1991-1992 freshman SSS participants and a matched comparison group. Despite efforts to select a similar comparison group, the comparison group students were less educationally and economically disadvantaged than the SSS participants. The three-year longitudinal interim evaluation, published in 1997, indicated that "SSS showed a small but positive and statistically significant effect on all three measures of student outcomes," grade point averages, retention rates, and college credits earned. An ED contractor published a study of promising practices in 1997 based on five projects identified in the aforementioned evaluation that had achieved positive, statistically significant results with respect to GPA, retention, or both. The most common practices at the five exemplary sites were providing a freshman experience, emphasizing academic support for developmental and popular freshman courses, maximizing student contact, recruiting selectively, providing incentives for participation, hiring dedicated staff, and having a prominent role on campus. In 2010, the contractor published the final report of the six-year longitudinal evaluation. The study concluded that postsecondary supplemental services are associated with better student outcomes, generally. Participation in SSS as a freshman was associated with receiving more supplemental services from other sources as well and with a "moderate" increase in postsecondary persistence and degree completion. However, the study found that participation in SSS as a freshman was not associated with a change in the rate of transfer from two-year to four-year colleges. Receiving supplemental services from any source over the six-year period, particularly in the later years, was associated with higher postsecondary persistence and degree completion than receiving supplemental services from the SSS program during the freshman year only. Models comparing the SSS participants to students in the matched comparison group found that supplemental services were associated with a 12-19 percentage point increase in retention or degree completion, an 8-10 percentage point increase in degree attainment, and a 16 percentage point increase in transfers from two-year to four-year institutions. Models based on the number of hours of participation in various services found that supplemental services were associated with a 15-24 percentage point increase in retention or degree completion, an 11-13 percentage point increase in degree attainment, and a 10 percentage point increase in transfers from two-year to four-year institutions. The specificity of the results to SSS is limited because freshman SSS participants received supplemental services through SSS and other programs; the intensity and types of SSS services varied considerably; some individuals in the comparison group received supplemental services from non-SSS programs; and students must have persisted to receive supplemental services. The study also found that a positive effect on student outcomes was associated with certain, specific supplemental services: home-based SSS programs, blended SSS programs, peer tutoring provided by the SSS grantee, services for disabled students provided by the SSS grantee, counseling, field trips or cultural enrichment, referrals to outside resources, services for the disabled and for those with limited English ability, college reentrance counseling, and any recent contacts with support services. Home-based SSS programs provide a home base on campus at which students may receive a broader range of services. In contrast to home-based programs, some SSS services were blended with other services on campus. 2006 SSS Promising Practices ED initiated another study of SSS promising practices in 2006. The study did not meet methodological standards and thus will not be released. AY2007-2008 Freshman SSS Participants In August 2015, ED released a study of postsecondary persistence and completion rates, comparing students who first participated in the SSS program as college freshmen in AY2007-2008 to a sample of students who began college during AY2003-2004 and who were either low-income, first-generation college students, or students with disabilities who also demonstrated some form of academic need. The sample of AY2003-2004 beginning college students was drawn from ED's 2004/09 Beginning Postsecondary Students Longitudinal Study (BPS:04/09). Because of the difference in the timeframe of the students and resulting differences in student and institutional characteristics, the persistence and completion outcomes for the AY2007-2008 SSS participants and AY2003-2004 BPS:04/09 cannot be compared to determine the effectiveness of SSS. Overall this study noted that "SSS participants appeared to have higher persistence and completion rates in postsecondary education at both two-year [and] four-year institutions." For students who first enrolled in two-year institutions, the SSS persistence rate (persistence includes continued enrollment or certificate/degree completion) to the following year was 86% and the three-year completion rate (completion includes transfer to a four-year institution or certificate/degree completion) was 41%. For SSS students who first enrolled in four-year institutions, the persistence rate to the following year was 93% and the six-year bachelor's degree completion rate was 48%. BPS:04/09 sample students who first enrolled in two-year institutions had a 65% persistence rate to the following year and a 21% three-year completion rate. Among BPS:04/09 sample students who first enrolled in four-year institutions, the persistence rate to the following year was 79% and the six-year bachelor's degree completion rate was 40%. SSS PART Reviews and Annual Performance Report Data A 2005 OMB PART review determined that the SSS program was moderately effective . Moderately effective programs had ambitious goals and were well-managed but needed to improve their efficiency or address other problems in the programs' design or management in order to achieve better results. According to the review, ED had not made grantee-level performance data available publicly, had not fully met its performance goals, and had not developed targets for its program efficiency measure. ED has published APR data on program performance measures and efficiency for 2005-2006 through 2013-2014. Based on the 2010-2011 through 2013-2014 APRs, approximately 87% of participants who were enrolled in the SSS project for the first-time as first-time, full-time freshmen persisted, graduated, or transferred from a two-year to a four-year IHE by the beginning of the next year. The six-year graduation rate was approximately 50% for participants who were enrolled in the SSS project for the first-time as first-time, full-time freshmen at four-year IHEs. The three-year graduation/transfer rate was approximately 40% for participants who were enrolled in the SSS project for the first time as first-time, full-time freshmen at two-year IHEs. UB Independent Evaluations The most recent evaluation report of Regular UB was a nine-year impact study contracted by ED. The study analyzed randomly assigned treatment and control groups from nationally representative projects from 1992 to 2004. The official results determined that Regular UB "had no detectable effect on the rate of overall postsecondary enrollment or the type or selectivity of postsecondary institution attended for the average eligible applicant." Postsecondary enrollment of the treatment group was 81% compared to 79% for the control group. However, the official results found that there was a five percentage-point increase in Regular UB participants earning postsecondary vocational certificates/licenses compared to nonparticipants, that the likelihood of the subgroup of Regular UB participants who entered the program with lower educational expectations earning a postsecondary degree/certificate/license increased by 12 percentage points, and that each additional year of participation in a Regular UB project resulted in a 5 percentage-point increase in the likelihood of receiving a bachelor's degree. A separate analysis of the study data was completed by the ED Contracting Officer's Technical Representative for the aforementioned study and published by the Council for Opportunity in Education (COE) without ED endorsement. The study was intended to address a number of perceived sampling design and nonsampling error issues in the official analysis. Examples of these issues included allowing one of the 67 projects sampled to represent 26% of the Regular UB universe of projects and a considerable proportion of the control group population receiving services similar to those offered through the Regular UB program, including participation in a UBMS program. The alternative analysis found a 10.9 percentage-point increase in postsecondary enrollment and a 50% increase in the probability of achieving a bachelor's degree for Regular UB and UBMS participants compared to the control group. However, the alternative analysis has its own limitations. For instance, the results do not represent the Regular UB universe since a project representing 26% of the Regular UB universe was removed from consideration. Additionally, the treatment and control groups become unequally weighted because individuals were reassigned from the control to the treatment group by the analyst in instances when the individual indicated exposure to UBMS. A component of ED's UB study evaluated a random sample of 1993-1995 UBMS participants and a comparison group of students with similar characteristics. Within four to six years of expected high school graduation, the study found that UBMS student outcomes were positive, showing an average 0.1 point GPA increase in math courses, higher enrollment in physics and chemistry courses in high school, a 10 percentage-point increase in enrollment in more selective four-year colleges, and a 6%-12% increase in the completion of math and science bachelor's degrees. Within seven to nine years of expected high school graduation, a second study found that participation in UBMS was associated with increased enrollment in selective four-year colleges and increased postsecondary degree completion, particularly in the social sciences. As part of the FY2007 Regular UB competition, ED included an "absolute priority" that would allow it to initiate a random assignment, control group evaluation. The absolute priority set rules regarding which students would be given priority for participation in the program and called for an evaluation of the program using a control group of students who would not receive UB services. The evaluation design required all grantees to be prepared to recruit sufficient students for the control and treatment group and ensure the integrity of the control and treatment groups. Some Members of Congress and stakeholders opposed as unethical the recruiting of a control group of primarily low-income and minority students that would not receive services. In addition, the selection criteria were vigorously opposed by many grantees who also questioned ED's authority, repudiated the effectiveness of recruiting a greater number of younger students, and argued that serving more students who have a high academic risk for failure would change the program's focus and effectiveness. The TRIO UB "absolute priority" also required grantees to begin serving students who had completed the 8 th grade, but not the 9 th grade. This priority was established in response to the nine-year impact study (described earlier) that indicated that postsecondary enrollment rates increased for participants who were served multiple years. The HEOA eliminated the absolute priority for the TRIO UB program and amended the evaluation requirements to preclude excess recruiting and the denial of services as part of the evaluation methodology. ED initiated a study of UB promising practices in 2006. The study did not meet methodological standards and thus will not be released. In place of ED's intended evaluation, the HEOA required a rigorous evaluation of UB identifying practices that further the achievement of a program's outcome goals to be completed by June 30, 2010. ED initiated a five-year, $3.8 million study entitled "A Study of Implementation and Outcomes in Upward Bound and Other TRIO Programs." ED determined that statutory limitations on the study design would make it difficult to meet ED's program evaluation standards and would prevent achieving "reliable results" from a quasiexperimental evaluation of the efficacy of various implementation strategies in UB. In February 2016, an ED contractor concluded the study of common UB program and project practices. The resulting survey report of Upward Bound directors indicated the types of services that programs provide and when, where, and how the services are delivered. Four of UB's core services had predominant approaches present in projects across the board: for academic instruction requirements, 58% of projects indicated a focus on noncredit courses; for tutoring requirements, 69% indicated a focus on homework help; for college exposure requirements, 56% indicated a focus on assistance in researching colleges; and for college application assistance requirements, 50% indicated a focus on providing guidance to complete applications. In 2014, approximately 200 UB projects volunteered to participate in the "Study of Enhanced College Advising in Upward Bound." The study follows 11 th graders who participate in projects using a professional development package to provide semicustomized college advising to students. The demonstration study is intended to assess "a low-cost, enhanced college advising approach ... designed to improve college fit and, therefore, persistence." The evaluation is estimated to cost $6.0 million through September 2018, with a final report expected in 2020. UB PART Review and Annual Performance Report Data A 2002 OMB PART review determined that the UB program was ineffective . According to the PART ratings, ineffective programs are not using tax dollars effectively and have been unable to achieve results due to a lack of clarity regarding the program's purpose or goals, poor management, or some other significant weakness. The review determined that UB projects do not typically target the students, those with lower expectations and at higher risk, for which the program was most effective according to an independent evaluation. The review also found that ED had not regularly conducted independent program evaluations, that program performance results were not used to manage the program, that the awarding of PE points did not encourage first-time grantees, and that the program had not achieved its performance goals. ED has published data on Regular UB and UBMS performance measures for 2004-2005 through 2013-2014. The 2009-2010 through 2012-2013 APRs show that the postsecondary enrollment rate of Regular UB participants expected to graduate high school in the prior year was approximately 82%, and the rate for UBMS was approximately 89%. In 2013-2014, ED modified the postsecondary enrollment calculation methodology to report that 85% and 87% of participants in Regular UB and UBMS, respectively, who graduated from high school in the prior year with a regular diploma enrolled in postsecondary education in 2013-2014. In 2008, an ED contractor published an analysis of 2000-2006 academic progress data from UB and UBMS APRs matched with the students' federal financial aid files maintained by ED. In 2004-2006, Regular UB grantees served seven high schools, on average, and UBMS grantees served 17, on average. Over half (59% and 55%, respectively) of participants stayed in their UB or UBMS project until their expected high school graduation date. Of participants expected to graduate in 2004-2005, 77% of UB participants and 86% of UBMS participants enrolled in postsecondary education by 2005-2006. Postsecondary enrollment increased as the length of project participation increased. For instance of participants expected to graduate in 2004-2005, 55% of one-year UB participants enrolled in postsecondary education by 2005-2006 compared to 91% of three-year or longer than three-year UB participants. For UBMS participants expected to graduate in 2004-2005, 80% of less-than-one-year participants enrolled in postsecondary education by 2005-2006 compared to 87% of one-year or longer than one-year participants. Of the participants who enrolled in postsecondary education, 45% of participants served by two-year IHE grantees enrolled at their grantee institution, 33% served by public four-year IHE grantees enrolled at their grantee institution, and 11% served by private four-year IHE grantees enrolled at their grantee institution. TS Evaluations In 2004, an ED contractor released the Final Report from Phase I of the National Evaluation . The report primarily described the program's history, grant recipients, program staff, program activities, and program participants through 1999. The evaluation also compared project outcomes to the goals established by the individual projects. In 1998-1999, the majority (87%) of projects achieved their secondary school graduation goal; 53% achieved their postsecondary admissions goal; and 38% achieved their postsecondary reentry goal. On average, 71% of high school graduates enrolled in postsecondary education compared to the average goal of 75%. Phase II of the National Evaluation culminated in a limited quasiexperimental study of 1995-1996 ninth graders in Florida, Indiana, and Texas. The study, released in 2006, found that TS participants applied for financial aid at rates 17, 14, and 28 percentage points higher than nonparticipant comparison students in Florida, Indiana, and Texas, respectively. The study also found that the rate of enrollment of TS participants in public colleges and universities was 14, 6, and 18 percentage points higher for Florida, Indiana, and Texas, respectively, than for the nonparticipant comparison groups. Postsecondary enrollment data were only available for public colleges in the states of Florida, Indiana, and Texas. TS PART Review and Annual Performance Report Data A 2005 OMB PART review determined that the TS program was moderately effective . The review determined that ED still needed to make grantee-level performance data available publicly, meet all of its program performance goals, and develop targets for its program efficiency measure. ED has published data on program performance measures and efficiency for 2006-2007 through 2013-2014. Since 2011-2012, approximately 84% of high school seniors applied for financial aid during their senior year. Also since 2011-2012, approximately 80% of college-ready participants enrolled in postsecondary education by the fall term following high school graduation or by the next academic term if the institution deferred the participant's enrollment. College-ready participants are high school seniors who received a regular diploma or alternative award (e.g., certificate of attendance). Participants were more likely to enroll in a college of the same level (two-year or four-year) as sponsored the TS program. For example since 2011-2012, approximately 55% of participants served by two-year IHEs enrolled in two-year IHEs compared to the 62% of participants served by four-year IHEs that enrolled in four-year IHEs. As a comparison since 2011-2012, approximately 54% of participants served by secondary schools and CBOs enrolled in four-year IHEs. EOC Evaluations The evaluation of TS in 2004 included an appendix describing EOC history, grant recipients, program staff, program activities, and program participants based on a 1999-2000 survey of project directors and 1998-1999 annual performance reports. Few data on student outcomes were available. Of the 16% of EOC projects that reported a goal for secondary school completion, the average goal was 58%, and the average completion rate was 93%. Of the 79% of EOC projects that reported a goal for postsecondary admissions, the average goal was 49%, and the average admissions rate was 51%. Finally, of the 67% of EOC projects that reported a goal for postsecondary reentry, the average goal was 46%, and the average reentry rate was 56%. CRS has not been able to identify any rigorous evaluations of EOC as of the date of this report. EOC PART Review and Annual Performance Report Data A 2007 OMB PART review rated the EOC program results not demonstrated . The score reflected a lack of a recent independent evaluation, missing baseline or targets for measuring and achieving efficiencies and cost effectiveness in program execution, a lack of grantee level performance analyses, and a failure to achieve annual performance goals. ED has published data on program performance measures for 2006-2007 through 2013-2014. Since 2011-2012, 60% of college-ready participants enrolled in postsecondary education, and of those postsecondary enrollees, approximately 68% enrolled in two-year IHEs. College-ready participants are participants who received a high school diploma during the year or already had a high school diploma before receiving program services. The enrollment rate of college-ready participants was higher (63%) for participants served by two-year IHE grantees than for participants served by four-year IHEs (56%) or other organizations (59%). McNair Independent Evaluations In 2008, an ED contractor released a report of educational and employment outcomes based on a descriptive analysis of prior McNair participants. The report found that 73% of McNair participants enrolled in graduate school within five to seven years of completing a bachelor's degree, compared to 30% of all bachelor's degree recipients. The report also found that 44% of McNair participants earned a master's degree, 14.4% earned a doctorate degree, and 12.1% earned a professional degree within 10 years of program participation. It is important to note that the findings presented in the report were not the result of a random assignment study design; there may be differences in the propensity to enroll in graduate school between McNair participants and all bachelor's degree recipients. McNair PART Review and Annual Performance Report Data A 2006 OMB PART review determined that the McNair program was moderately effective . The program was in the early stages of measuring and achieving efficiencies in program execution, and the program had not made grantee-level performance data available publicly. ED has published program performance measure data for cohorts of students graduating from college in AY2005-2006 through AY2013-2014. On average, since the 2009-2010 cohort, 70% of McNair participants who received their bachelor's degree enrolled in graduate school within three years. Training Evaluations A major evaluation of the program has not been conducted, and ED does not publish grantee-level performance results.

The TRIO programs are the primary federal programs providing support services to disadvantaged students to promote achievement in postsecondary education. The Higher Education Amendments of 1968 (P.L. 90-575) consolidated a "trio" of programs under one overall program. This report provides a description of the TRIO programs, authorized in Title IV-A-2-1 of the HEA. In FY2017, the TRIO programs were funded at $950 million, and they served more than 800,000 secondary, postsecondary, and adult students. The TRIO programs have been designed to encourage and prepare qualified individuals from disadvantaged backgrounds for success throughout the educational pipeline from secondary school to undergraduate and graduate education. While the TRIO programs primarily serve low-income, first-generation college students, they also serve students with disabilities, veterans, homeless youth, foster youth, and individuals underrepresented in graduate education. The TRIO programs are also designed to award prior grantees that implement successful projects and propose high-quality projects with subsequent grants before awarding applicants without prior TRIO experience. There are now six TRIO programs, each serving a different demographic. The TRIO Upward Bound (UB) Program serves secondary school students, providing relatively intensive preparation services and encouragement to help students pursue education beyond secondary school. The TRIO Talent Search (TS) Program provides less intensive services than UB in support of the completion of high school and enrollment in postsecondary education, and it encourages primarily students and out-of-school youth. The TRIO Educational Opportunity Centers (EOC) Program primarily serves adults. The TRIO Student Support Services (SSS) Program aims to motivate undergraduate students to complete their undergraduate education. The Ronald E. McNair Postbaccalaureate Achievement (McNair) Program prepares undergraduate students for graduate school. Finally, the TRIO Staff Development (Training) Program trains TRIO project staff to be more effective. Several key TRIO program provisions were amended by the Higher Education Opportunity Act (HEOA; P.L. 110-315) in 2008. Two key HEOA amendments address issues pertaining to the application review process: scoring and second reviews (appeals). The first amendment defined outcome criteria that require the Secretary and each grantee to agree upon objectives/targets for the criteria. The extent to which grantees meet or exceed these objectives determines the number of prior experience (PE) points the grantee may earn as part of its application in the next grant competition. Earning more PE points increases the likelihood of funding. The second amendment established an application review process by which those unsuccessful applicants that can identify a specific technical, administrative, or scoring error may have their applications reviewed a second time (appealed). The FY2012 TRIO UB competition was the first to use the revised application review process.

Introduction The year 2014 was pivotal for the North Atlantic Treaty Organization (NATO, or the alliance). Russia's annexation of Crimea, the conflict in Ukraine, and instability in Europe's southern neighborhood sparked recognition of NATO's need to adapt to a changing security environment. NATO shifted its focus from what had been a global security orientation during the post-Cold War period toward a renewed focus on defense and deterrence in Europe. Since 2014, NATO has sought to ensure that it has the political and military tools needed to remain an "unparalleled community of freedom, peace, security and shared values" in this new environment. Several factors are driving NATO's desire to adapt. Among them is the challenge of protecting NATO's military technological superiority over its potential adversaries, and staying ahead of political and technological change. NATO faces both conventional and hybrid challenges, but threats could expand to include new challenges related to the diffusion of technology, the accelerating pace of technological change, or NATO's military and societal dependence on commercial technologies. Operating domains have already expanded to include cyberspace, land, sea, and air, and could soon include space. Policymakers from across the alliance, concerned that NATO's technological edge is eroding across domains, have urged NATO to address the risks and opportunities associated with technological change. In the future, NATO might have to rely as much on its agility and capacity for innovation as it has previously relied on its military technological advantage. This report provides analysis for Congress on how NATO is responding to the technology landscape, and includes sections on the evolving threat environment and how NATO is affected by global trends in defense spending and advancing technology; U.S. defense strategy and its increasing focus on strategic competition for technological superiority and innovation; NATO's response, including institutional strategies as well as national responses from Europe's top-three defense spenders (the UK, France, and Germany); and the opportunities and the challenges that NATO faces in fostering a NATO capacity for innovation in light of technological change. Congress may consider what role it can play in supporting NATO's adaptation to the changing technology environment. For decades, Congress has helped steer U.S. NATO policy and the NATO agenda itself. During the Cold War, Congress played a role in the burden-sharing debates, and it promoted NATO enlargement as a priority in U.S. NATO policy after the Cold War. More recently, Congress has supported U.S. efforts to promote national defense innovation, and it has supported a stronger U.S. military presence in Europe. In February 2018, a group of Senators reconstituted the NATO Observer Group. The group's revival is a signal of Senate attention, and the group is to focus on NATO's emerging challenges, including burden-sharing and defense spending, military capabilities, and NATO's preparedness for unconventional warfare. Congress already has strong relationships with NATO allies as a result of decades of cooperation and its active participation in the NATO Parliamentary Assembly and the Transatlantic Policy Network. Through these and other channels, Congress may be in a position to help NATO anticipate how technology will be used and by whom, and develop the right set of tools to strengthen Euro-Atlantic security. Background At the 2014 Wales Summit, NATO heads of state and government described 2014 as a "pivotal moment." Russia's annexation of Crimea and its aggression in Eastern Europe, they argued, presented a "fundamental" challenge to their vision of a "Europe whole, free and at peace." Russia's cyberattacks and political influence operations were widely seen in Europe as a violation of the established security order. Russia's resurgence continues. In March 2018, NATO accused Russia of a "clear pattern of reckless and unlawful behavior" to destabilize the West, including its support for separatists in Ukraine, its military presence in Moldova and Georgia, its meddling in elections, and its involvement in the war in Syria. In the last few years Russia has expanded its anti-Western rhetoric and shown willingness to use force in pursuit of its political objectives. It has modernized its military and increased investments in unmanned systems and other emerging technologies. Russia reportedly now has sophisticated sensors, space capabilities, and cyber capabilities, as well as long-range precision missiles, which can be used to deliver nuclear weapons or for anti-access/area denial (A2AD) in local conflicts. The latter undermines NATO dominance in operating domains and increases the risks associated with NATO deployments into those areas. Some analysts believe that Russia is reducing the once "gaping qualitative and technological gap" between Russian and NATO military forces. On NATO's southern flank, technologies are also reshaping the threat environment, including through the proliferation of conventional weapons, small arms, and munitions; the evolution of cybersecurity and social media; and the rapid development of technologies that can be used by terrorists or harnessed in NATO's counterterrorism or crisis-management operations. Syria is in its eighth year of war, Libya remains unstable, and poor governance, demographic pressures, and natural resource constraints threaten security. The Mediterranean has become a transit hub for refugees from war-torn countries, economic migrants, foreign fighters, and organized crime networks. The growing influence of China and Russia is challenging the prominence of Western actors in the Mediterranean, and nonstate groups are more empowered to shape security outcomes. Transnational threats, including terrorism, have become priorities for several European allies, including France and others that are more exposed to the security challenges emanating from the south. Defense Spending Trends Global defense spending trends are also affecting the technology environment, and could have ramifications for NATO. The balance of spending appears to be shifting away from the Euro-Atlantic area toward other parts of the world. Between 2002 and 2016, military expenditure grew by approximately 332% in China and by 210% in Russia. In the United States, it grew by 45%. In France, however, military expenditure grew by 10% and in the UK it grew by 6%. In other places in Europe, military expenditure has actually fallen according to figures from the Stockholm International Peace Research Institute. Reduced military spending in Europe since the end of the Cold War has led to the relative downsizing of European militaries, aging equipment, and some readiness challenges. Some academics predicted that Europe would "demilitarize" after the Cold War, and some justified it by arguing that Europe, a "civilian power," was focused on shaping global affairs through nonmilitary means such as institutional enlargement, trade agreements, and development aid. This pattern has begun to change. In 2014 European NATO allies recognized a need to increase their defense spending and investments. At the Wales Summit, the allies pledged to halt the decline and move toward spending 2% of their gross domestic products (GDPs) on defense, devoting 20% of that to investments in equipment and R&D over 10 years. These targets, the "Defense Investment Pledge," were formalized in Wales and have become the accepted, albeit understood to be imperfect, measure of allies' defense input and political will. The allies have increased their defense spending every year since 2014. Although only 3 allies met the spending target in 2014, 8 are expected to meet it in 2018, and 15 are expected to meet the spending target and 22 are expected to meet the investment targets by 2024. If allies continue to increase their defense spending and investment, NATO will have an opportunity to help coordinate those additional investments to achieve efficiencies. It will also have the opportunity to help channel the additional funds into the most strategically important areas. Advancing Technology Rapidly advancing technologies add uncertainty to the security environment, thus complicating NATO's spending choices and planning requirements. Technological change is accelerating in many areas, including in artificial intelligence (AI) and machine learning, as well as biotechnology, materials science, and other fields, as a result of improved sensors, computing power, and other developments. The National Intelligence Council reports that advances in AI and automation, in particular, threaten to change industry faster than economies can adjust, and technologies with the potential to "disrupt societies" by attacking networks or critical infrastructure, for example, are set to become more affordable and more accessible to a wider range of actors. International competition for technology and innovation is also increasing. The Uni ted States, China, and to some extent Russia are engaged in an emerging, strategic competition in dual-use technologies. These countries have different advantages and disadvantages in terms of their investment strategies, R&D, procurement, and ability to leverage commercial industry for defense and security purposes. Commercial interaction between them has also become more "fluid" and intertwined than it was in the past. As international competition grows and innovation cycles shorten, NATO could find it increasingly difficult to identify the relevant technology breakthroughs, assess their applications, and anticipate how they might be used. In their most recent strategy documents, NATO's largest defense spenders in Europe—the UK, France, and Germany—have all identified advancing technology as an important feature of the security environment. The most recent UK strategy, the Strategic Defense and Security Review (SDSR), includes technology as one of the four main drivers of security priorities for the coming decade. It focuses on cybersecurity, resilience, the use of space, and the UK's increasing dependence on "networked technology in all areas of society, business and government." It highlights the asymmetric and global nature of the threat, and the ways in which technology empowers individuals and nonstate groups to communicate rapidly. The 2017 French Strategic Review on Defense and National Security (SRDNS) also identifies technology as an emerging security challenge. The French strategy argues that the diffusion of technology is enabling an increasing number of nonstate actors to "export their military know-how to other areas," and that this jeopardizes Western military supremacy. In Germany, the 2016 defense white book highlights cyber challenges as well as threats to supply, communications, and trade and energy as security priorities. It calls for more flexible forces, "networked action," and efforts to engage the drivers of innovation. One analyst asserts that it shows the German government's awareness of its diminishing deterrence capabilities vis-a-vis its potential adversaries. Institutionally, NATO shares similar concerns regarding the pace of technological change and the diffusion of technology. Responsibility for NATO's transformation or adaptation rests largely with NATO's military command, Allied Command Transformation (ACT) in Norfolk, VA, which is working with other NATO stakeholders to build a shared vision for the future, to identify potential capability needs for future operations, and to use that information to establish and align S&T investment priorities for the allies. Table 1 presents five global technology trends and their implications for NATO, as published in ACT's 2017 Strategic Foresight Report. U.S. Defense Innovation U.S. policymakers have had concerns about the development and proliferation of disruptive technologies and their implications for defense for more than a decade. In the 2006 Quadrennial Defense Review Report, U.S. strategymakers officially identified China as having the "greatest potential to compete militarily with the United States and to field disruptive military technologies that could over time offset traditional U.S. military advantages absent U.S. counter strategies." U.S. policy toward China at the time continued to focus on encouraging China to play a constructive role on common security challenges, but U.S. strategic thinkers also focused their attention on the need for modernization and for innovation in U.S. defense strategy. By 2014, U.S. policymakers had grown increasingly concerned about China's and Russia's comprehensive and long-term military modernization programs, and the possibility that one or the other might close the capabilities gap with the United States. Policymakers were also concerned that relatively unsophisticated militaries, militias, or other nonstate armed groups were gaining access to disruptive technologies and to weapons that were once solely possessed by governments. These developments led to a push for new concepts, and they sparked a robust debate in the United States about defense innovation or what came to be known as the "Third Offset Strategy." The debate focused on how the United States should plan its defense strategy, shape operational concepts, and organize its R&D investments and acquisition processes to "offset" the impact of disruptive technologies on the security environment and their use by potential adversaries. Defense Innovation Initiative (DII) In November 2014, the Department of Defense (DOD) launched a Defense Innovation Initiative (DII) to respond to these developments. The DII would "pursue innovative ways to sustain and advance [U.S.] military superiority for the 21 st Century and to improve business operations throughout the department." Then-Secretary of Defense Chuck Hagel described defense innovation as requiring investments by government and industry as well as a "spirit of innovation and adaptability across our defense enterprise." DOD leaders referenced past U.S. successes in "changing the landscape" through the development and innovative use of technology. In the 1950s President Dwight Eisenhower's buildup of the U.S. nuclear deterrent countered Soviet conventional capabilities, and in the 1970s-1980s, the United States introduced and used networked precision strike capabilities, stealth, and surveillance technologies in order to offset or nullify Soviet conventional advantages. DOD officials argued that the United States should pursue a "Third Offset Strategy" in order to secure U.S. competitive advantage and safeguard U.S. power projection in the future. Given the political context of the "rebalance to Asia and the Greater Middle East," and the constrained budget environment, the DII focused not only on developing new technologies and integrating them into capabilities but on finding efficiencies in their development and in their fielding. The DII introduced several reforms, including efforts to reform DOD leadership development practices; a new long-range R&D planning program to identify, develop, and field breakthrough technologies and systems; reinvigorated war-gaming efforts to develop and test alternative ways of achieving strategic objectives; new operational concepts to employ resources to greater strategic effect and deal with emerging threats in more innovative ways; and an examination of business practices to be more efficient and effective through external benchmarking and focused internal reviews. Third Offset Strategy Between 2014 and 2016, the Third Offset Strategy gained traction in U.S. defense circles. Senior DOD officials were concerned that Russia and China had developed "battle networks" that could potentially rival those of the United States. In particular, officials were concerned that those countries' command, control, communications, computers, intelligence, surveillance and reconnaissance (C4ISR) grids could capture what was happening in an environment and sync it with military effects, logistics, and support grids. Officials also observed that Russia and China had invested in counternetwork capabilities that could target space-based assets, networks, or other enablers for U.S. global power projection. To restore the U.S. advantage, DOD officials sharpened their focus on technology. Analytics firms have estimated that DOD spent roughly $27.8 billion between 2011 and 2015 on the third offset, and they expected an additional $18 billion in spending for the five years from 2016. It is difficult to track spending, however, because there is no account for the third offset strategy in the DOD budget. Investments focused on AI and deep-learning, human-machine collaboration, human-machine combat teaming, assisted human operations, and network-enabled, cyber-hardened weapons. The DOD tasked the Strategic Capabilities Office with repurposing technologies for creative use and set up the Defense Innovation Board to provide private sector advice to the Secretary. The Defense Innovation Unit Experimental (DIUx) was established as a kind of venture mechanism linking entrepreneurs with DOD problems and sponsors. The strategy sought to transform defense planning from a rational process to an "indirect approach of organizing arenas for networks, in which start-up companies and civilian corporations get to interact with government officials in order to identify incrementally suitable acquisition projects." Trump Administration officials no longer use the term third offset, but their recently published strategy documents, the National Security Strategy (NSS) and the National Defense Strategy (NDS), are relatively consistent with the concept. They share assumptions about the security environment, the proliferation of disruptive technologies, and the impact of innovation. They also emphasize the need to restore U.S. operational advantage, and the importance of helping DOD access commercial innovation. Vocabulary in the NSS and the NDS includes calls for more "agile, resilient units," as well as for more "modernization," greater "lethality," and a more robust "national security innovation base." The DOD, meanwhile, continues to pursue defense innovation as established under the previous Administration. The Defense Innovation Board continues to support the Secretary, and by the end of 2017 DIUx had transitioned its first pilot contracts into follow-on production. The Advanced Capability and Deterrent Panel has continued to push new concepts and constructs to get capabilities into the field faster, and DOD has reestablished the position of Under Secretary of Defense for Research and Engineering in a congressionally mandated effort to promote defense innovation. NATO and Defense Innovation The U.S. architects of the Third Offset Strategy envisioned collaboration with allies, but the strategy has not been well understood among allies and partners. U.S. defense innovation strategies raise questions for the United States and its allies about their expectations of one another in terms of technology and innovation, and about their willingness to collaborate on technology development. U.S. defense innovation also prompts concerns about interoperability, about NATO's level of dependence on U.S. technology, and about the implications of technology—unmanned systems or long-range bombers, for example—on the U.S. military presence in Europe. NATO faces some of the same challenges that led the United States to pursue defense innovation. Namely, it confronts a major state rival with sophisticated military capabilities as well as an expanding group of nonstate challengers with potential access to disruptive technologies. Its networks—command and control, communications, intelligence, surveillance and reconnaissance (ISR)—and the national assets that comprise those networks, may be increasingly vulnerable to competitors or others with access to disruptive technology. In the face of these challenges, NATO allies are increasingly aware of the importance of agility, resilience, and innovation. NATO depends on the allies for capabilities, and the changing technology environment could affect their willingness to share technology or develop it jointly. On one hand, technology can reduce NATO's reliance on the allies for certain capabilities. NATO has been operating a fleet of Airborne Warning & Control System (AWACS) aircraft for command and control, air and maritime surveillance, for example, and a new Allied Ground Surveillance system is coming into service on behalf of the alliance. This system could reduce NATO's reliance on a handful of member states for ground surveillance, and enable NATO to produce its own comprehensive assessments of situations on the ground. Technology could also offer NATO an affordable, open-source intelligence or ISR capability, when traditionally it has had to rely on the intelligence that member states have been willing to provide. Technology could equally divide the alliance, on the other hand, as some allies are developing sensitive technologies in areas like cybersecurity, which they are less comfortable sharing. This has prompted concern among some NATO officials about allies' potential reluctance to share technology widely. As a result NATO officials push continuously to develop processes and procedures that integrate such technologies into NATO structures and to assess how they might be tested in a contingency. If the allies continue to increase defense spending, more funding is expected to become available in Europe for R&D and capabilities development. A NATO debate about defense innovation could help set priorities in such a way that manages risk and enhances interoperability across the Atlantic. Such a debate could help reduce duplication in Europe and balance short-term priorities with preparations for future warfare. As is the case in the United States, operational costs are expected to continue rising for European militaries. Defense innovation could help allies develop tools to control costs while finding ways to counter the asymmetric use of inexpensive technologies against allied forces. If the United States continues to pursue a technology-driven defense strategy and European countries do not, interoperability and alliance cohesion could be reduced. For the United States, working with allies could become more constraining or risky, and Europeans could face trade-offs between buying more technology from the United States and investing in their own R&D, both of which would have consequences for European and transatlantic industry and for European autonomy vis-a-vis the United States. NATO Institutions and Processes In the past NATO has successfully responded to new challenges through strategic and organizational change. Generally speaking, it is the member states that steer NATO through "critical junctures" or crisis situations through political leadership in the North Atlantic Council (NAC), the alliance's main decisionmaking body. NATO institutions, however, also have some agency in facilitating their own transformation, and some have the specific mandate to help NATO adapt on science and technology (S&T) issues. On the military side, NATO rebranded the Supreme Allied Commander Atlantic as ACT, and gave it responsibility for transformation. On the civilian side, it tasked the Science and Technology Organization (STO) to lead on S&T issues. The latter is composed of three main entities: Office of the Chief Scientist; Collaboration Support Office in Paris, which links 5,000 scientists and engineers with one another and helps shape commercial strategies to ensure technologies meet NATO standards and are available to NATO; and Center for Maritime Research and Experimentation, which conducts research and technology development for the maritime domain. At the Brussels Headquarters, NATO's Defense Investment Division advises the allies on issues related to defense procurement, interoperability, standards, and industry. The division oversees the Conference of National Armaments Directors (CNAD), which works on armaments cooperation and is supported by the NATO Industrial Advisory Group (NIAG), which convenes senior industrialists to provide the CNAD with insights on industry trends and emerging technologies. In recent years the CNAD has hosted a growing number of discussions about defense innovation, and those allies with innovation strategies (e.g., the United States, UK, Canada, and the Netherlands) are briefing their peers and sharing best practices. The group is limited in what it can accomplish, however, because some allies lack the will, the authorities, the industrial capacity, or the relevant startup communities to contribute. The NATO Parliamentary Assembly, which supports links between NATO and allies' national parliaments, has been particularly active in this area. Its Science and Technology Committee adopted reports on NATO's eroding technological advantage and on the implications of the Internet of Things for NATO at its October 2017 meeting in Romania. The committee hosted panel discussions at which the Chief Scientist argued that NATO's edge had already eroded in part due to the growth in commercial R&D, which surpassed government R&D investments. In particular, he singled out the cyber domain as an area in which NATO faced daily challenges resulting from the accelerating pace of technological change. He also spoke of a need for innovation in the way technology is used, arguing for a culture change when it comes to S&T adaptation, providing incentives to program managers to insert technology quickly and to be willing to fail. In 2018, the committee plans three reports covering NATO and defense innovation; cybersecurity and information warfare; and the implications of the dark web, bitcoin, and encryption for terrorism and for counterterrorism efforts. NATO Defense Planning Process The NATO Defense Planning Process (NDPP) is the alliance's primary means of translating collective political ambition into requirements for capabilities and apportioning them to member states. This four-year cyclical process, outlined in Figure 2 , begins with national defense ministers' political guidance, from which a framework for NATO capability requirements is derived. These requirements are then translated into targets and then apportioned to the member states through a decisionmaking process of consensus minus one. A relatively small portion is apportioned to NATO through common funding. The allies participate on a voluntary basis, however, and they are not sanctioned for missing their targets or allotted requirements. Designed to deliver NATO requirements without jeopardizing national sovereignty over defense planning, the NDPP has been praised for its ability to protect national sovereignty and criticized for failing to fill NATO's capability shortfalls. NATO institutions use the NDPP to transform the alliance by harmonizing planning and filling capability shortfalls. NATO's ACT works in part through the production of Strategic Foresight Analysis Reports to create a shared perspective on the future environment that synthesizes views from academics, think tanks, and industry representatives across the alliance. ACT has a futures team, which is working on long-term capability development initiatives and aims to use the priorities of NATO's largest defense spenders—the United States, the UK, France, and Germany—to inform smaller allies and support multinational collaboration. Some officials at ACT believe that extending the NDPP's planning horizon would help the alliance to get ahead of national defense planning processes and therefore steer national decisionmaking more effectively toward NATO requirements. In recent years ACT has increased its collaboration with STO scientists and engineers in a number of areas, including in research on achieving operational effects and in defining NATO's future force needs through the alliance's Framework for Future Alliance Operations (FFAO). ACT's strategic foresight work, in turn, is informing the STO products, such as its Technology Trends Report, S&T Priorities, and technology-monitoring process. The STO aims to help shape NATO capabilities for the future by identifying priority S&T areas for allied investments. The STO's most recent S&T priority areas are listed in Table 2 . According to a senior NATO official, STO is planning to update NATO's Science and Technology Strategy, and publish an updated list of long-term requirements under the NDPP. To support NATO's adaptation to the technology environment, NATO is also building an in-house capacity to promote innovation. The NATO Innovation Hub (IH) was launched in 2013 in Norfolk, VA, to develop tools, networks, and human skillsets to support NATO projects through open innovation, which it defines as crowdsourcing understanding, solution design, and implementation through a worldwide experts' network. Housed under ACT, the IH is NATO's means of reaching out to a wide range of people from diverse backgrounds for help in designing solutions for NATO problems in an open way. IH is currently working with public-private partnerships that have similar missions across NATO's member states, including the UK's Defence and Security Accelerator, the German Cyber and Information Space Command ("Kommando Cyber- und Informationsraum"), and the U.S. MD5, SofWerx, and H4Di Hacking for Defense. ACT is also working to integrate technologies into concepts development, education, and training, but officials highlight the limitations of technology absent a shared understanding of the environment and of NATO's operational objectives. Some NATO officials are concerned, however, that ACT's and STO's work on strategic foresight, S&T priorities, and innovation has not received adequate attention at NATO Headquarters, either at the political level or among the national delegations to the alliance. They argue that the relative lack of attention is largely due to the alliance's focus on a wide range of more urgent challenges and short-term priorities that relate to preparing for contingencies in NATO's south and east. Other officials argue that this is also due to the challenges related to NATO's defense planning process and to national preoccupations with their own security priorities and to their concerns about national sovereignty in defense. Some officials contend that NATO's international bureaucracy has lost its influence with national delegations over time, and that it is the national delegations to NATO that handle much of the alliance's day-to-day business. Selected European National Perspectives Historically, European states have tended to focus on preserving national self-sufficiency in defense. In recent years, however, some European governments have begun to realize that their defense aspirations are inhibited by relatively limited national defense budgets, duplication, and inefficiencies across the European continent. Many European states are now taking steps to increase their defense budgets and, at the same time, balance commitments to national sovereignty in defense with efforts to increase practical cooperation with European partners. The UK and France remain committed to preserving full-spectrum national capabilities; however, like other governments in Europe, they are working to determine which technologies they would like to develop nationally, which they could develop jointly with European partners, and which they are prepared to buy off-the-shelf in the global market. The United States, the UK, France, and Germany together represent approximately 85% of NATO's total defense spending. They broadly share the assessments of the security environment that led to the development of the U.S. Third Offset Strategy, and they have strategic and industrial interests in promoting defense innovation, at least at the national level. If NATO is to develop a coherent approach to defense innovation or a response to developments in the United States, it will likely depend on one or more of these large member states showing political leadership and driving change at the NATO level. Given limited resources, however, these governments and others in Europe are focused on short-term priorities, including support for operations and readiness challenges. When it comes to defense innovation, investments in R&D, and reforms to improve access to commercial innovation, European nations are in the early stages of formulating predominantly national strategies. United Kingdom The UK is one of a handful of European NATO member states with a national strategy for defense innovation. In 2016 the UK government identified defense innovation as vital to maintaining the British armed forces' military technological edge in the future, and it launched a Defense Innovation Initiative. The initiative introduced multiple lines of effort to promote defense R&D, to leverage other R&D investments, and to engage commercial centers of innovation. Much like the U.S. Third Offset Strategy, the UK initiative sought to transform the British defense enterprise through organizational and cultural changes to create more appetite for risk and to link government and commercial actors by fostering open innovation. The initiative was also expected to reverse more than a decade of UK underinvestment in R&D, improve government-industry relationships, and help the government engage small to medium-sized enterprises (SMEs) more effectively. The strategy comprised the following: "a new Innovation and Research InSight Unit to 'draw on horizon scanning and market intelligence from across government, academia, industry and international partners,' a Defence and Security Accelerator organization to 'accelerate ideas from conception through to application,' by linking suppliers and inventors with users and investors,' and an Innovation Fund 'of around £800 million over ten years, to provide the freedom to pursue and deliver innovative solutions.'" British defense analysts assert that the drivers for this strategy included a recognized need to protect UK assets in a world of ubiquitous precision weapons, as well as a long-standing strategic interest in maintaining interoperability with U.S. military forces. The analysts also argue, however, that the strategy faces significant limitations, and that it has not been a high priority for the UK Ministry of Defence (MoD). The amount of funding dedicated to this strategy is considered relatively modest: the £800 million fund represents just 1% of the expected UK procurement budget for the decade, meaning the challenge comes in ensuring the funding is "meaningfully spent." Implementation also depends on the MoD's ability to leverage commercial R&D and work with industry to capitalize on its investments in the UK equipment plan. Translating the UK vision for innovation into practical steps that lead to organizational and culture change in the ministry could present further challenges. Negotiations on the UK's pending exit from the EU have taken center stage in UK government and politics. "Brexit" has presented complex challenges, and the UK's political parties are divided, externally and internally, over the negotiations. Political and economic uncertainty related to Brexit could affect UK defense and the future role of the UK in European security. To adapt British defense strategy in light of the changes in the UK and in response to uncertainty in the security environment, the UK government is conducting a National Security Capabilities Review, and it is expected to publish a further review, the Modernizing Defense Program (MDP), in the summer of 2018. The forthcoming MDP review may not incorporate a strategy for defense innovation per se, but it is expected to sharpen the UK's focus on leveraging technology and capabilities to maintain UK armed forces' "credibility" over the next decade. France President Emmanuel Macron's government published a new national defense strategy to outline its vision in the context of a changing security environment. Generally speaking, the strategy seeks to balance a traditional focus on preserving national independence and power projection with an ambition for pragmatic cooperation with European partners in pursuit of "European strategic autonomy." Published in October 2017, the Strategic Review on Defense and National Security (the Review) shows France's growing concerns about the risk of high-technology warfare, interstate competition for technology, and the disruptive effects of digital innovation. The Review calls for more military agility and responsiveness, as well as for more investments in space, cybersecurity, and electronic warfare capabilities. It also calls for an organizational and cultural change at the Ministry of Armed Forces in order to improve the ministry's ability to access and leverage private sector innovation. The Review lays the groundwork for the Military Programming Law for 2019-2025 (LPM) and budget, which also offer insights into French ambition for defense innovation. The Review and the LPM build on prior efforts to support French SMEs and research labs that are working on sensitive, dual-use technologies and link them with defense contractors and with the services. Also, the budget for "upstream studies and innovation in research and development" is expected to increase from €730 million in 2018 to €1 billion by 2022. The LPM also calls for an average of €1.8 billion to be devoted each year to designs and preparations for future armament programs. The Ministry of Armed Forces is planning reforms to enable its procurement office, Direction Générale de l'Armement (DGA), to improve access to digital innovation and commercial industry. French analysts assert, however, that while the LPM does usher in new investments, especially in cybersecurity, its overall focus is on equipping the French military for more short-term priorities and current operations, and ensuring that aging platforms are replaced. France also has strategic and industrial interests in defense innovation. It is committed to preserving its capabilities for global power projection and yet it faces a growing risk of A2AD threats in the areas in which it operates. For France, defense innovation could strengthen its operational advantage while enhancing its national industrial base and protecting its global market share. In addition, defense innovation could help maintain interoperability with U.S. forces while protecting against technological dependence on the United States. At the same time, however, addressing public concerns about terrorism and migration has taken priority, and a high operational tempo of late has placed considerable strain on the French armed forces. Some French analysts expect that equipment, maintenance, and other support for current operations will remain France's priority for the short term, possibly at the expense of preparations for future warfare. They also argue that the significant efforts to boost spending have been pushed to the end of the five-year period, indicating some uncertainty about its implementation. Germany Germany's most recent defense strategy, the 2016 White Book , outlines a growing ambition for Germany to make substantial contributions to European security while building resilience into societies, economies, and institutions. The 2016 White Book also shows the German government's awareness that its conventional deterrence capabilities are eroding, and of the importance of defense R&D and commercially developed technologies in securing superiority in defense. As Europe's largest economy, Germany has the industrial capacity to make significant contributions to defense innovation. Its industry is competitive and established in U.S. supply chains, and it generates high-technology capabilities and revenue that can in turn finance more innovation. One analyst has remarked that Germany is leading Europe in some technologies deemed critical for defense innovation in the United States. Germany's research on autonomous vehicles, for example, is "breaking new records" on German roads, and Germany hosts leading hubs for software (Darmstadt), manufacturing (Aachen), and aerospace (Munich and Hamburg). Germany has also made strides in defensive cybercapabilities. A new Cyber Innovation Hub helps bridge commercial startups with the German armed forces, focusing on disruptive technologies, information technology, and other digital products and services. The government's 2015 defense industry strategy calls for expanding funding for R&D, defining Germany's national enabling technologies, and increasing cooperation with European partners. It also calls for more public dialogue on the importance of industry for German foreign and security policy. German politics and public opinion, however, will also shape Germany's contributions to a defense innovation agenda. Since World War II, successive German governments have taken a more cautious and multilateral approach to defense than other European governments. In 2015, 25% of Germans felt that Germany should play a more active military role in helping maintain peace and stability, and 69% felt Germany should limit its military role in world affairs. German analysts point to a deep-seated concern in the German public consciousness about defense research and its potential to undermine peace. As a result, defense innovation is largely cut off from Germany's "national innovation ecosystem," and there is a "systematic and deliberate firewall" between civilian and defense research. This tension is also present in government. The Defense Ministry stresses the importance of defense research and commercial industry to cope with current challenges, but the Ministry of Education and Research has traditionally opposed closer links between defense and commercial research. In the near term, analysts expect Germany to focus defense policy on addressing current national readiness shortfalls and preparing for contingencies in Eastern Europe. Looking ahead, Germany has committed to budget increases, but personnel costs are expected to continue to account for a large portion of the increase, alongside modernization, maintenance, and training. According to some analysts, if Chancellor Merkel decides to increase defense spending and make the case to the German people for a stronger national defense, then that action itself would constitute an innovation in European and transatlantic defense and security, albeit not of a technological nature. NATO's Innovation Challenges Even as some NATO allies develop defense innovation strategies, NATO faces a series of obstacles to coordinating these initiatives, aligning national perspectives, and forging a unified approach. Without legal or financial mechanisms to steer the allies in a particular direction, or the ability to effect a step change across the alliance, NATO relies on its efforts to build and share knowledge among the allies, set agendas, establish priorities, and promote multinational cooperation. Generally speaking, NATO's innovation challenges relate to securing resources for innovation and engaging commercial industry; balancing short-term priorities with preparations for the future; preserving interoperability and transatlantic burden-sharing; harmonizing defense planning processes, including with the EU; and using allies' diversity to foster more effective innovation. Resources for Innovation During the Cold War, the United States and its NATO allies maintained defense spending and investment levels sufficient to ensure their military technological superiority. Large U.S. public investment programs in technology and innovation supported U.S. economic success and spurred innovation. The U.S. government was a driver for innovation through the internet, biotech, and shale gas, for example, in part because of its willingness to invest in early stages of the innovation cycle. Analysts have concluded that long-term government funding for defense and civilian R&D are key ingredients for the development of dual-use technology. Since the end of the Cold War, however, the United States shifted attention away from government-led innovation and toward "consumption markets." As a result it faces new challenges that relate to cost pressures, limited budgets, the shift from "defense spin-offs to consumer-market spin-ons" in technology, and rising international competition. Since 2014, NATO allies have been increasing their defense spending and investment budgets, with Canada and the European allies spending more on defense in 2017 for the third consecutive year. In addition to more funding, NATO has other strengths to leverage, including hosting high-performing universities and research labs as well as dynamic and open economies that attract talent. These strengths could potentially give NATO access to a wide network of innovative entrepreneurs and ideas. At the same time, however, European governments continue to be constrained by relatively limited budget environments and resources for defense R&D. The budgetary context that allowed for the Third Offset Strategy in the United States, for example, does not exist anywhere in Europe. For some European governments, relatively small increases in defense spending require a convincing political narrative. Even then, the resources devoted to defense are often allocated toward more pressing short-term priorities such as readiness and current operations. Relatively limited budgets combined with NATO's bureaucratic processes and a risk-averse culture are likely to continue to present challenges for NATO in its efforts to build relationships with large technology companies or other sources of innovation. NATO's capacity has also been reduced over time through reductions to the command structure. Defense Ministers recently agreed to reverse the downsizing trend by introducing two new military command centers, but the new staff is expected to focus on maritime security, troop movements, and contingency planning for Eastern and Southern Europe. Interoperability and Burden-Sharing A potential contingency in eastern or southern Europe could require rapid decisionmaking and rapid NATO reinforcements. As the alliance mobilizes, the allies' expectations of one another for burden-sharing and the potentially fast pace of conflict could raise NATO's requirements for interoperability and speed. Burden-sharing and interoperability are not new challenges for NATO. During the Cold War, a gap opened up between the United States, which invested in global power projection capabilities, and most European nations, which, with the partial exception of the UK and France, prioritized personnel over procurement as they prepared to fight on home soil. That gap deepened with the U.S.-led "Revolution in Military Affairs" in the 1990s, which was largely unsuccessful in generating political consensus in Europe. The transatlantic capabilities gap that resulted has affected NATO's post-Cold War operations. In Kosovo, for example, U.S. technological superiority created problems for NATO in both communications and conducting operations. Even Europe's most capable powers—the UK and France—had to rely on U.S. enablers such as ISR, targeting, and extra munitions in NATO's 2011 Libya operation. Concerns around burden-sharing and dependence led U.S. officials to warn allies of a "dwindling appetite" in Washington "to expend increasingly precious funds on behalf of nations that are unwilling ... to be serious and capable partners in their own defense." Transatlantic burden-sharing continues to be a priority for the Trump Administration. While European allies are increasing their defense budgets, they are unlikely to close the capabilities gap with the United States any time soon because that gap reflects decades of spending patterns as well as historical experience and strategic culture. The risk is that the gap could deepen if the United States continues to pursue a technology-driven strategy and Europeans do not, or if the United States moves faster than its NATO allies on fielding new technologies. In particular, a technology gap could present challenges to the interoperability of NATO forces, especially if the future battlefield demands faster decisionmaking, more rapid troop movements, or an immediate response to a crisis situation in close proximity to or even inside NATO territory. NATO officials are working on processes to integrate national technologies and assets into NATO networks and structures, and they are evaluating how those networks could be tested in a crisis situation. As technology advances and international competition grows, this challenge could become both more difficult and more important for NATO. It could also increase the pressure on NATO to ensure that technology transfer moves in both directions across the Atlantic, as there is a conviction in Europe that not only should European militaries "buy American," but NATO should help European companies gain access to the U.S. defense market, too. NATO-EU Cooperation In 2016 the EU launched a Global Strategy that reignited ambitions for European strategic autonomy, and that ambition has dominated the debate about EU defense. As a result, questions now exist for European allies about the strategic relationship between EU and NATO structures and processes. In 2016 officials from the EU and NATO signed a Joint Declaration that lays out 42 actions in seven areas of cooperation ranging from countering hybrid threats and cybersecurity to defense capabilities, industry and research, and exercises and capacity building. They are now working toward implementation, but questions remain as to how NATO and the EU will relate to one another in strategic terms. If the EU aspires to strategic autonomy, then what role does NATO play? Conversely, what is the purpose of the EU's Common Security and Defense Policy if it does not achieve autonomy and continues, in practice, to rely on NATO for collective defense and security? The Joint Declaration makes clear that both NATO and the EU have an interest in building "stronger defense industry and greater defense research and industrial cooperation within Europe and across the Atlantic." The two institutions, however, have different strategic priorities and different sets of tools to foster cooperation. While NATO works through the Defense Investment Division and other stakeholders to encourage transatlantic cooperation, the EU has the European Defense Agency and a set of unique legal and financial tools to promote defense-industrial cooperation and spur innovation in the EU. In 2017, the EU launched a European Defense Fund, which by 2020 is expected to generate €5.5 billion per year from the EU budget for investments in defense capabilities development. Although it represents only 1% of the EU budget, the fund provides a financial incentive in Europe for multinational cooperation on capabilities development for the first time. The EU also launched Permanent Structured Cooperation (PESCO), which is a treaty-based, political framework to help the EU member states develop capabilities jointly and in a way that will make them available for EU military operations. Another recent EU initiative, the Coordinated Annual Review on Defense, is designed to address the EU's identified capability shortfalls while fostering cooperation and ensuring coherence and transparency between defense spending plans. These initiatives on the part of the EU have sparked debate in Brussels about prioritization, governance, and the role of third-party countries (such as the UK) and companies owned in part by third-party countries in EU projects. It will be up to NATO and the EU to work out how their initiatives relate to one another, and it will be up to the European allies to work out whether one institution or the other offers a better platform for cooperation on S&T issues, capabilities development, and innovation. Political Challenges NATO's member states are unique in their historical experiences and security priorities, and they will likely only invest in capabilities that they see as addressing their security needs. For the United States, the primary drivers for defense innovation are Chinese and Russian military modernization and a sense of strategic competition for technology and innovation. While many European allies broadly accept U.S. assessments of the global security environment, including the rise of China, their assessments of China's rise differ from those of the United States. France and Germany, for example, are more focused on managing Chinese investments in Europe, and Europeans are generally much more concerned by challenges from Russia and the Middle East. NATO allies are also divided over whether they see Russia as more of a conventional or a hybrid challenge, and over balancing NATO focus on the east with efforts to address challenges in the south. NATO has tried to communicate the indivisibility of Euro-Atlantic security through the "360 Degree Approach" outlined at the Warsaw Summit, but its efforts face continuing challenges. Others point to a transatlantic rift or a "wearing down" of a sense of collective identity in NATO with U.S. public opinion appearing uncommitted and European public perceptions of a "wider Atlantic" than in the past. While studies show diversity can be a driver for innovation in the workplace, it could restrict a NATO agenda if the allies cannot achieve a common understanding of the threat environment and a shared vision for how technology and innovation can address security challenges. European leaders are under pressure to address the immediate security challenges that concern their constituencies, which for some European allies include Russia and Ukraine and for others include refugees, migration, and the spread of terrorism. Generally speaking, short-term priorities take precedent in Europe. Discussions about technology and future warfare are beginning to take place in some national governments and in NATO institutions. According to a senior NATO official, however, these discussions need to take place at the strategic level in the North Atlantic Council, and political leadership from one or more of the major allies is likely to be required to foster cohesion and drive change at the NATO level. Potential Issues for Congress Looking ahead, NATO might have to rely as much on its agility and capacity for innovation as it has previously relied on its military technological advantage. A key question for Congress relates to what role the United States should play in NATO to help allies make more effective use of increased defense spending, build flexibility and responsiveness while protecting interoperability, and capitalize on commercial investments in technology and innovation. A second question is: What role might Congress play in that effort? For decades, Congress has played an important role in shaping U.S. NATO policy and steering the NATO agenda itself. It helped shape the Cold War burden-sharing debates by exerting pressure on allies to increase their defense spending, and it used a combination of oversight and legislation to promote post-Cold War NATO enlargement as a priority in U.S. policy toward the alliance. The NATO Parliamentary Assembly has facilitated a transatlantic dialogue among legislators for decades, as has the nongovernmental Transatlantic Policy Network. In February 2018, a group of Senators reconstituted the NATO Observer Group to help strengthen congressional relations with NATO in light of evolving challenges. Other channels exist, or could be reconstituted to suit current circumstances. In defining Congress's role, there are a number of questions that could be considered: Congress has generally supported defense innovation in the United States by authorizing and appropriating funding for R&D and mandating DOD reform to bring commercial technology, talent, and innovation into the Department. Should DOD efforts require a NATO component or a framework for allied participation? Does Congress accept that European innovation can play a role in the U.S. military renewal? Might Congress consider balancing U.S. technology exports to Europe with a willingness to facilitate technology imports from Europe? Or revising export controls to facilitate joint R&D and industrial collaboration? What are the risks and opportunities? For European allies, increases in defense spending could be expected to support European firms and strengthen European autonomy. This could mean fewer opportunities for U.S. firms, but it could also mean more European capabilities. What posture should Congress take toward these possibilities? Also, what can Congress do to help allies invest more effectively, especially in terms of R&D and procurement? Global commercial investments in R&D are growing, and commercial innovation is increasingly important for defense and security. Government and commercial actors contribute to different parts of the innovation cycle, and they can leverage one another's advantages in areas like intelligence and cybersecurity. Can Congress help NATO reach a broader group of technology stakeholders by building links or facilitating public-private partnerships? The United States National Technology and Industrial Base now includes the United States, the UK, Australia, and Canada. What are the risks and opportunities associated with closer collaboration with these partners? Might Congress consider expanding this base to include another tier group of NATO allies or a wider group of associated countries? What role can Congress play in expanding NATO's access to commercial technology and innovation? Should the United States pursue this agenda with a small group of NATO allies or seek coherence at the NATO level? Europeans feel pressure from Washington to take more responsibility for their security and to have capabilities to manage crises in their neighborhood. They have also, at times, seen U.S. dissatisfaction with EU initiatives that could potentially close markets to U.S. industry. Congress may wish to reconcile U.S. narratives in its messaging to NATO and to the EU.

The North Atlantic Treaty Organization (NATO) has a renewed focus on defense and deterrence in Europe. In the past, NATO relied at least in part on its military technological superiority over potential adversaries for defense and deterrence in Europe, but some policymakers are increasingly concerned that NATO's technological superiority is eroding. Russia, China, and others are modernizing their militaries, investing in new and emerging technologies, and exploring their applications for defense. In addition, NATO faces rising operating costs, and both conventional and hybrid challenges in operating domains that have expanded to include cyberspace as well as land, sea, and air. NATO must also contend with a growing group of nonstate challengers empowered by the pace of technological change and the global diffusion of technology. Increasingly dependent on ubiquitous technology, NATO is adapting to a world in which commercial investments in research and development (R&D) outpace those of governments, innovation cycles are shortening, and there is more international competition for technology and innovation. Since 2014, the United States has promoted defense innovation as a strategy to integrate new technologies into military capabilities and strengthen U.S. technological superiority over its potential adversaries. Today, many European allies acknowledge the importance of technology and innovation in defense, and they are beginning to respond to the changing environment by committing more resources to defense, and a few have national defense innovation strategies of their own. The United Kingdom, France, and Germany—NATO's largest European defense spenders—are investing more in R&D and reforming their defense ministries to take more risk, procure technology faster, develop innovative concepts, and strengthen their links with commercial industry. Generally speaking, however, European governments are still in the early stages of developing what are predominantly national strategies. NATO seeks to harmonize the allies' national strategies and defense investments, promote collaboration, and build a shared vision for the future. Its member states have sophisticated militaries, institutional frameworks for collaboration, and dynamic economies that attract talent, and support innovation. Innovation challenges persist, however, such as those related to NATO's limited budgets and its bureaucratic processes, which make it difficult for NATO to attract the attention of commercial industry and global technology companies. NATO is also working to balance its member states' concerns over national sovereignty with the need for more multinational cooperation, both from a cost and from an interoperability point of view. NATO also seeks to enhance interoperability among allied militaries and balance short-term priorities with preparations for future warfare. In the future, NATO might have to rely as much on its agility and on its capacity for innovation as it has relied on its military technological advantage in the past. Congress may consider what role the United States can play to support NATO's adaptation, and what channels Congress could pursue to exert influence over NATO's direction. There are both risks and opportunities associated with sharing technology or developing it jointly with NATO allies, and there are questions about what the United States and its allies expect from one another in terms of technology and innovation. Technology has the potential to enhance NATO's effectiveness, but it also has the potential to undermine interoperability or political cohesion if the United States develops a technology-driven strategy and its NATO allies either do not keep pace, or do not adapt to strategic, political, and technological change.

Government Estimates of Iraqi Civilian Deaths The Department of Defense (DOD) has not released a composite estimate of Iraqi civilian deaths during Operation Iraqi Freedom. However, in the report Measuring Stability and Security in Iraq , it has released a chart containing two separate estimates of Iraqi civilian deaths from January 2006 to August 2008. The first estimate is derived from a compilation of coalition and Iraqi reports of civilian deaths while the second estimate is derived from the Iraq Significant Activities (SIGACTS) III database, which includes coalition reports only. The DOD noted in the December 2007 update of Measuring Stability and Security in Iraq that "host nation reports capture some types of deaths on which the Coalition does not have visibility, in particular, murders and deaths in locations where Coalition forces are not present." While the chart provides a guideline to Iraqi civilian deaths trends, the specific data used to create the chart have not been released. Using the DOD chart as a guideline, therefore, CRS has reproduced an approximation of the original chart in the figure below. For some time, the United Nations has attempted to release comprehensive statistics on Iraqi civilian deaths. From August 2005 to March 2007, the United Nations Assistance Mission for Iraq (UNAMI) published a series of quarterly reports on human rights in Iraq that included sections on Iraqi civilian casualties. On April 25, 2007, however, the Iraqi government announced its intention to cease providing civilian casualty figures to the United Nations. Ivana Vuco, a UN human rights officer, stated, "[Iraqi] government officials had made clear during discussions that they believed releasing high casualty numbers would make it more difficult to quell unrest." The UNAMI report on human rights released on October 11, 2007 and concerning the period between April - June 2007 expressed regret that "for this reporting period, [UNAMI] was again unable to persuade the Government of Iraq to release data on casualties compiled by the Ministry of Health and its other institutions. UNAMI continues to maintain that making such data public is in the public interest." UNAMI did not publish another human rights report until December 2, 2008, when it issued a report covering the human rights situation in Iraq from January 1, 2008 – June 30, 2008. This latest report provides a list of instances of bombings in which civilians were killed, but does not give a comprehensive estimate of civilian deaths. The report's first recommendation to the government of Iraq is to "Issue on a regular basis mortality data compiled by the Ministry of Health, based on information received from all governorates and statistics kept at the Medico-Legal Institute in Baghdad, together with details of the methodology used to calculate the figures." In a November 2008 statement in front of the United Nations Security Council, Ambassador Zalmay Khalilzad announced that the security situation in Iraq had "significantly improved since June 2007." According to the Ambassador, the number of overall attacks since June 2007 had decreased by 86% and Iraqi civilian deaths due to violence had decreased by 84% in the same time period. The non-profit Iraq Body Count also reported a decrease in civilian deaths in 2008; according to their database, 8,315-9,028, or approximately 25 people a day, Iraqi civilians died due to violence in 2008. By comparison, 22,671-24,295 (or approximately 67 a day) civilian deaths were added to their database in 2007, and 25,774-27,599 civilian deaths (or approximately 76 a day) were added in 2006. However, the reported decrease has not been entirely consistent on a month-to-month basis. The New York Times reports that the Iraqi Health Ministry counted a total of 148 civilian deaths for November 2008, compared with 118 deaths in October and 156 in September. Other Estimates of Iraqi Civilian Deaths Table 1 , below, provides Iraqi civilian dead and wounded estimates from non-governmental sources. These estimates are based on varying time periods and have been created using differing methodologies, and therefore readers should exercise caution when using these statistics. Three cluster studies of violence-related mortality in Iraq have recently been undertaken. The first two studies were both conducted by researchers from Johns Hopkins University and Baghdad's Al-Mustansiriya University and are commonly referred to in the press as "the Lancet studies" because they were published in the British medical journal of that name. The third study was conducted by a consortium of researchers, many of whom are associated with the World Health Organization, and so the study is commonly referred to as "the WHO study" in the press. The first of these studies, published in 2004, used a cluster sample survey of households in Iraq to develop an estimate ranging from 8,000 to 194,000 civilian casualties due to violent deaths since the start of the war. This report has come under some criticism for its methodology, which may not have accounted for the long-term negative health effects of the Saddam Hussein era. Former British Foreign Minister Jack Straw has written a formal Ministerial Response rejecting the findings of the first Lancet report on the grounds that the data analyzed were inaccurate. The second study, published in 2006, increased the number of clusters surveyed from 33 to 47 and reported an estimate of between 426,369 and 793,663 Iraqi civilian deaths from violent causes since the beginning of Operation Iraqi Freedom. This article, too, has sparked some controversy. Stephen Moore, a consultant for Gorton Moore International, objected to the methods used by the researchers, commenting in the Wall Street Journal that the Lancet article lacked some of the hallmarks of good research: a small margin of error, a record of the demographics of respondents (so that one can be sure one has captured a fair representation of an entire population), and a large number of cluster points. On the other hand, documents written by the UK Ministry of Defence's chief scientific advisor have come to light, which called the survey's methods "close to best practice" and "robust." In the third and most recent study, a team of investigators from the Federal Ministry of Health in Baghdad, the Kurdistan Ministry of Planning, the Kurdistan Ministry of Health, the Central Organization for Statistics and Information Technology in Baghdad, and the World Health Organization formed the Iraq Family Health Survey (IFHS) Study Group to research violence-related mortality in Iraq. In their nationally representative cluster study, interviewers visited 89.4% of 1,086 household clusters; the household response rate was 96.2%. They concluded that there had been an estimated 151,000 violence-related deaths from March 2003 through June 2006 and that violence was the main cause of death for men between the ages of 15 and 59 years during the first three years after the 2003 invasion. This study seems to be widely cited for violence-related mortality rates in Iraq. Neither the Lancet studies nor the IFHS study make an effort to distinguish different victims of violence, such as civilians versus police or security force members. The Associated Press has kept a database of Iraqi civilian and security forces dead and wounded since April 2005. According to its database, between April 2005 and January 5, 2009, 44,971 Iraqi civilians have died and 51,540 have been wounded. A number of nonprofit groups have released unofficial estimates of Iraqi civilian deaths. The Iraq Body Count (IBC) is one source often cited by the media; it bases its online casualty estimates on media reports of casualties, some of which may involve security forces as well as civilians. As of January 7, 2009, the IBC estimated that between 90,253 and 98,521 civilians had died as a result of military action. The IBC documents each of the casualties it records with a media source and provides a minimum and a maximum estimate. The Brookings Institution has used modified numbers from the UN Human Rights Report , the Iraq Body Count, General Petraeus's congressional testimony given on September 10-11, 2007, and other sources to develop its own composite estimate for Iraqi civilians who have died by violence. By combining all of these sources by date, the Brookings Institution estimates that between May 2003 and January 5, 2009, 108,707 Iraqi civilians have died. Finally, the Iraq Coalition Casualty Count (ICCC) is another well-known nonprofit group that tracks Iraqi civilian and Iraqi security forces deaths using an IBC-like method of posting media reports of deaths. ICCC, like IBC, is prone to the kind of errors likely when using media reports for data: some deaths may not be reported in the media, while other deaths may be reported more than once. The ICCC does have one rare feature: it separates police and soldier deaths from civilian deaths. The ICCC estimates that there were 44,276 civilian deaths from April 28, 2005 through January 7, 2009.

This report presents various governmental and non-governmental estimates of Iraqi civilian deaths. The Department of Defense (DOD) regularly updates total U.S. military deaths statistics from Operation Iraqi Freedom (OIF), as reflected in CRS Report RS21578, Iraq: U.S. Casualties, by [author name scrubbed]. However, no Iraqi or U.S. government office regularly releases publically available statistics on Iraqi civilian deaths. Statistics on Iraqi civilian deaths are sometimes available through alternative sources, such as nonprofit organizations, or through statements made by officials to the press. Because these estimates are based on varying time periods and have been created using differing methodologies, readers should exercise caution when using these statistics and should look on them as guideposts rather than as statements of fact. See also CRS Report RS22532, Iraqi Police and Security Forces Casualties Estimates, by [author name scrubbed]. This report will be updated as needed.

Introduction After several years of growing producer discontent with the apparent ineffectiveness of the federal dairy price support program and growing concerns about rapidly escalating dairy feed costs, the U.S. dairy industry advocated for substantial changes in the nature of federal dairy support. As a result, the 2014 farm bill (the Agricultural Act of 2014; P.L. 113-79 ), which was signed into law on February 7, 2014, makes significant changes to the structure of U.S. dairy support programs including the elimination of several major price and income support program provisions from the 2008 farm bill (the Food, Conservation, and Energy Act of 2008, P.L. 110-246 ), the extension of several smaller dairy programs, and the addition of two new programs. This report describes the major dairy provisions contained in the 2014 farm bill as well as Congressional Budget Office (CBO) cost projections of historical program outlays compared with outlays under the new dairy programs. The report also includes a discussion of potential issues related to the new dairy policies. Finally, a table at the end of this report ( Table A-1 ) provides a side-by-side comparison of dairy provisions from the 2008 and 2014 farm bills. Reaching a final compromise on U.S. dairy policy, as contained in the 2014 farm bill, was a long and arduous task involving considerable debate over what the nature and role of federal support programs should be. The following section provides background on the shift of federal support from dairy product prices to the dairy operating margin. Origins of the New Dairy Policy Federal dairy price supports were first established by federal law in 1949 and modified in subsequent legislation including the 2008 farm bill ( P.L. 110-246 ), which established the Dairy Product Price Support Program (DPPSP). DPPSP indirectly supported the farm price of fluid milk at $9.90 per hundred lbs. (i.e., hundredweight or cwt.) through government purchases of dairy products from dairy processors at statutorily set prices. The program was countercyclical, in that government purchases occurred when product prices were low, and ceased as product prices rose above support levels. However, by the mid-1990s, the annual farm price of milk had trended higher, albeit subject to an increasingly volatile pattern ( Figure 1 ), whereas the federal support rate was flat at $9.90 per cwt. Volatile milk prices made planning more difficult and made dairy producers more vulnerable to unexpected or sustained increases in the cost of feed (the major cost component of dairy production). Milk producers have argued since the early 1990s that support levels had become too low, relative to market prices and costs of production, to provide meaningful support. More recently, milk producers argued that support based strictly on the price of milk failed to account for the sharp escalation of feed costs that has occurred since 2006 ( Figure 2 ). After the emergence of the U.S. ethanol industry as a major source of corn demand in 2006, coupled with a series of weather-related, below-trend yield years (especially 2010-2012) for the U.S. corn crop, U.S. feed grain markets surged to new price levels by 2012 that were nearly three times above the levels that had persisted during the previous four decades. Rising feed costs are of particular concern to dairy producers because they represent a substantial portion of the cost of milk production—in 2011, feed costs accounted for 80% of operating costs and 54% of total costs of milk production (compared with 71% and 37% shares during the 2000-2004 period). The combination of volatile milk market prices rising well beyond support levels coupled with rapidly rising feed costs contributed to a shifting of focus away from price supports and towards protecting or guaranteeing some portion of the margin between milk prices and feed costs. This refocusing of policy interest on the dairy operating margin was formalized by a proposed dairy margin protection program published in June 2010 by the National Milk Producers Federation (NMPF) called the Foundation for the Future (FTF). A version of the FTF was introduced in the 112 th Congress as H.R. 3062 , The Dairy Security Act (DSA), by House Agriculture Committee Ranking Member Collin Peterson on September 23, 2011. Through the legislative process FTF eventually evolved into the new dairy program described in the following sections. An appendix at the end of this report ( Appendix ) provides additional detail on the legislative debate behind the new dairy policy. Dairy Provisions in the 2014 Farm Bill The 2014 farm bill repealed several previously existing dairy programs, extended others, added some new programs, and was silent on several existing dairy programs that derive their authority from outside of the farm bill. Each of these aspects is briefly summarized below. Programs Repealed The three major price and income support programs from the 2008 farm bill are eliminated. These include the following. The Dairy Product Price Support Program (DPPSP) is repealed immediately. DPPSP mandated that USDA directly support the price of cheese, nonfat dry milk, and butter through acquisitions at statutorily set minimum purchase prices in order to support the farm price of milk at $9.90 per hundred lbs. or hundred-weight (cwt.). The program also included USDA resale of acquired dairy products under certain price and stock-volume conditions. Some variation of a dairy price support program has been in effect since the Agricultural Act of 1949 first required USDA to support the farm price of milk. The Milk Income Loss Contract (MILC) program is temporarily extended until September 1, 2014, or until the implementation date of the new margin program (described below), whichever comes earlier and after which it is permanently repealed. MILC is a counter-cyclical payment program first authorized in the 2002 farm bill ( P.L. 107-171 ) that makes payments available on up to 2.985 million lbs. of milk whenever the monthly Boston Class I price of fluid milk falls below a threshold of $16.94/cwt. adjusted for feed cost changes. The Dairy Export Incentives Program (DEIP) , originally authorized by the 1985 farm bill ( P.L. 99-198 ), is repealed immediately. DEIP provided cash bonuses to U.S. dairy exporters when certain international dairy market conditions were met. The Federal Milk Marketing Order Review Commission —established by the 2008 farm bill (§1509) to conduct a comprehensive review and evaluation of FMMO and non-FMMO systems—is also repealed effective immediately. The review commission-which was subject to annual funding appropriations—was never funded. Programs Extended Certain other programs that were reauthorized by the expired 2008 farm bill ( P.L. 110-246 ) are extended through the life of the 2014 farm bill—that is, FY2018. These include the following. The Dairy Forward Pricing Program allows farmers to voluntarily enter into forward price contracts with milk handlers for pooled milk used for manufactured products (Classes II, III, and IV) under Federal Milk Marketing Orders (FMMOs). The program allows regulated handlers to pay farmers in accordance with the terms of a forward contract instead of paying the minimum FMMO blend price for pooled milk. The prices paid by milk handlers under the contracts are deemed to satisfy the minimum price requirements of FMMOs. The 2014 farm bill allows for new contracts until September 30, 2018, but no contract can extend beyond September 30, 2021. The Dairy Indemnity Payment Program (DIPP) makes payments to dairy producers when a public regulatory agency directs them to remove their raw milk from the commercial market because it has been contaminated by pesticides, nuclear radiation or fallout, or toxic substances and chemical residues other than pesticides through no fault of their own. Payments also are made to manufacturers of dairy products, but only for products removed from the market because of pesticide contamination. The Dairy Promotion and Research Program is a generic dairy product promotion, research, and nutrition education program, funded by a mandatory 15¢/cwt. assessment on milk produced and marketed in the 48 contiguous states. Importers in all 50 states, the District of Columbia, and Puerto Rico must also pay an assessment rate of 7.5¢/cwt. of the milk equivalent in imported dairy products. USDA issues regulations on the time and method of importer payments. Continuation of Existing Programs Under Non-Farm-Bill Authority Certain dairy programs derive their operating authority outside of the farm bill and simply continue to operate independent of the enactment of the 2014 farm bill. These include, but are not limited to the following. Federal Milk Marketing Orders (FMMOs) , which exist under permanent authority, established by federal law in the Agricultural Marketing Agreement Act of 1937, are 10 geographically defined fluid milk marketing areas. The FMMO system regulates milk marketing across state lines but within these 10 explicitly defined and geographically aligned multi-state regions. Within each FMMO, dairy processors or handlers (i.e., milk buyers) are required to pay a minimum price for farm milk depending on its end use. Dairy Import Tariff Rate Quotas (TRQs) are a system of product-specific import quotas—with low in-quota tariffs and high, often-prohibitive above-quota tariffs—designed to protect higher-priced domestic dairy products by limiting the importation of lower-priced foreign dairy products. Dairy TRQs are part of the Harmonized Tariff Schedule of the United States and are unaffected by changes made in the 2014 farm bill. The Dairy Price Support Program is authorized under "permanent farm law" contained in the 1949 Agricultural Act, but is suspended by periodic passage of new farm legislation. Under permanent law, USDA is required to purchase manufactured milk and butterfat products in sufficient quantities to raise demand in order to raise the farm price of fluid milk to the equivalency of 75% to 90% of a 1910-1914 parity price index—which would result in milk support prices near $40/cwt. double the average all-milk farm price of $20/cwt. during 2013. Reversion to permanent dairy law has been referred to as the "milk price cliff." The Dairy Product Mandatory Reporting Program requires manufacturers to report to USDA the price, quantity, and moisture content of dairy products sold. Quarterly audits are to be undertaken to ensure compatibility between submitted information and related dairy market statistics. The Livestock Gross Margin Insurance for Dairy (LGM -D ) is an ongoing pilot program available for purchase from private insurers through USDA's permanently authorized federal crop insurance program. LGM-D provides protection to dairy producers when feed costs rise or milk prices drop. Gross margin is the market value of milk minus feed costs. LGM-D uses futures prices for corn, soybean meal, and milk to determine the expected gross margin and the actual gross margin. The Fluid Milk Processor Promotion Program , established by the 1990 farm bill ( P.L. 101-624 ) with subsequent reauthorizations, develops and finances generic advertising programs designed to maintain and expand markets and uses for fluid milk products produced in the contiguous 48 states and the District of Columbia. The program is funded through a 20¢/cwt. assessment paid by processors on all milk processed for fluid consumption. The fluid milk order was approved by a referendum among fluid milk processors and became effective December 10, 1993. The program originally required periodic congressional reauthorization; however, the 2002 farm bill gave it permanent authority. Revival of a Previously Expired Provision The 2014 farm bill also included a provision (§1410(d)) that removed the expiration dates in U.S. code (7 U.S.C. 7235[a][2]) related to the petition and approval by California dairy producers to designate the state of California as a separate Federal Milk Marketing Order (FMMO) with the potential to use a Class I quota plan to determine individual producer payments. California currently operates its dairy industry under a state marketing order, but in recent years has been considering adopting an FMMO in order to alter its current milk class pricing structure. By removing the expiration dates, the 2014 farm bill actively revives the FMMO option for California's dairy industry. USDA's Agricultural Marketing Service would still have to receive a formal petition from California's producers and conduct a hearing to collect evidence about the market and hear testimony on desired provisions before California's dairy producers actually decide whether to adopt—via referendum—an FMMO. New Programs The 2014 farm bill replaced the repealed price support programs—DPPSP, MILC, and DEIP—with two new support programs that are authorized for the five-year period of the 2014 farm bill, FY2014-FY2018—the Margin Protection Program (MPP) and the Dairy Product Donation Program (DPDP). These two programs are described in the following two sections. The Margin Protection Program (MPP) for Dairy Producers MPP Implementation Specifics USDA was mandated to establish a new margin protection program (MPP) for dairy producers no later than September 1, 2014. Although the dairy provisions of the 2014 farm bill provide important structure and direction concerning the application of the new programs, substantial detail concerning the actual functioning of the new programs is contained in the USDA implementation regulations. The final regulations for both the MPP and DPDP were released on August 29, 2014, and the enrollment period began on September 2, 2014, at which point both new dairy programs became operational. Defining the Margin MPP is a voluntary program intended to provide milk producers with protection from low operating margins. A key aspect of the MPP is creating a timely and transparent measure of an average dairy-production operating margin that will be useful across all dairy production regions. For MPP purposes, the operating margin is defined as the difference between the farm-level price of a hundred lbs. of milk—referred to as hundredweight or cwt. of milk—and the cost of an average feed ration necessary to produce a cwt. of milk. To construct this margin, MPP will use USDA-reported monthly national average price data for all classes of milk (called the all-milk price) and for the three principal feeds that represent the bulk of purchased feeds in dairy rations (corn, soybean meal, and alfalfa hay) to construct an estimate of the operating margin (see box below). MPP Eligibility All U.S. dairy producers are eligible to participate in the margin protection program. If a dairy operation consists of more than one dairy producer, all of the dairy producers shall be treated as a single dairy producer for purposes of participation in the margin protection program. If a dairy producer operates two or more dairy operations, each dairy operation shall separately register to participate in the margin protection program. Participating dairy producers are prohibited from reconstituting a dairy operation for the purpose of capturing payments under MPP. The dairy operation must have commercial milk sales in the United States (or its territories) at the time of enrollment. Each participating dairy producer must be "actively engaged" in the dairy farm business. Participating dairy operations must certify compliance with two conservation provisions—highly erodible land conservation and wetlands conservation. Signing Up for Margin Protection The initial enrollment period of September 2, 2014, to November 28, 2014, covers, separately, both the last four months of the 2014 program year and the full 2015 program year. In future years, the registration period will run from July 1 through September 30. To participate in MPP for any given year, each dairy operation must sign up and pay an annual registration fee of $100. The administrative fee is due by the end of the enrollment period. Failure to pay the fee precludes the operation from receiving any payments under the program until any outstanding fee has been paid. Participation in MPP is voluntary. However, once a dairy operation is enrolled in the MPP, it is in the program through 2018 unless there is some change in ownership, including both who is the owner and what share of the operation they own. The operation may defer enrolling until a later year, but once enrolled it must participate for each remaining year through 2018—the exception would be if the producer retires or dies, or the dairy operation is dissolved. As a result, a participating dairy operation is committed to paying at least the minimum $100 annual administration fee for each year in the program. At the initial sign-up, each dairy operation must complete Form CCC-781 to establish its identity, eligibility, and production history (see box below). Choosing a Margin Protection Coverage Level Once CCC-781 is submitted and approved, and the $100 administration fee has been paid, the dairy operation is considered enrolled in the $4/cwt. margin protection level with a 90% coverage level—referred to as Catastrophic Coverage. This is the minimum (or default) protection level for a dairy operation. Dairy producers may, on an annual basis, change their MPP coverage level (see box below). Every participating dairy operation has the annual choice of selecting both higher margin protection levels up to $8/cwt. and PH coverage in a range from 25% to 90%. Higher coverage levels must be paid for with premiums (described below) that vary based on the CPH and producer-selected margin threshold. If producers want to register for a higher coverage level, they must do so during the enrollment period using Form CCC-782. Failure to successfully submit CCC-782 during the enrollment period results in margin protection equal to the default Catastrophic Coverage of a $4/cwt. margin threshold at 90% PH coverage. No Cap or Limit on Participation Unlike the MILC program, where payments each fiscal year were limited to the first 2.985 million lbs. of milk for producers with an adjusted gross income (AGI) under $500,000, participation in the MPP has no explicit cap related to a producer's AGI or the size of a dairy operation—in other words, there is no production or dollar payment limitation associated with the dairy margin program. Instead, margin protection payments would be limited by how much of a producer's historical milk marketings are covered by the program (i.e., the CPH). Producers who sign up for MPP are ineligible to sign up for the Livestock Gross Margin for Dairy Cattle program (LGM-D) offered by USDA's Risk Management Agency (RMA). Producers may complete pre-existing LGM-D contracts at the time of their first enrollment; however, they will not be allowed to receive an MPP payment until their LGM-D contract is completed. Timing of Payments USDA is instructed to determine the ADPM as soon as possible after the necessary prices are reported in order to expedite the payments. However, NASS full-month price estimates—not preliminary estimates—must be used for both months in calculating the two-month average. As a result, the two-month average margin calculation will not be available until a full month after the two-month period has expired. For example, the January-February ADPM will not be available until the end of March when USDA's Agricultural Prices report is issued with full-month, farm-prices-received estimates for February. Thus, if an MPP payment is triggered by the January-February ADPM, the payment will not begin until April. If a producer is in arrears on payment of administration fees and/or premiums for higher coverage levels (described below), then no payment will be made. MPP Payments Whenever the calculated Actual Dairy Production Margin (ADPM) falls below the selected MPP margin threshold for a consecutive two-month period, a payment will be made on the selected coverage-level portion of a participating producer's PH—referred to as the covered production history or CPH. The MPP payment rate per cwt . is equal to the difference between the selected MPP threshold and the average ADPM as calculated for that two-month period. Each two-month period is assigned an equal share of a participating producer's CPH—since there are six periods, each share will be equal to CPH/6. To determine the total MPP payment for a specific two-month period, the MPP payment rate times the coverage percent is applied to the producer's CPH, but prorated to a two-month period (i.e., CPH divided by six). MPP payments will continue as long as the ADPM is less than the selected MPP margin threshold for consecutive two-month periods. MPP payments cease when the ADPM reaches or exceeds the selected MPP margin threshold for a two-month period. Likelihood of an MPP Payment The historical frequency of the average margin levels ( Table 1 ) provides information concerning the likelihood of future payments at different margin thresholds. Using ADPM estimates for successive two-month periods since January 2000, the ADPM has been below $4/cwt. in about 7% of the two-month periods and above $8/cwt. in 58% of the periods. Margins within the $6/cwt. to $8/cwt. range occurred in about 30% of the two-month periods. During this same period (January 2000 to March 2014), the national average ADPM was $8.61/cwt. Thus, the maximum MPP coverage level of $8.00/cwt. represents 93% of the national average ADPM. See Figure 3 for a depiction of how often the monthly margin would have fallen below the $8.00/cwt., $6.00/cwt., and $4.00/cwt. thresholds since January 2000. MPP Premiums Participating producers must pay premiums that start at the $4.50/cwt. margin protection level and rise with higher coverage levels up to the $8.00/cwt. maximum. No premium is charged for the minimum $4.00/cwt. margin protection. The premium schedule also differentiates based on the level of covered production history (CPH). A substantially lower premium schedule is used for the first 4 million lbs. of CPH ( Table 2 ). In addition, a special 25% discount is available for premiums on the first 4 million pounds of CPH during each of calendar 2014 and 2015. The premium rate differential based on APH is significant because, in 2011, approximately 88% of U.S. dairy farms had annual milk production of 4 million lbs. or less, and they produced about 25% of total U.S. milk volume. Annual premiums are calculated as the product of the premium rate per cwt. (from Table 2 ) and the coverage production history (CPH). Thus, the premium rate varies with the volume of covered production history (CPH) of the participating dairy operation (i.e., whether it has greater or less than 4 million lbs. of CPH), and the level of margin protection selected (from $4.00/cwt. to $8.00/cwt. in $0.50/cwt. increments). Premium Calculation Method The CPH is split into two components—the first 4 million lbs., and the remaining CPH above 4 million lbs. Dairy producers with a CPH in excess of 4 million lbs. would be charged the lower premium rate on the first 4 million lbs. of CPH and the higher premium rate on the amounts of CPH above that. Premium payments may be paid in full by the end of the enrollment period, or they may be paid in tranches, with the first 25% of the total premium paid no later than February 1 of the relevant year, with the remaining premium balance paid no later than June 1 of the relevant year. The 2014 farm bill states that a participating dairy operation that fails to pay its administrative fee and/or premiums remains legally obligated for such charges, and may not receive any payments under MPP until such charges are fully paid. Margin Coverage Distinction: $6.50/cwt. vs. $7.00/cwt. Separately, it is worth noting that the premium structure strongly encourages participation at the $6.50/cwt. level for CPH greater than 4 million lbs. To raise the margin coverage level an additional $0.50/cwt. (from $6.50/cwt. to $7.00/cwt.), an additional $0.54/cwt. of premium must be paid (i.e., $0.83/cwt. - $0.29/cwt.). The total premium cost for insuring 70% of the APH of 120,000 cwt. at a margin of $7.00/cwt. for the same hypothetical scenario would be $40,120—more than double the premium cost of $16,360 for $6.50/cwt. margin protection. The Dairy Product Donation Program (DPDP) According to the 2014 farm bill, USDA shall establish and administer a Dairy Product Donation Program (DPDP) to (1) address low dairy operating margins, and (2) provide nutrition assistance to individuals in low-income groups. A result from the dairy policy debate that preceded the final 2014 farm bill (see Appendix ) was as follows. It is generally agreed that dairy operating margins are low when the equilibrium between milk supply and demand is out of balance with supply exceeding demand. The original proponents of the dairy margin program had argued that an additional policy feature—a supply disincentive component—should be added that would work to reduce supply and bring the milk supply-demand equation back into balance at a higher margin. Opponents of this concept argued that the government should not manage supplies, but should instead work to enhance demand to rebalance the milk supply and demand. This latter argument won out in conference when conferees proposed an entirely new "demand enhancing" program—DPDP. DPDP Program Activities USDA must announce and undertake DPDP activities whenever the actual dairy production margin (ADPM) is $4.00/cwt. or less for each of the immediately preceding 2 months. When DPDP has been triggered, USDA must immediately purchase dairy products, at prevailing market prices, until such time as one of the termination conditions (described below) is met. USDA must consult with public and private nonprofit organizations—organized to feed low-income populations—in order to determine the types and quantities of dairy products to purchase under the DPDP. USDA must distribute, not store, the purchased dairy products. USDA is directed to use the funds, facilities, and authorities of the Commodity Credit Corporation (CCC) to implement and administer the DPDP. DPDP Distribution of Purchases The 2014 farm bill directs USDA to distribute, but not store, the dairy products purchased under DPDP so as to encourage greater domestic consumption by diverting them to persons in low-income groups as determined by USDA. USDA shall use public and private nonprofit organizations for distribution of DPDP dairy products to provide, without cost or waste, nutrition assistance to individuals in low-income groups. DPDP purchases are expected to be made in package sizes suitable for immediate household use, to best accommodate the immediate distribution requirement of the 2014 farm bill. Any organization receiving dairy products under the DPDP may not sell the products back to commercial markets. DPDP Program Termination Conditions USDA must terminate its DPDP activities whenever any one of the following conditions occurs. 1. After three consecutive months of purchases, the DPDP purchases are required to cease, even if the margin remains < $4.00/cwt. , until there have been at least two more consecutive months of margins below $4.00/cwt. 2. If the margin is > $4.00/cwt. for the preceding month, DPDP purchase activities must cease until the original requirements (i.e., margin < $4.00/cwt. for two consecutive months) are met again. 3. USDA will stop making DPDP purchases, even if the margin remains < $4.00/cwt. , if the U.S. price for dairy products is significantly above world market prices. In particular: a. USDA will stop making DPDP purchases, when $3.00/cwt. < margin < $4.00/cwt. for the preceding month and either: i. the U.S. cheddar cheese price > 105% of world price, or ii. the U.S. non-fat dry milk price > 105% of world price; or b. USDA will stop making DPDP purchases, when the margin < $3.00/cwt. for the preceding month and either: i. the U.S. cheddar cheese price > 107% of world price, or ii. the U.S. non-fat dry milk price > 107% of world price. The 2014 farm bill gives USDA the latitude to determine which domestic and international prices of cheddar cheese and non-fat skim milk powder will be used to assess the DPDP termination conditions. If DPDP purchases are suspended due to domestic prices being sufficiently above world prices, margins would be tracked for the next two months, and purchases could resume after three months if conditions permit. Budget Outlays: Historical and Projected USDA outlays for the major dairy support programs have trended downward since the 1980 farm bill period ( Table 3 ). An outlook for strong dairy product prices for the next several years in the CBO May 2013 baseline accounts for the relatively small net outlay projections of $161 million over 5 years (FY2014-FY2018) and $250 million over 10 years (FY2014-FY2023) for the major dairy programs, assuming an extension of dairy policy as it existed under the 2008 farm bill. According to CBO, replacing current dairy policy with the new dairy programs of the 2014 farm bill will result in projected additional budgetary outlays above baseline over the 5-year (FY2014-FY2018) and 10-year (FY2014-FY2023) periods of $241 million and $912 million, respectively, under the Agricultural Act of 2014 ( P.L. 113-79 ). In other words, the total 5-year and 10-year outlays projected by CBO under the new dairy programs are $402 million and $1.162 billion, respectively, thus continuing the downward trend in program outlays per farm bill period. Dairy Issues Because the MPP and DPDP are new programs that differ notably from previous support programs, several questions have been raised concerning their implementation and potential cost, as well as their effect on U.S. and international dairy markets and consumers. History provides some indications but solid evidence will likely only emerge with implementation. Some of the more noteworthy related issues are briefly discussed here. 1. Will DPDP Activities Supplement or Offset Commercial Sales? As Bozic et al (2014) have noted: The fundamental question is whether or not the end-users of donated products would have purchased them on commercial markets anyway. If these donations are strictly additive to total dairy usage then the amount of dairy products served in Food Banks or other settings is increased. If the donation displaces commercial purchases that would have been made with other cash resources, then total commercial sales of dairy products would actually decline. To the extent that these donations are going to programs that have limited resources and continuously unmet needs, it is not unreasonable to speculate that commercial displacement will be minimal. 2. Will MPP Work as a Safety Net? If So, With What Consequences? Economic analysis indicates that, by focusing on the national average milk operating margin rather than strictly on the price of milk and offering a range of margin protection and coverage choices, U.S. dairy producers, regardless of their geographic location or management style, will be provided with substantial opportunity to manage their milk-production risk environment under the new dairy programs. Another related, but unanswered question is, if MPP is effective as a safety net, will its subsidized premiums crowd out private sector risk markets? 3. Will Production Incentives Result from MPP and DPDP? The margin protection program will likely have a risk reduction effect, and the fixed premium structure likely has a significant federal subsidy component embedded in it—although the actual extent of implicit subsidy has yet to be assessed. This combination can be expected to provide some degree of production incentives to participating milk producers. Overly strong production incentives can disrupt the traditional market signals that lead to reduced milk production via herd culling. Furthermore, MPP provisions could inadvertently result in a policy framework that gives advantage to "lumpy" over "incremental" growth at the farm level as producers may choose to respond by starting new dairy operations at new locations to be able to enroll new milk production in the MPP. The nature by which DPDP will be implemented and its subsequent effect on dairy markets is unknown at present. Will DPDP act as a catalyst for further milk production by artificially inflating the true underlying demand for dairy products, thus encouraging greater milk production and leading to lower prices and higher program payments down the road? Unlike early versions of the Dairy Security Act—the precursor to the dairy subtitle contained in the 2014 farm bill—which contained a strong production disincentive component in the form of the proposed Supply Management Program, MPP has only a mild disincentive in the form of its exclusion of new milk production in excess of the national average milk production growth rate. If producers act in unison to expand production beyond normal annual growth rates, even that milk restriction is minimized. 4. Can the MPP Program be Gamed by Participants? MPP does not follow sound insurance principles—premiums are not set to reflect the risk environment in milk and feed markets but instead are fixed over the life of the farm bill. This fixed premium structure combined with the ability of the producer to annually choose a margin insurance level creates incentives to adversely game the program to one's financial advantage. Publicly available information on futures contract prices from the Chicago Mercantile Exchange for milk and feed can be used to forecast near-term milk production margins that, in turn, indicate the probability of indemnity payments under various MPP coverage levels. As a result, strong adverse gaming incentives exist for participants in the MPP. Economic analysis suggests that the adverse gaming incentives can be reduced or mitigated by specifying an earlier sign-up date for coverage decisions—for example, 60 to 90 days ahead of each year's program starting date of January 1. The initial enrollment unavoidably falls within this range; however, the enrollment period of July 1 to September 30 for the out years 2016, 2017, and 2018 meets the 90-day threshold. 5. How Will MPP Payments Be Distributed Across Farm Sizes? Economic analysis suggests that, under the fixed premium structure of the 2014 farm bill—with strong differentiation between premiums on the first 4 million lbs. and on marketings above 4 million lbs.—net expected benefits under MPP will closely align with those under the previous MILC program, but with slightly less skewed results. Farms with fewer than 100 cows would receive approximately 38% of the expected benefits (compared with 39% under MILC), while farms with over 1,000 cows would account for approximately 15% of benefits (compared with 9% under MILC) during low margin periods. Furthermore, the same analysis concluded that, "only when higher coverage levels are deep in-the-money will payments per cwt. be more consistent across farm sizes and result in the distribution of net benefits following closely to the distribution of milk production." 6. What Are the Trade Implications of MPP and DPDP? The 2014 farm bill dairy provisions made several changes that have profound implications for U.S. and international trade agreements. First and foremost, by repealing the Dairy Product Price Support Program (DPPSP) and the Dairy Export Incentive Program (DEIP), U.S. dairy programs have made a significant step in better complying with its domestic support commitments under the World Trade Organization (WTO). During the 17-year period from 1995 through 2011 (the most recent year for which notification data is available), the implicit program costs of DPPSP have represented the single largest U.S. domestic support outlay of any single program commodity accounting for $93.5 billion ($5.5 billion annually) or 39% of all U.S. amber box domestic support notifications to the WTO. Thus, the repeal of DPPSP is likely to have a substantial effect in lowering annual U.S. domestic support notifications to the WTO, and keeping U.S. domestic support outlays well below the United States' $19.1 billion ceiling. It is not yet clear how USDA will notify program outlays under MPP and DPDP—for example, possibly as amber box but exempt under the de minimis exclusion—but current CBO spending projections of about $1.2 billion over 10 years or about $120 million per year pale in comparison with the DPPSP's annual average notification of $5.5 billion. In addition, repeal of DEIP fulfills a general commitment by WTO members to end use of agricultural export subsidies, and brings greater pressure to bear on the European Union, Switzerland, Norway, and the rest of the world to act similarly. Finally, U.S. dairy TRQs remain in place but are WTO legal as they were included in the original U.S. country schedule of tariffs and quotas that was approved and accepted by all WTO-member countries. Given the very favorable market conditions for the U.S. dairy sector with near record high milk prices in 2014 coupled with prospects for relatively low feed costs, it is expected that market incentives will dominate producer decision making for the foreseeable future. Conclusion The answers to these questions may emerge only slowly. The new MPP and DPDP programs are likely to be implemented during a period of sustained strong milk prices, moderate to weak feed costs, and sustained large margins that, if realized, would minimize the impact of the new dairy programs ( Figure 3 ). Appendix. Debate Behind the New MPP and DPDP As mentioned earlier in the text (" Origins of the New Dairy Policy "), a version of the National Milk Producers Federation's (NMPF's) Feed the Future (FTF) proposal was introduced in the 112 th Congress as H.R. 3062 , The Dairy Security Act (DSA), by House Agriculture Committee Ranking Member Collin Peterson on September 23, 2011. A modified version of DSA appeared as "Subtitle D—Dairy," in Title I of both the House-reported ( H.R. 6083 ) and Senate-passed ( S. 3240 ) farm bills of the 112 th Congress. Dairy Policy in the 113 th Congress In the 113 th Congress, both the Senate and the House passed different farm bills ( S. 954 , passed by the Senate on June 10, 2013, and H.R. 2642 , passed by the House on July 11, 2013) that proposed replacing the traditional set of dairy price and income support programs with a new margin-based income support program—called the Dairy Production Margin Protection Program (DPMPP) under S. 954 , and the Dairy Producer Margin Insurance Program (DPMIP) under H.R. 2642 . The two proposed margin programs were similar in many respects; however, the Senate bill (but not the House bill) also included an accompanying market stabilization program—the Dairy Market Stabilization Program (DMSP), which, under certain conditions, would reduce payments to participating producers for their milk marketings when the margin falls below proposed statutory thresholds. Early versions of the House farm bill in the 113 th Congress also included the DMSP as part of new dairy policy. However, during the House Agriculture Committee's markup of its first version of the 2013 farm bill ( H.R. 1947 ) in May 2013, an amendment ( H.Amdt. 228 ) was introduced by Representatives Goodlatte and Scott that proposed removing the DMSP from H.R. 1947 and making some minor adjustments to DPMPP. The Goodlatte-Scott amendment (GSA) was defeated in committee by a vote of 28 to 26. The amendment was reintroduced during the House floor debate of H.R. 1947 and passed by a vote of 291-135 (May 15, 2013). However, the full House voted to reject the amended farm bill (195-234) on June 20, 2013. On July 11, 2013, the full House passed (by a vote of 216-208) a second version of the 2013 farm bill ( H.R. 2642 ) which included the Goodlatte-Scott amendment—thus removing DMSP and replacing DPMPP with DPMIP. Conference Committee Resolves Differences The differences between the Senate- and House-passed farm bills were resolved when conferees reported a conference agreement on January 27, 2014 (the Agricultural Act of 2014, H.R. 2642 / H.Rept. 113-333 ). The dairy supply management debate was resolved when the conferees included an entirely new program—the Dairy Product Distribution Program (DPDP)—focused on demand enhancement, rather than supply control. Prior to the conference, the dairy debate had been limited to whether a supply management component should be included in the final bill—the concept of a DPDP did not emerge until conference. The full House and Senate approved the conference agreement on January 29 and February 4, respectively, and the President signed the measure into law on February 7, 2014 ( P.L. 113-79 ).

The 2014 farm bill (P.L. 113-79), which was signed into law on February 7, 2014, makes significant changes to the structure of U.S. dairy support programs, including the elimination of several major price and income support programs from the 2008 farm bill (P.L. 110-246), the extension of several smaller dairy programs, and the addition of two new programs. Three of the principal dairy support programs under the 2008 farm bill—the Dairy Product Price Support Program (DPPSP), the Milk Income Loss Contract (MILC) program, and the Dairy Export Incentives Program (DEIP)—are eliminated. These programs are replaced by two new support programs that are authorized for the five-year period of the 2014 farm bill, FY2014-FY2018—the Margin Protection Program (MPP) and the Dairy Product Donation Program (DPDP). The MPP is a voluntary program that makes a payment to participating farmers when a formula-based national margin—referred to as the Actual Dairy Production Margin (ADPM) and calculated as the national average farm price for all milk minus a national-average feed cost ration—falls below a producer-selected insured margin that can range from $4.00 per hundredweight (cwt.) to $8.00/cwt. in $0.50/cwt. increments. According to USDA final rules (released August 29, 2014), MPP payments are based on a farm-level production history and a producer-selected coverage level that ranges from 25% to 90%—the product of these two items yields the covered production history (CPH). Producers must pay an annual administrative fee of $100 for each participating dairy operation, and a premium that rises steadily for higher margin protection levels starting at the $4.50/cwt. margin level. The minimum $4.00/cwt. margin is fully subsidized and has no farmer-paid premium. The premium structure is further divided based on the volume of CPH—lower premiums are charged for the first 4 million pounds (lbs.) of CPH, higher premiums are charged on CPH above 4 million lbs. As an incentive to encourage participation by smaller dairy operations (with CPH under 4 million lbs.), premiums will be reduced by 25% across the board for all margin protection levels except the $8.00/cwt. level during calendar 2014 and 2015. The DPDP requires USDA to procure and distribute certain dairy products when the ADPM falls below $4.00/cwt. for two consecutive months. DPDP dairy product distribution is required to target individuals from low-income groups and not be allowed for resale into commercial markets. Purchases and distribution under the DPDP end after three months or if the U.S. price for certain dairy products is significantly above world prices. Several programs from the 2008 farm bill were extended through FY2018 including the Dairy Forward Pricing Program, the Dairy Indemnity Program, and certain provisions to augment the development of export markets under the National Dairy Promotion and Research Program (i.e., the dairy check off program). In addition, the final bill adopted a provision that requires USDA to adhere to standard rulemaking procedures. Separately, federal milk marketing orders have permanent statutory authority and continue intact, as does the Livestock Gross Margin for Dairy Cattle program (LGM-D) and the suite of Dairy Import Tariff Rate Quotas (TRQs) that limit access to the U.S. domestic market by lower-priced foreign dairy products. The permanent Dairy Price Support Program contained in the Agricultural Act of 1949 (P.L. 81-439) is suspended but would be reactivated should MPP expire at the end of FY2018 without replacement or extension.

Background In May 2003, the United States, Canada, and Argentina requested consultations—the first step in WTO dispute settlement—with the European Union (EU) concerning the latter's de facto moratorium since 1998 on approving new genetically engineered (GE) products. U.S. agricultural interests contended that these policies not only blocked their exports to the EU, but also fueled unwarranted concerns about the safety of agricultural biotechnology throughout the world. The United States also maintained that a number of EU member states maintained national marketing and import bans on GE products even though those products had already been approved by the EU for both marketing and import in the EU. Although the EU recommenced approvals in May 2004 with the approval of a GE corn variety for human consumption, a number of EU member states continue to block dissemination of approved biotech varieties. The EU restarted its approval process following adoption of new labeling and traceability rules for GE crops and foods in 2003. The United States accounted for 48% of the 331 million acres (134 million hectares) planted globally with GE crops in 2009. In 2009, 91% of all U.S. soybean, 88% of U.S. cotton, and 85% of U.S. corn acres were planted with GE varieties, designed mainly to control pests (weeds and insects). GE production is not segregated from production from conventional varieties because the U.S. regulatory system recognizes GE crops (once approved for commercialization) as substantially equivalent to non-GE varieties. Gaining market acceptance of GE crops within the United States has been easier than overseas, however, where, in markets like the EU, consumers and their governments have been more wary of biotechnology. With minor exceptions, the EU and its member states approved no GE products between 1998 and 2004. As of January 2004, 22 GE products or crops were awaiting approval. A bloc of EU states had effectively halted the release of any new GE crops into the environment, saying that they would not implement the EU-wide legislation for approvals until new, stricter regulations for labeling and tracing GE-containing products (discussed below) took effect. In the three years before the de facto ban, U.S. corn exports to the EU averaged about $300 million annually, according to USDA data (Spain and Portugal were the largest EU importers). During the ban, they declined to less than one-tenth of that value annually—the result, according to analysts, of the EU's moratorium on the approval of new corn varieties already approved in the United States. Although one variety of biotech corn was approved by the EU prior to the moratorium, the United States grew other varieties. Thus, U.S. export of any corn to the EU was impractical because of the difficulty of segregating approved from unapproved varieties. The WTO Case The United States and co-complainants argued that the EU moratorium violated provisions of the WTO Agreement on the Application of Sanitary and Phytosanitary (SPS) Measures. The SPS agreement permits countries to regulate crops and food products to protect health and the environment, but their rules must be scientifically justified, and approval procedures must occur without undue delay. U.S. interests contend that there is no scientific evidence that GE food and feed crops are substantially different from, or any less safe than, conventional varieties, a conclusion they say even European scientific authorities have reached. The United States contends that EU biotechnology measures also are inconsistent with provisions of other WTO agreements, namely the Technical Barriers to Trade Agreement (TBT), the General Agreement on Tariffs and Trade (GATT 1994), and the Uruguay Round Agreement on Agriculture. EU officials counter that their cautious approach to regulating biotechnology is necessary to cultivate trust among European consumers. At the same time, they also assert that they have shown good faith in moving to restart the approval process. The Dispute Panel's Ruling The WTO dispute panel found that the EU had maintained a moratorium on approvals of genetically engineered crops between June 1999 and the beginning of panel deliberations in August 2003. The EU had claimed that there were no measures imposing a moratorium. The panel agreed with the United States and the co-complainants that marketing or import prohibitions on GE products in six EU countries (Austria, France, Germany, Greece, Italy, and Luxembourg) violated the WTO's Agreement on Sanitary and Phytosanitary (SPS) Measures, which requires such measures to be based on science and risk assessment. The panel upheld the complainants' charge that the EU also violated the SPS agreement by not ensuring that approvals for 24 of 27 genetically modified (GM) products in the approval pipeline were carried out without "undue delay." The dispute panel's ruling dismissed several other U.S. and co-complainant claims, including claims that EU approval procedures were not based on appropriate risk assessment; that the EU unfairly applied different risk assessment standards for GE processing agents; and that the EU had unjustifiably discriminated between WTO members. The panel made no recommendations as to how the EU should bring its practices in line with WTO rules, nor did the ruling require the EU to change its regulatory framework for approving GE products. The EU announced on December 19, 2006, that it would not appeal the panel's ruling in the case. The United States and EU agreed that a reasonable period of time would be until November 21, 2007, a deadline subsequently extended by mutual agreement until January 11, 2008. Time would likely be required to reach intra-EU agreement to lift the prohibitions on already approved GE products or to launch court challenges to require member countries to lift their prohibitions on GE products. In May 2004, the EU effectively ended the moratorium by approving a GE corn variety (Syngenta Bt-11) for human consumption. Since then, the EU has approved GE corn varieties (Monsanto's NK603) for both human and animal consumption, Pioneer's 1570 corn for feed use, and 17 strains of GE corn seed (all derived from the MON810 strain approved in 1998) for commercial use. The latest EU approval is the Amflora starch potato, approved for cultivation and for use in the production of industrial starch. The Amflora potato is only the second GE variety approved for cultivation in 12 years; in 1998, the EU had approved MON810, a GE corn, for cultivation and for use as food and livestock feed. While the United States and the EU are continuing technical discussions on market access issues for biotech products, both Canada and Argentina have settled their disputes with the EU. On July 15, 2009, Canada and the EU signed a final settlement of the WTO dispute that Canada had brought against the EU in May 2003. Similarly, Argentina and the EU announced their final settlement of the biotech dispute on March 18, 2010. All three parties have notified these settlements to the DSB as mutually agreed solutions. Both settlements provide for bilateral, biannual meetings between competent services of the European Commission and the co-complainants' authorities regarding the application of biotechnology to agriculture and related trade issues of mutual interest, including follow-up of authorizations of genetically modified products of interest to each of the parties; measures related to biotechnology that may affect trade between the parties, including measures adopted by EU member states; specific issues that arise in the context of requests for authorization submitted to regulatory evaluations; any trade impacts of asynchronous authorizations of genetically modified products; renewal of authorizations of genetically modified products; and exchanges of information regarding such issues as new legislation affecting biotechnological agriculture, or coordination mechanisms to solve eventual cases of adventitious presence of non-authorized GMOs in shipments of authorized products. Differing Regulatory Approaches The United States has embraced the concept of substantial equivalence with regard to GE products: if a GE product is substantially the same as its conventional counterpart, it should be regulated no differently than the conventional product. The EU, on the other hand, takes a "precautionary approach," which means that if scientific evidence is insufficient or inconclusive regarding a practice's or product's potential dangers to human or environmental health, it should be more vigorously regulated or even prohibited if there are reasonable grounds for concern, thus providing a safeguard against future unforeseen problems. Under this approach, the products of biotechnology are deemed to be inherently different from their conventional counterparts and to require a separate regulatory regime. United States The basic federal guidance for regulating biotechnology products is the Coordinated Framework for Regulation of Biotechnology . One of its key principles is that GE products should be regulated according to their characteristics and unique features—not according to their method of production. Once approved, food products do not have to be labeled as to whether or not they contain any genetically modified organisms, except to the extent that a GE food is substantially different (e.g., contains an allergen or has a changed nutritional content). Because they are deemed substantially equivalent, GE products are regulated under existing federal statutory authorities. European Union The EU has established separate structures specifically for approving GE products and for labeling products derived from them. Currently, the key measure is Council Directive 2001/18 (as amended in July 2003) which spells out steps for assessing human health and environmental risks before any GE product can be released into the environment or marketed. Prior to the 2003 amendments, the competent authority in the EU member state where the product was to be released was responsible for assessing its safety and, if approved, notifying other member states, opening the way for marketing throughout the EU (with EU-level intervention if one member state disagreed with another's decision). The amended directive provides for a "one-door-one-key" approach, whereby the European Food Safety Authority (EFSA) conducts all scientific risk assessments and communicates risks to the public. Then, the EU Council of Ministers decides whether or not to approve a GE product for the EU market. EU regulations empower the European Commission to approve applications by default if the Council of Ministers fails to act on them within three months. Labeling and Traceability The WTO case does not involve EU labeling and traceability regulations, which, U.S. agricultural interests argue, continued to discriminate against U.S. exports even after the GE product approval moratorium was lifted. The labeling and traceability regulations, adopted in July 2003, require that most foods, ingredients, and (for the first time) animal feeds from GE products be labeled, even if they no longer contain detectable traces. The regulations (1830/2003 on the Traceability and Labeling of GMOs and 1829/2003 on Genetically Modified (GM) Food and Feed) were implemented in April 2004. Under the regulations, a tolerance level for non-GE foods, feeds, and processed products of 0.9% is set for allowable "adventitious presence" (AP)—that is, unintended, low-level presence—of an EU-approved GE substance. All products with more than 0.9% must be labeled as containing GE products. Products like meat, milk, and eggs from animals fed or treated with GE materials will not have to be labeled, however. Traceability provisions now require all firms that produce, store, move, or process GE products to track and keep records on them from farm to consumer. Compliance with the EU labeling rule requires segregation of GE crops and foods derived from them from the time they are planted all the way through the processing and marketing chain. This entails prevention of pollen drift from GE to non-GE fields; and difficult and costly handling procedures such as using separate equipment, storage, and shipping containers, or at least painstakingly cleaning them. U.S. interests argue that food companies forced to label accurately all GE products face huge risks and liabilities. All of these problems discriminate against U.S. shipments—even though they are as safe as "conventional" shipments, they contend. In practice, many U.S. manufacturers have opted not to market GE products in the EU, in part due to the EU's stricter GE regulations. The European Commission is currently discussing new technical guidelines for the allowable level of genetically engineered organisms in food and feed shipments for GE products that have been approved in exporting countries but not the EU. Differing Public Attitudes? Differing U.S. and EU perspectives may reflect the fact that U.S. consumers apparently have been not only less fearful of GE foods than their European counterparts, but also more confident in their food safety regulators. According to USDA's Economic Research Service (ERS), surveys of consumer attitudes toward GE products, conducted both here and overseas, have yielded mixed results. Still, "U.S. consumers have voiced little objection to genetically modified foods, while EU consumers have been vocal in their disapproval," ERS observed. Europeans may be much more wary of changes in how their food is produced due to a series of recent food safety crises during the 1990s. Bovine spongiform encephalopathy (BSE, or "mad cow disease") emerged in the United Kingdom and spread to other parts of Europe. U.K. food safety authorities first insisted that the disease could not be transmitted to humans eating meat from BSE-infected animals. By 1996 scientific evidence indicated there was a link between some cases of a similar human disease and consumption of BSE-contaminated beef. In 1999, high levels of dioxin were found in meat products and eggs originating in Belgium. Also, foot-and-mouth disease (FMD) outbreaks in Europe added to consumer concerns and to their "waning faith in regulatory agencies," according to the Pew Charitable Trust's Initiative on Food and Biotechnology. Pew is careful to point out that these crises have not been caused by GE food, but that GE food has been caught up in the general suspicion about food safety. Environmental groups in the EU, such as Greenpeace and Friends of the Earth, also have raised concerns about environmental impacts. Recently, concerns have been voiced by European grain and feedstuffs traders and compound feed manufacturers about EU regulations and attitudes about GE corn and soybeans. They point to short supplies and high prices for feedstuffs and call for changes in the EU regulations that impose strict limits on adventitious presence and that have helped create a shortage of feed supplies in the EU. COCERAL, the association of EU feedstuffs traders, has pointed out that neither Argentina nor Brazil, who along with the United States supply the bulk of annual EU feed supplies, could guarantee that its corn and soybean shipments contain only EU-approved GMOs. Congressional Interest In the last Congress, Members representing agricultural interests urged the United States to take an aggressive stance with respect to EU biotechnology regulations. Senator Grassley, the Ranking Member of the Senate Finance Committee, expressed hope that the EU would soon come into compliance with the WTO ruling in the biotechnology case. He noted that, although he would have preferred the U.S. Trade Representative to take a harder line in the case, he recognized that a "hard approach" of seeking retaliation might not be successful. At the same time, many lawmakers are well aware of the risks involved in escalating U.S.-EU trade tensions to new heights. How to proceed with the EU on biotechnology trade is an issue that the Bush Administration left unresolved. The options for the Obama Administration appear to be either to continue a dialogue with the EU on biotechnology policy and trade or to pursue retaliation for failure to comply with the earlier adverse ruling. Before the United States could impose retaliatory measures, however, it would have to request establishment of a panel to determine whether the EU had complied with the November 21, 2006, decision in the dispute. As the 111 th Congress monitors the Administration's conduct of agricultural trade policy, the issues raised by the U.S.-EU biotechnology dispute will likely remain on the agenda. Appendix. Chronology of the U.S.-EU Biotech Dispute (DS291)

In May 2003, the United States, Canada, and Argentina initiated a dispute with the European Union concerning the EU's de facto moratorium on biotechnology product approvals, in place since 1998. Although the EU effectively lifted the moratorium in May 2004 by approving a genetically engineered (GE) corn variety (MON810), the three complainants pursued the case, in part because a number of EU member states continue to block already approved biotech products. Industry estimates are that the moratorium costs U.S. corn growers some $300 million in exports to the EU annually. Corn gluten exports from the United States to the EU have been blocked since 2007 because of a zero tolerance policy governing the accidental presence of non-approved U.S. GE corn in such shipments. On November 21, 2006, the WTO's Dispute Settlement Body (DSB) adopted the dispute panel's report, which ruled that a moratorium had existed, that bans on EU-approved GE crops in six EU member countries violated WTO rules, and that the EU failed to ensure that its approval procedures were conducted without "undue delay." The EU announced it would not appeal the ruling. The United States and EU agreed on November 21, 2007 (subsequently extended to January 11, 2008), as a deadline for EU implementation of the panel report. On January 11, 2008, the U.S. Trade Representative announced that, while it was reserving its rights to retaliate, it would hold off seeking a compliance ruling while the United States sought to normalize trade in biotechnology products with the EU. In the meantime, co-complainants Canada (July 15, 2009) and Argentina (March 18, 2010) have reached "final settlements" in the biotech dispute with the EU. Canada, Argentina, and the EU notified the DSB of their mutually agreed solution under Article 3.6 of the DSU. The parties agreed to establish a bilateral dialogue on agricultural biotech market access issues of mutual interest. U.S. agricultural and trade officials continue to criticize the EU for its biotech approval processes. During the second session of the 111th Congress, Members with agricultural interests may debate the issue of whether to continue a dialogue with the EU on re-establishing trade in biotechnology products or to seek retaliation for presumed lack of EU compliance with the panel decision.

Overview: U.S. Interests Toward ASEAN The Association of Southeast Asian Nations (ASEAN) is Southeast Asia's primary multilateral organization, a 10-member grouping of nations with a combined population of 580 million and an annual gross domestic product (GDP) of around $1.5 trillion. Established in 1967 to foster regional dialogue during the turbulent post-colonial, Cold War period, it has grown into one of the world's largest regional fora, representing a strategically and economically important region that spans some of the world's most critical sea lanes and accounted for around 5% of the United States' total trade in 2008. The Obama Administration is pursuing a policy of expanding and upgrading U.S. relations with Southeast Asia, and with ASEAN itself. Although the Bush Administration took steps to develop ties with the region, it was widely perceived among members of ASEAN as narrowly focused on terrorism, neglectful of other issues, and not sufficiently committed to multilateral dialogue. By contrast, the Obama Administration has explicitly expressed an intent to pay greater attention to Southeast Asia, listen more carefully to regional concerns, and work with multilateral organizations, particularly ASEAN, to cooperate on issues of mutual interest. The United States has deep-seated interests in Southeast Asia, such as maritime security, the promotion of democracy and human rights, the encouragement of liberal trade and investment regimes, counterterrorism, the combating of illegal trafficking of narcotics and human trafficking, and many others. As China has deepened its economic and cultural ties in Southeast Asia, and even taken some steps to build security ties, some analysts believe the region has also become an important site of "soft power" rivalry, in which the long-standing leadership role of the United States could be challenged by a rising China. Other external powers also have shown renewed or greater interest in the region, including Japan, the EU, and India. Engagement with ASEAN has presented the United States with an important foreign policy dilemma. Despite considerable U.S. security, economic, and foreign assistance initiatives in the region, particularly at the bilateral level, in recent years a perception has developed among Southeast Asian elites that the United States has placed relatively little priority on ASEAN itself and has, thereby, demonstrated a lack of commitment to Southeast Asia as a whole. Southeast Asian diplomats frequently note that other nations, including China and Japan, have given ASEAN meetings a considerably higher diplomatic commitment than has the United States. Indeed, in some ASEAN countries, one of the largest irritants to bilateral relations with the United States is the fact that it is perceived as insufficiently engaged with the multilateral body of ASEAN. The United States has long had close bilateral relations with many of Southeast Asia's nations. Two ASEAN members, Thailand and the Philippines, are U.S. treaty allies, and a third, Singapore, is a close security partner. Indonesia and Malaysia have long had strong ties with Washington, and both are seen as important models of progressive governance and economic development in majority Muslim nations. In recent years, Vietnam has also become an increasingly important voice in regional affairs, and the United States has moved to normalize and deepen ties with its one-time adversary. Some feel that these strong sets of bilateral ties are sufficient to anchor the U.S. role in the region, arguing moreover that ASEAN's consensus-based decision-making makes it difficult for the organization to accomplish much, given its broad membership, which includes highly developed financial centers, vibrant developing-nation democracies, and impoverished military dictatorships. Still, symbolic commitment is particularly important in a region that places a heavy emphasis on process and informal networking. Many observers argue that the United States needs to "show up" more frequently and at higher official levels, lest it lose influence in the region and risk being cut out of emerging Asian diplomatic and economic architectures. Recent actions by the Obama Administration suggest that it accepts this argument, at least on a symbolic level. U.S. Policy Developments Toward the Region The United States has been steadily expanding and deepening its relations with ASEAN since the middle of the decade. A common goal of both the Bush and the Obama Administrations appears to be to increase the multilateral dimension of U.S. policy in Southeast Asia, which traditionally has been organized along bilateral lines. However, many of the Bush Administration's initiatives—which included becoming the first country to appoint an ambassador to ASEAN, providing assistance to the ASEAN Secretariat to upgrade its capabilities, and launching the US-ASEAN Trade and Investment Framework Agreement (TIFA)—were undermined by a belief among Southeast Asian elites that the United States lacked a strong commitment to ASEAN and Southeast Asia. The piece of evidence cited most often by critics was former Secretary of State Condoleezza Rice's decision to not attend two of the four ASEAN Regional Forum (ARF) Foreign Ministerial meetings during her tenure. Considerable attention was focused on President Bush's decision to cancel the scheduled US-ASEAN Summit in September 2007 to focus on the security situation in Iraq. A number of countries have regular summits with ASEAN leaders, including China, Japan, South Korea, and India. The Obama Administration has taken steps with ASEAN that some see as explicitly designed with symbolic diplomacy in mind. In February 2009, Secretary of State Hillary Clinton visited the ASEAN Secretariat in Jakarta, a first for a U.S. Secretary of State. In July 2009, during Clinton's second visit to Southeast Asia to participate in the ARF Foreign Ministerial in Thailand, the United States acceded to ASEAN's Treaty of Amity and Cooperation (TAC), which promotes the settlement of regional differences or disputes by peaceful means and is one of the organization's core documents. President Obama attended a first-ever U.S.-ASEAN leaders meeting on the sidelines of the November 2009 Asia-Pacific Economic Cooperation (APEC) forum summit in Singapore. In a joint statement, the leaders pledged continued or enhanced dialogue and cooperation in many areas, including engagement with the government of Burma (Myanmar), human rights, trade, regional security, nuclear non-proliferation and disarmament, counterterrorism, energy, climate change, educational exchanges, and support for the Lower Mekong Basin countries (Cambodia, Laos, and Vietnam). They agreed to hold a second meeting in 2010. The Obama Administration has taken other potentially noteworthy steps. Divergent U.S. and ASEAN approaches to Burma have also been an irritant to U.S.-ASEAN relations since Burma became a member of the organization in 1997. The United States has pursued a policy of diplomatically shunning the Burmese military regime and imposing stringent economic sanctions against the country—creating difficulties in engaging both politically and economically with a grouping that includes it. In the fall of 2009, the State Department announced a new Burma policy, in which the United States would hold dialogues with the Burmese leadership while still maintaining U.S. sanctions. This move, which brings Washington closer to ASEAN policy, could help to improve U.S.-ASEAN ties. Additionally, on the sidelines of the July 2009 ARF meeting, Secretary Clinton met with the foreign ministers of the lower Mekong countries, excluding Burma (i.e., Vietnam, Cambodia, Laos, and Thailand), in the first-ever U.S.-Lower Mekong Ministerial Meeting. The ministers issued a joint statement outlining the wide-ranging areas of discussion, which included responses to climate change, fighting infectious disease, and education policy. President Obama plans to visit Indonesia and Australia in March 2010. His talks with Indonesian President Yudhoyono will likely focus on trade and security ties as well as raise the profile of the region's largest and arguably most democratic nation. Taken together, the message of the Administration's symbolic and substantive moves appears to be that the United States intends to engage with ASEAN and Southeast Asian countries at a higher level, and do so more persistently. There remain questions about how far this change in approach will persist, particularly as it raises expectations in Southeast Asia. For instance, will the U.S.-ASEAN leaders' meeting be regularized, as many Southeast Asian leaders hope? On the other hand, by raising the profile of U.S.-ASEAN ties, the United States likely will place new pressures on ASEAN to increase its own utility in resolving regional crises and addressing security and economic issues in a more concerted manner, lest a more activist United States eventually bypass it. ASEAN: Formation and Institutions The Association of Southeast Asian Nations was founded on August 8, 1967, with the adoption of the ASEAN Declaration in Bangkok, Thailand. Originally, the association had five members—Indonesia, Malaysia, Philippines, Singapore, and Thailand—and expanded to its current 10 members during the 1980s and 1990s with the addition of Brunei Darussalam, Vietnam, Laos, Burma, and Cambodia. Colonial experiences led to a strong desire by the original members to prevent the domination of the region by any single power. Furthermore, the formation of the organization reflected an attempt to forge independent foreign policies in the context of Cold War pressures. As stated in the ASEAN Declaration, the association was created to achieve joint goals including those related to economic growth; regional peace and security; collaboration and mutual assistance in a number of development areas; trade promotion; and linkages with other regional organizations. On February 24, 1976, ASEAN created the ASEAN Secretariat, located in Jakarta, Indonesia, an administrative body consisting of representatives of each ASEAN member nation. The Secretariat is headed by a secretary-general, who serves a term of five years. Since its creation, the structure and the duties of the Secretariat have been changed on several occasions. As of 2009, the secretary-general's main responsibilities are to organize the annual foreign ministers' meeting; initiate, advise, coordinate, and implement ASEAN activities; serve as spokesman and representative of ASEAN on all matters; and oversee the operations of the ASEAN Secretariat. ASEAN remains, to a large degree, an informal organization. The ASEAN Secretariat is lightly staffed, without the deep administrative resources and responsibilities of some multilateral organizations such as the European Union. Its current secretary-general is Surin Pitsuwan, a former Thai foreign minister, who has sought to institutionalize many of ASEAN's practices and has pushed the introduction of the ASEAN Charter. Still, much of the diplomatic activity that occurs at meetings of ASEAN leaders and senior officials occurs on the sidelines rather than at the formal level. ASEAN has traditionally operated on principles of consensus and non-interference in the internal affairs of members, which has led to considerable difficulty in the group operating in formal concert. Many analysts note that ASEAN's expansion to include underdeveloped nations such as Laos, Cambodia, and Burma has created a wide range of interests within the group that make formal security and economic moves difficult to agree upon. Although ASEAN is starting to play a more active role in dealing with its members' differences—most notably over Burma's human rights record—much of what the group does is still done through informal channels. ASEAN Charter A new ASEAN Charter went into effect on December 15, 2007, superseding the ASEAN Declaration as the organizing document for the organization. The charter is effectively a constitution for ASEAN, committing the member nations to the formation of an "ASEAN Community in furtherance of peace, progress and prosperity of its peoples." Some aspects of the charter may signal a greater willingness to discuss and comment on the internal affairs of the organization's members. Such a potential institutional development may help the organization to deal with members such as Burma that have caused troublesome policy issues both within the region and with ASEAN's relations with outside states. The new charter establishes a number of goals for ASEAN, including: Maintenance of peace, stability, and security in the region; Promotion of greater political, security, economic; and socio-cultural cooperation; Preservation of Southeast Asia as an area free of weapons of mass destruction, including nuclear weapons; Creation of a just, democratic, and harmonious environment in the region; Formation of a single market and production base in which there is free flow of goods, services, and investment, as well as facilitated movement of business persons, professionals, talents and labor, and the freer flow of capital; Alleviation of poverty and the narrowing of the development gap in the region; and Promotion of sustainable development so as to ensure the protection of the region's environment. According to the new charter, there are to be two ASEAN summits each year, attended by the members' heads of state or their designated representatives. In addition, the foreign ministers of the ASEAN members are to meet at least twice a year. The ASEAN Charter also creates three Community Councils, dealing with political and security, economic, and socio-cultural issues, respectively, plus preserves the institutions of the ASEAN Secretary-General and the ASEAN Secretariat as the administrative bodies for the association. Article 14 of the charter calls for the establishment of an ASEAN human rights body, a new development for ASEAN, which has traditionally refrained from commenting on the human rights situation in member nations. The first meeting of the ASEAN human rights body—formally called the ASEAN Intergovernmental Commission on Human Rights (AICHR)—took place on October 23, 2009, in Cham-Am, Thailand, following an ASEAN summit. ASEAN's Regional Significance ASEAN is at the center of several other security- and trade-related groupings in the Asia-Pacific region. The ASEAN Regional Forum (ARF), established in 1994 with 26 Asian and Pacific states plus the European Union, was formed to facilitate dialogue on political and security matters in the region. The ASEAN + 3 (China, Japan, and South Korea) was created in 1997, partly as a response to the Asian financial crisis, and partly as a way to balance the northeast Asian powers in the security dialogue process with ASEAN. Created in 2005, the East Asia Summit (EAS) which, in addition to the ASEAN + 3 members, includes Australia, New Zealand, and India, represented an effort by some countries in the region, particularly Japan, to balance China's influence in the region through the inclusion of additional, non-East Asian powers. More recently, the geopolitical discussion in Asia has turned to the issue of the formation of an EU-style association of Asian nations. While this discussion is in its early stages, there are already advocates for the creation of a pan-Asian entity—the East Asian Community (EAC)—that would include closer economic and trade relations among its members, possibly even the creation of a single Asian currency. At the same time, there has been a separate ongoing discussion about greater regional economic and trade integration in Asia taking place in various fora. The Asia-Pacific Economic Cooperation (APEC) forum was formed in 1989 with the express mission of accelerating regional economic integration and fostering greater trade and investment liberalization through a process known as "open regionalism." ASEAN has also formed the core at periodic meetings of ASEAN + 3 and the EAS to consider ways and means of fostering closer economic and trade ties. For its own part, ASEAN has been pursuing ways to expedite closer economic ties amongst its 10 member nations with the goal of creating an ASEAN Economic Community. Policy Issues Security While security concerns were downplayed in the original ASEAN Declaration, the importance of regional peace and security was a major purpose behind ASEAN's formation. ASEAN has sought to maximize its security interests by developing a set of norms for its members, and beyond that has increasingly relied on consensus building and discussion as the preferred means of conflict resolution. That said, all is not tranquil among ASEAN members or between ASEAN states and external powers. There continue to be bilateral tensions among ASEAN states, as recently demonstrated by the border clashes between Cambodia and Thailand near the 11 th -century Preah Vihear Temple, and maritime disputes between Indonesia and Malaysia over the energy-rich Ambalat sea bloc in the Sulawesi Sea. Nevertheless, it does appear that ASEAN has played a key role in promoting a normative order that has minimized interstate conflict in Southeast Asia since the group's formation during the Cold War. Geopolitical Importance ASEAN's key strategic value emanates from its geographic position as well as its economic development. ASEAN is situated astride the key sea lanes that link the energy-rich Persian Gulf and the economic power centers of East Asia. Maintaining the free flow of goods and energy through the strategically vital Malacca, Sunda, and Lombok Straits is a key geostrategic interest for ASEAN members, as well as the United States, Japan, China, and South Korea. Energy reserves in and around the South China Sea, Indonesia, and Burma also give the region added strategic importance. While ASEAN has been a key player in the creation of emerging economic and strategic architectures in Asia, such as the ASEAN + 3 and the East Asia Summit, it faces the increasingly challenging task of maintaining strategic balance and its pivotal role in this process. The emergence of China and India as great powers in an increasingly multi-polar world, and the continued engagement of the United States, present diplomatic challenges for ASEAN as it seeks to shape an international order that will promote peace and stability for the region. The United States and ASEAN share a mutual interest in preventing conflict and maintaining the independence of regional states. ASEAN as an organization will likely seek to balance external actors in the region while seeking to avoid antagonizing great powers. America's military posture in Asia supports ASEAN's goal of ensuring that no hegemon can arise that could dominate the region. As such, America is generally a valued offshore balancer relative to the perceived rising influence of China, though some ASEAN members—Laos, Cambodia, and Burma, in particular—are relatively closer to China than others. China also acts as a balancer to American presence in the region. While securing sea lanes of communication and trade that transit maritime Southeast Asia is of mutual importance among all interested states, there is the potential that increasingly intense competition for energy resources could lead to increased tensions. This could be the case should Chinese efforts to secure energy resources and routes entangle China and India in a security dilemma where "defensive" moves by one party are viewed as "offensive," or threatening, by the other. This could also be the case should Chinese activity in Burma intensify. China is interested in developing an energy and trade corridor from Sittwe, Burma, to Kunming, China, which could be viewed as a means of lessening China's strategic vulnerability at the Strait of Malacca. Some in India are increasingly concerned that this move by China in Southeast Asia could be part of a larger strategy to encircle India. South China Sea Disputes Territorial disputes in the South China Sea have been at the center of some of ASEAN's most active security-related diplomacy in recent decades—but also serve as an illustration of the difficulty of marshaling the group's diverse membership to act in concert. For decades, the Paracel and Spratly Islands have been the site of regional competition for control of the South China Sea among ASEAN members and China, and between individual ASEAN members themselves. The source of competition over this region is the desire to extend sovereignty over sea beds by establishing claims to the islands and thereby control important fishing areas and what are thought to be rich energy reserves beneath the sea. In the late 1990s and early 2000s, ASEAN's push for a Code of Conduct on the South China Sea to promote the norms of peaceful resolution of conflict—which resulted in the Declaration on the Conduct of Parties in the South China Sea signed by ASEAN's members and China in November 2002—can be viewed as one of the group's successes in acting in concert to promote common security interests of organization members. In 1992, following a series of incidents including China's sinking of three Vietnamese vessels near Fiery Cross Reef in the Paracels in 1988, ASEAN issued a declaration on the South China Sea, calling for a mutual code of conduct for nations navigating in the waters. This led to a decade of active diplomacy in which the organization's members largely held together to promote multilateral security in the area. By acting as a group, ASEAN states arguably have collectively more weight when dealing with any outside actor than they do when acting individually. However, the continuation of flare-ups in these waters is also an illustration of the limits of ASEAN's ability or willingness to act in concert to deal with external powers. In recent years, continued Chinese disputes with Vietnam and the Philippines have been kept largely bilateral, with ASEAN as a grouping opting not to lend formal support to its members in their disputes with China. This has had an effect on U.S. interests. In 2008, for instance, China warned international oil firms, including ExxonMobil, against exploring for energy resources in blocks leased by the Vietnamese government. Historical Context Of ASEAN states, only Thailand was able to maintain a fair degree of political autonomy throughout the colonial period in Southeast Asia. The later colonial period witnessed the domination of Indo-China by France; Burma, Malaya, and Singapore by the United Kingdom; Indonesia by the Netherlands; and the Philippines by Spain and the United States. During World War II, the region came under the control of imperial Japan. These experiences led to a strong desire of ASEAN members to prevent their newly independent states from being dominated by any single power, as Japan did during WWII, and to preserve and expand their independence of action from external great powers. ASEAN was formed through the Bangkok Declaration of 1967 at the height of the Cold War, when external powers were directly or indirectly militarily engaged in the region. ASEAN was created largely as a reaction to Cold War pressures on the region. At the time, the United States was deeply engaged in the war in Vietnam, and the ongoing global struggle between the West and the Soviet bloc was intense. Small Southeast Asian states also sought in part to bring Indonesia into a regional grouping as a way of curbing its previously demonstrated ability to threaten regional neighbors, as it did with Malaya under its policy of Konfrontasi, which included a guerilla war on Borneo from 1963 to 1966 against British, Australian, New Zealand, and Malay security forces. While the Cold War is now history, ASEAN continues to be faced with the diplomatic, strategic and foreign policy challenges of how to deal with external great power actors in its region. Today, Soviet influence has faded and Chinese influence has expanded while the United States has sought to remain engaged in the region. ASEAN-China relations have become deeper, as China has engaged in a "charm offensive" since the late 1990s, seeking better diplomatic and trade relations with Southeast Asian states. The potential for larger Indian engagement with the region is also developing, as demonstrated by India's inclusion in the East Asia Summit. External Security Ties Some regional states continue to have outside bilateral or multilateral defense ties, some of which can be viewed as legacies of the colonial, post-WWII, and Cold War periods. These security relationships include the Five Power Defense Agreement between the United Kingdom, Malaysia, Singapore, Australia, and New Zealand and the U.S. alliances with the Philippines and Thailand that were originally part of the San Francisco system formed in the early 1950s. In addition, Indonesia has moved on somewhat from its non-aligned position by developing bilateral security ties with Australia. While there are some relatively low-level security concerns either between ASEAN states or at the sub-state level, as is the case with insurgents in Southern Thailand and the Southern Philippines, the largest threats to stability in the region as a whole emanate largely from outside the region and relate to the evolving correlates of power in Asia as a whole. It is for this reason that much of ASEAN's diplomatic activity and initiative has been focused at establishing a new Asian or trans-Pacific economic and strategic group that can seek to prevent or ameliorate conflict between the extra-regional powers that are active in the region, including the United States, China, Japan, South Korea, and India. For example, a conflict between China and the United States over Taiwan would likely have a devastating impact on regional trade and would place unwanted pressure on ASEAN states to pick sides. The Emerging Security Agenda in Southeast Asia The general trend in recent decades of re-conceptualizing security as more than simply the realm of cross border conflict between the armed forces of sovereign nation states, or internal counterinsurgency operations, is clearly evident in Southeast Asia. This is evident from the negative impact of terrorist groups active in the region, such as Jemaah Islamiya and Abu Sayyaf, as well as from the relatively high incidence of piracy in maritime Southeast Asia. Jemaah Islamiya in Indonesia and Abu Sayyaf in the Philippines are two key terrorist groups that are a threat to Americans and Western interests in the region. Counterterrorism efforts by ASEAN states working with the United States and Australia have done much to hunt down regionally based terrorists. While the cultural heart of Islam is Mecca, the demographic heart of Islam is closer to Southeast Asia, as Indonesia has the world's largest Muslim population. Indonesia and Malaysia generally recognize a more tolerant and less fundamentalist form of Islam, which some argue could be a good starting point for increased engagement by the United States in the Muslim world. Contemporary security interests also encompass other sub-national and trans-regional levels of conflict in addition to interstate conflict. The conflicts that Indonesia has had in East Timor, Aceh, the Moluccas, and Papua, some of them still festering; ongoing insurgencies in Muslim areas of Thailand and the Philippines; and Burma's restive minority groups can be viewed in this context. ASEAN's reluctance to become involved in the internal affairs of its members has largely kept such issues from becoming the business of the group as a whole. Concepts of human security have also brought many analysts of security dynamics in the region to increasingly focus on the negative impacts of environmental degradation and the impact that climate change may have on the region. The "haze" generated by the burning of forests after logging operations brought this to the attention of regional governments concerned over public health risks in 1997. The damming of the upper reaches of the Mekong in China has also raised concerns over the long-term viability of that river system as a source of food for the region. Increased temperatures associated with climate change may undermine regional food production and cause sea level rise that would negatively impact low-lying coastal areas where many in the region live. Piracy in Southeast Asia has been a relatively large problem as compared with other areas of the world, with the exception of the Gulf of Aden and the Arabian Sea in recent years. Human and narcotics trafficking and the plight of refugees in the region are other human security issues worthy of attention. Trade and Trade Relations ASEAN's Role in Global Trade The ASEAN economies have become a major regional hub for globalized manufacturing. According to official ASEAN statistics, ASEAN's total merchandise trade exceeded $1.7 trillion (see Table 1 ). A little more than one-quarter of its trade was between ASEAN members. Another third was with the European Union (EU-25), Japan, and the United States. Trade with China claimed about one-tenth of the association's merchandise trade. The rest of ASEAN's trade was distributed around the world. In terms of the types of goods and commodities traded by ASEAN in 2008, three different groups far surpassed all other categories—electrical machinery, mineral fuels and oils, and mechanical appliances (see Table 2 ). Taken together, these items account for nearly 60% of ASEAN's exports and almost two-thirds of its imports. This pattern can be partially explained by ASEAN's role in the globalized manufacturing of electrical machinery and mechanical appliances. As described in a number of studies, the production of home appliances, computers, telecommunications equipment and other products that fall into these two categories has become a multi-country process, with components and parts being shipped between nations for final assembly in multiple competing countries. Much of ASEAN's intra-regional trade in intermediate goods ends up as components used in final assembly work done in China. While this multi-country assembly process is comparatively mobile and fluid, in recent years, the ASEAN nations—along with China—have become regionally integrated manufacturing hubs for selected products. According to official U.S. trade statistics, ASEAN's trade with the United States—like with the rest of the world—is dominated by electrical machinery (HTS 85) and mechanical appliances (HTS 84) (see Table 3 ). Over 40% of U.S. imports from ASEAN and nearly half of U.S. exports to ASEAN are in these two categories. Knit and non-knit clothing (HTS 61 and 62), plus rubber and articles made of rubber (HTS 40) are also major products imported from ASEAN. Other top-five U.S. exports to ASEAN are aircraft (HTS 88); optical and scientific equipment (HTS 90); and mineral fuels and oils (HTS 27). U.S. trade statistics show a larger U.S. trade deficit with ASEAN than ASEAN's statistics. ASEAN's Trade Relationships Since the early 1990s, the ASEAN members have been gradually moving toward the creation of a free trade area encompassing the 10 members of the association. The ASEAN Free Trade Area (AFTA) is to be fully implemented in 2010 by six ASEAN countries and 2015 for the remaining signatories. Under AFTA's Common Effective Preferential Tariff (CEPT) Scheme, more than 99% of the product categories will have their intra-ASEAN tariff rates reduced to below 5%. In addition, the 10 ASEAN members have agreed to the goal of creating an ASEAN Economic Community (AEC) by 2015. During the ASEAN summit held in Cha-Am, Thailand on October 23-25, 2009, there was a recommitment to the 2015 goal for the creation of the AEC, as well as discussion of alternative ways of forming closer economic and trade ties with several Asian nations, including China, India, Japan, and South Korea. ASEAN's efforts to create the AEC have been complemented by its interest in negotiating trade agreements with key Asian nations. The United States is the only major power in the region that has not agreed to some form of formal free trade agreement (FTA) with ASEAN. As of October 2009, ASEAN had concluded trade agreements with the following countries: Australia and New Zealand —On February 29, 2009, ASEAN, Australia, and New Zealand signed the ASEAN-Australia-New Zealand Free Trade Area (AANZTA) Agreement. The agreement commits the parties to the progressive reduction of tariff and non-tariff trade barriers. China —On November 5, 2002, ASEAN and China set the goal of establishing an ASEAN-China Free Trade Area (ACFTA) within 10 years. The two sides subsequently signed an Agreement on Trade in Goods in 2004, and an Agreement on Trade in Services was entered into force in 2007. Under ACTFA, ASEAN and China began reducing tariff lines on a range of goods on January 1, 2010. On the ASEAN side, Singapore, Malaysia, Indonesia, the Philippines, Thailand, and Brunei agreed to begin reductions in 2010, while Vietnam, Laos, Cambodia and Burma aren't expected to begin reductions until 2015. There has been early resistance within ASEAN to the tariff reductions, most sharply in Indonesia, where the government sought in January 2010 to postpone import tariff reductions on some 228 product lines, arguing that it needs to cushion domestic industries from Chinese competition. India —On August 13, 2009, ASEAN and India concluded an agreement on trade in goods that provides for the gradual reduction of tariff and non-tariff trade barriers, plus commits the parties to the establishment of an ASEAN-India Free Trade Area (AIFTA). Japan —In April 2008, ASEAN and Japan concluded negotiations for the creation of an ASEAN-Japan Free Trade Area (AJFTA). South Korea —On August 24, 2006, ASEAN and the Republic of Korea concluded the ASEAN-Korea Free Trade Agreement (AKFTA). The original document covered trade in goods. Since then ASEAN and South Korea have extended their trade arrangement to cover investment as well. ASEAN has also held talks with the European Union (EU) about a possible free trade agreement, but progress has been slow and prospects are unclear. Beyond its efforts to negotiate bilateral trade agreements with selected countries, ASEAN has also been actively promoting the creation of a larger, Asia-based free trade area. This possible regional economic association has been referred to by different names at different times, including the more recent East Asian Community (EAC). In some cases, the discussants have been limited to ASEAN + 3. In other cases, the group of nations has been expanded include the EAS (ASEAN + 6). During the East Asia Summit held in Hua-Hin, Thailand, on October 25, 2009, there was discussion about the nature of a possible EAC as well as which nations ought to be members. While there appeared to be some consensus to create a regional free trade area by 2020, there was no agreement on which nations should he part of such an arrangement. In particular, there were apparently sharp differences of opinion over the inclusion of the United States in the free trade area. Similarly, although Russia has applied for membership in the East Asia Summit, it is unclear if Russia is being considered for inclusion in the EAC. While some have suggested the possibility of an ASEAN-U.S. Free Trade Agreement, there are several structural problems to negotiating such an agreement. First, the United States would probably require that the trade agreement comply with the U.S. model FTA, a condition that ASEAN may not find acceptable. Second, the United States has a comprehensive ban on direct trade with Burma. Third, the ASEAN economies vary in their level of economic and legal development, which would make the FTA's compliance requirements difficult to specify. U.S. Burma Policy and ASEAN The Obama Administration's revision of U.S. policy toward Burma has coincided with a similar review by ASEAN of its stance on relations with the ruling junta, the State Peace and Development Council (SPDC). While the new U.S. policy may be viewed as a tacit admission that sanctions alone were not sufficient to effect change in Burma, recent statements and actions by ASEAN may indicate that their past policy of "constructive engagement" had proven equally ineffective. As a result, there may be an opportunity for ASEAN and the United States to confer and coordinate their policies toward Burma. During the U.S.-ASEAN leaders' meeting in November 2009, in which President Obama sat four chairs away from Burma's representative, Prime Minister Thein Sein, the United States raised the issue of human rights abuses in Burma and the need for democratic reforms and genuine dialogue with opposition leaders, and called upon the military government to release all political prisoners, including Nobel Peace Laureate Aung San Suu Kyi. The joint statement issued at the summit expressed the hope that the renewed dialogue between the United States and Burma, as well as ASEAN's efforts to work with the Burmese government, will "contribute to broad political and economic reforms." There was also a call for the government to conduct the proposed general election in 2010 in "a fair, free, inclusive and transparent manner." However, there was no mention of political prisoners or the release of opposition leaders. Although there was interest in including Burma as an original member of ASEAN in 1967, it did not join the association until 1997. From the start, ASEAN as an organization adopted a policy of "constructive engagement" toward Burma, refraining from public comments in its "internal affairs," while some members sought closer economic, trade, and investment relations with Burma. Some of the strongest supporters of ASEAN's policy of "constructive engagement" toward Burma have been the governments of Thailand, Indonesia, Malaysia, and Singapore, for slightly different reasons. Thailand has had an ambivalent view of Burma. Burmese domestic unrest has adverse direct impacts on Thailand, and Thailand suffers from the flow of both narcotics and refugees out of Burma. However, successive governments in Bangkok have felt an interest in maintaining at least some ability, even if limited, to deal with the Burmese regime, and to foster stability in Burma, with which Thailand shares a long border. Under the Suharto regime, the Indonesian government shared some ideological views with Burma's military government that led to its support of Burma's ASEAN membership and closer relations, although Jakarta has taken a harder line as the country has democratized. Malaysia at the time was concerned about both Chinese and U.S. influence in the region, and found similar views among Burma's military rulers. The Singaporean government saw economic opportunity in closer relations with Burma, and for a time was a major supplier of equipment and arms for the Burmese military, as well as a major investor in the country. The adoption of a new ASEAN Charter in 2007 may signal a greater willingness to address issues such as human rights and democracy. As previously mentioned, the new charter states that among ASEAN's purposes are strengthening democracy and protecting human rights, and mandated the establishment of an "ASEAN human rights body." However, among ASEAN's founding principles is a commitment to "non-interference in the internal affairs of ASEAN Member States." In practice, under the new charter, ASEAN has shown a greater willingness to express its opinion about the situation in Burma. In response to the conviction of Aung San Suu Kyi in August 2009, ASEAN's chairman issued a statement expressing ASEAN's "deep disappointment" at the verdict, calling for the immediate release of Aung San Suu Kyi and other political prisoners, and asserting that "such actions will contribute to national reconciliation among the people of Myanmar, meaningful dialogue and facilitate the democratization of Myanmar." In addition, ASEAN has indicated that the junta's treatment of opposition groups and ethnic minorities will affect how the election results will be perceived by the Association. Although ASEAN appears to be more willing to publicly criticize Burma's military government, it has not shown a greater willingness to impose economic sanctions on the country. Malaysia, Singapore, and Thailand are major trading partners with Burma, and may be reluctant to forswear the economic benefits of bilateral trade and investment. Indonesia's civilian government may be more willing to consider economic pressure on Burma, in part because of its history of military rule and in part because of its concern about Burma's Muslim minority. The conduct and outcome of Burma's 2010 parliamentary elections may prove critical to ASEAN's future relationship with Burma. While few expect a free and fair election, if the results provide some space for opposition views in the government and indicate a possible shift in power to civilian rule, then ASEAN will likely continue its policy of modified "constructive engagement." If, however, the election results provide only a veil of cover to the continuation of military rule, then ASEAN may be willing to consider adopting a tougher policy. In one of the first signs that the elections may lack credibility, in March 2010, the Burmese government enacted rules that require political parties to expel any members who are imprisoned, thus barring Aung San Suu Kyi from participating. U.S. Assistance to ASEAN U.S. assistance for Southeast Asian multilateral efforts focuses on trade facilitation, counterterrorism, security sector reform, and the environment. Other program areas include good governance, combating transnational crime, and education. U.S. funding for East Asia Pacific regional programs, a large portion of which supports ASEAN, ARF, and APEC objectives, totaled an estimated $20 million in 2009. In the area of security, U.S. foreign assistance supports the Counter-terrorism Regional Strategy Initiative, which focuses on transnational aspects of terrorism and regional responses. U.S. assistance to ARF includes funding for regional programs in counter-terrorism, combating transnational crime, disaster preparedness, and non-proliferation. USAID's Regional Development Mission Asia (RDMA) supports efforts to strengthen the capacity of the ASEAN Secretariat, develop regional economic institutions, and enhance ASEAN's Food Security Information System. RDMA also provides trade-related technical assistance and supports U.S. commitments under the ASEAN-U.S. Enhanced Partnership. In terms of bilateral assistance, the United States provided an estimated $526 million in FY2009 to nine ASEAN countries (Brunei Darussalam does not receive U.S. assistance). Since 2001, the Philippines and Indonesia have received large increases in U.S. assistance, largely for counterterrorism programs. Vietnam also has received large growth in U.S. aid, reflecting significant funding for HIV/AIDS programs. Among providers of bilateral official development assistance (ODA) as measured by the Organization for Economic Cooperation and Development (OECD), Japan is by far the largest donor in the region, followed by the United States, although Japanese ODA includes a relatively large loan component. France, Germany, the United Kingdom, and Australia also provide significant ODA in the region. China has become a key source of financing and assistance for infrastructure, energy, and industrial development in Southeast Asia. Regional Powers and their Relations with ASEAN ASEAN's most critical external relations continue to be with the United States, the region's primary security guarantor; Japan, the major provider of development assistance; and China, a rising source of aid, trade, and, according to some, strategic influence in the region. Many analysts argue that China's "soft power"—global influence attained through economic, diplomatic, cultural, and other non-coercive means—has grown significantly in the past decade. Furthermore, many observers contend that China's diplomatic outreach, including building links to ASEAN, has surpassed that of the United States during the past several years. Most Southeast Asian leaders and foreign policy experts have welcomed engagement from both the United States and China because of the benefits that strong relations bring; they do not want a single foreign influence to dominate the region, and excluding either power is "not an option." Although Japan is a close development partner in the region, some Southeast Asians would welcome a more robust Japanese diplomatic and security presence. Many analysts view India as an ascendant but still nascent regional power that has an interest in balancing China's rise in the region. The United States The United States exerts the most established and forceful military presence in the region, including alliances with the Philippines and Thailand (Major Non-NATO Allies), strong security cooperation with Singapore, counterterrorism cooperation with Indonesia and Malaysia, and military education programs in Vietnam, Cambodia, and Laos. The United States is also engaged economically. It is ASEAN's fourth-largest trading partner, having been surpassed by China in recent years. The United States is a larger export market than China and the third-largest source of FDI from outside the region after the EU and Japan, followed by China (including Hong Kong) and South Korea. In terms of diplomacy and trade, many in ASEAN considered Washington neglectful of the organization under the Bush Administration, although some foundations were established upon which the Obama Administration has developed its policy of engagement. The United States was the first country to nominate an ambassador to ASEAN (2008). In 2009, the United States acceded to the Treaty of Amity and Cooperation (TAC), which was seen by many as a symbolic recognition of the value of a multilateral approach to regional security issues. The United States was the last major power in the region to sign the treaty. Although the United States has met the requirements for joining the EAS through its accession to the TAC, the Obama Administration remains undecided about its intent to do so. In 2005, the United States created a framework for U.S. assistance to ASEAN—the ASEAN-U.S. Enhanced Partnership—encompassing cooperation on political, security, economic, and development issues. This initiative was followed in 2007 by the ASEAN Development Mission Vision to Advance National Cooperation and Economic Integration (ADVANCE). Among the goals of the mission are to help ASEAN and its members work toward an ASEAN community, support the Enhanced Partnership, and promote the U.S.-ASEAN Trade and Investment Framework Agreement (TIFA), signed in 2006, which could be a precursor to a possible FTA with ASEAN. China China's ties with ASEAN have reflected attempts to defuse security tensions in the South China Sea, promote economic integration, support infrastructure development, and cultivate diplomatic influence. Some experts argue that China's power projection in the region amounts to a coordinated attempt to dominate the region economically and ultimately militarily. Others contend that although China's influence is growing, in part due to declining American engagement, Beijing has neither the will nor the capacity to aggressively pursue such a strategy, and is content with the U.S. security role in the region, at least in the medium term. Moreover, many Southeast Asian countries remain wary of China's power and intentions and may seek ways to engage China while hedging against its rise. In 2002, China and ASEAN agreed to the Declaration on Conduct of Parties in the South China Sea as well as several other agreements on economic and agricultural cooperation and non-traditional security threats. China reportedly has favored the ASEAN + 3 (ASEAN, Japan, China, and South Korea) summit process, inaugurated in 1997, over other forums such as the ASEAN Regional Forum and the East Asia Summit. Nonetheless, China has become more active in ARF, which focuses on security issues and dialogue, exceeding U.S. involvement in recent years, according to some analysts. The formation of the EAS in 2005 represented an effort by some countries in the region, including Japan, to balance China's influence by including powers that generally are more aligned with the United States than China on security matters. However, some analysts perceive the U.S. absence in the grouping as working to China's advantage. In 2003, the PRC became the first country to accede to ASEAN's Treaty of Amity and Cooperation. China committed relatively early to a free trade agreement with ASEAN, signing a framework agreement in 2002 that set a 10-year deadline for an FTA, and then negotiating an actual trade pact that came into force in January 2010. In August 2009, China and ASEAN signed a new Investment Agreement to accompany the FTA. A major provider of bilateral development financing in the region and economic assistance to Laos, Cambodia, and Burma, in particular, Chinese leaders announced in April 2009 a plan to set up a $10 billion China-ASEAN Fund on Investment Cooperation to support new infrastructure. Other assistance promised at the time included $15 billion in loans to ASEAN countries to be allocated over three to five years, nearly $40 million to Cambodia, Laos, and Burma "to meet urgent needs," $5 million for the China-ASEAN Cooperation Fund, and rice for a regional emergency rice reserve. Japan Japan has been a close partner to ASEAN and the principal provider of development assistance to Southeast Asia, but its role has been relatively low-profile. In the past few years, Japanese governments have pledged to strengthen ties to the organization and to Indonesia, in part to balance China's rising influence. In November 2009, Japanese Prime Minister Yukio Hatoyama pledged $5.5 billion in assistance to the Mekong Delta region, in large part to bolster Japan's role in a part of Southeast Asia that is becoming economically integrated with China. Tokyo has long been actively involved in the three major satellite groupings—ASEAN + 3, ARF, and the EAS. While stressing the importance of Japanese ties with the United States, Japanese governments have supported the formation of an East Asian Community, which may include members of the EAS (ASEAN + 6) as its core (excluding the United States). ASEAN reportedly is divided over whether to include the United States in such a grouping. Japan acceded to the TAC in 2004 and appointed an ambassador to ASEAN in 2008. In 2005, the Japanese government reportedly pledged $70 million for ASEAN regional integration projects. Cooperation and aid activities with ASEAN have included counterterrorism, environmental protection, and preventing the spread of infectious diseases. In addition to the Japan-ASEAN FTA, Tokyo has signed Economic Partnership Agreements with Singapore, Thailand, Indonesia, Malaysia, and the Philippines, which involve not only trade liberalization but also the areas of labor movement, investment, intellectual property rights, and cultural and educational cooperation. Issues for Congress Much of the congressional activity concerning Southeast Asia deals with bilateral relations and issues with individual Southeast Asian nations. In recent years, however, Congress has also sometimes played a leadership role in initiatives toward ASEAN. In 2006, Senator Richard Lugar introduced the U.S. Ambassador for ASEAN Affairs Act ( S. 2697 ), urging the Bush Administration to name an ambassador to the grouping. Its passage helped lead to the naming of Scot Marciel as the first U.S. Ambassador to ASEAN and the first ambassador to the organization from outside the region. There are several ways in which shifts in the U.S. approach toward ASEAN could be of importance to Congress. Congress may also seek to provide further assistance to support ASEAN's Secretariat and organizational capacity building. In trade policy, Congress may consider, on the one hand, pushing for further economic engagement and the passage of FTAs or other agreements with ASEAN and/or its member countries. In October 2009, Senator Richard Lugar introduced S.Res. 311 , calling for the start of discussions on a free trade agreement with ASEAN. Stalled FTA discussions with Malaysia and Thailand could potentially be considered by Congress, although this does not appear to be on the near-term agenda. On the other hand, Congress could prevent further FTA negotiations with Southeast Asian countries or ensure that labor and environmental concerns are addressed in such negotiations. Shifts in U.S. policy toward Burma and the implications for relations with ASEAN have been a major focus in 2009 and will likely continue to be of congressional interest. Senator Jim Webb, chair of the Senate East Asia and Pacific Affairs Subcommittee, in August 2009 became the first Member of Congress in 10 years to visit Burma. Senator Webb also traveled to Thailand, Cambodia, Laos and Vietnam, where he reportedly told leaders that ASEAN should call for the release of Aung San Suu Kyi. Over recent years, Congress has been a leader of the U.S. sanctions policy toward the Burmese regime through legislation such as the Burmese Freedom and Democracy Act of 2003 and the Tom Lantos Block Burmese JADE (Junta's Anti-Democratic Efforts) Act of 2008. The conduct and outcome of parliamentary elections set to be held in Burma in 2010 may play a significant role in how the Obama Administration implements its new Burma policy, and in its relations with ASEAN vis-à-vis Burma. Congress may seek to play an active role in the development of U.S. policy toward Burma and ASEAN, both before and after Burma's elections. The development of ASEAN's human rights body may also merit attention. Congress has frequently considered legislation and resolutions concerning human rights conditions in Southeast Asia, and ASEAN's emerging human rights approaches may be of interest in future consideration of how to promote human rights in the region.

The Association of Southeast Asian Nations (ASEAN) is Southeast Asia's primary multilateral organization. Established in 1967, it has grown into one of the world's largest regional fora, representing a strategically important group of 10 nations that spans critical sea lanes and accounts for 5% of U.S. trade. This report discusses U.S. diplomatic, security, trade, and aid ties with ASEAN, analyzes major issues affecting Southeast Asian countries and U.S.-ASEAN relations, and examines ASEAN's relations with other regional powers. Much U.S. engagement with the region occurs at the bilateral level, but this report focuses on multilateral diplomacy. The United States has deep-seated ties in Southeast Asia, and it has viewed ASEAN as a useful organization since its inception during the Cold War. Today, U.S. policy toward ASEAN and Southeast Asia is cast against the backdrop of great power rivalry in East Asia, and particularly China's emergence as an active diplomatic actor in its geographic backyard. Some worry that the United States, preoccupied with other priorities, has been neglectful of ASEAN and of Asian multilateral diplomacy in recent years. The Obama Administration has expressed an intent to work more closely with multilateral organizations, particularly ASEAN. A number of steps in this direction include Secretary of State Hillary Clinton's visit to the ASEAN Secretariat in Jakarta in February 2009, the U.S. accession to ASEAN's Treaty of Amity and Cooperation (TAC) in July 2009, and President Obama's attendance at the ASEAN leaders meeting in November 2009. Congress has frequently played an important role in shaping U.S. diplomatic, security, and economic relations with Southeast Asia and ASEAN. Major U.S. and congressional interests in Southeast Asia include maritime security, the promotion of democracy and human rights, the encouragement of liberal trade and investment regimes, counterterrorism, combating narcotics trafficking, environmental preservation, and many others. In October 2009, Senator Richard Lugar introduced S.Res. 311, calling for the start of discussions on a free trade agreement with ASEAN. In August 2009, Senator Jim Webb visited five countries in mainland Southeast Asia and was the first Member of Congress in 10 years to visit Burma. The United States exerts a strong military and economic presence in Southeast Asia, and through diplomacy it seeks to remain a major power—perhaps the major power—in the region. ASEAN, however, has been active in recent years in exploring a variety of diplomatic architectures for East Asia and the Pacific. ASEAN is at the center of several broader security- and trade-related groupings in the Asia-Pacific region, through which it has aimed to maintain regional multi-polarity or a balance of powers among itself and other states including the United States, China, and Japan. ASEAN is also the nexus for discussion of regional economic integration. ASEAN has launched an internal free trade accord, the ASEAN Free Trade Agreement (AFTA), which will go into full effect in 2015. ASEAN has also concluded FTAs with many external trade partners, though not with the United States. ASEAN has also been exploring ways to advance the ultimate creation of a broader European Union-like East Asia Community. Some within the group—but not all—support the inclusion of the United States in such a community. Human rights conditions, particularly in some ASEAN members such as Burma, have long been a source of friction between the organization and the United States. ASEAN's new Charter, enacted in 2007, attempts to bring more pressure to bear upon recalcitrant member states. However, ASEAN still operates on principles of consensus and non-interference in the internal affairs of its members, so it remains unclear how active an actor it will be in this area.

History of Science and Technology Advice to the President Science and technology policy issues tend to reach the presidential level if they involve multiple agencies; have substantial budgetary, economic, national security, or foreign policy dimensions; are highly controversial (especially when science and technology intersect with values, ethics, and morality); or are highly visible to the public. When these matters reach the Oval Office, Presidents generally seek information and advice from trusted sources as to the options available and their implications. Throughout U.S. history, Presidents have obtained S&T advice from federal scientists and engineers and informal personal contacts. Since the early 1930s, Presidents have attempted to expand their sources of S&T advice through advisory boards and committees. Lacking a statutory foundation, these boards and committees tended to lack permanency, as successive Presidents often disbanded them. When again faced with the need for S&T advice, Presidents would form new advisory boards or committees, sometimes reconstituted from previously disbanded ones. In the years leading up to World War II, the importance of research and development (R&D) to the nation's economic and military strength became increasingly evident. As a result, President Franklin D. Roosevelt established the Office of Scientific Research and Development (OSRD) in 1941. Historians widely credit the federal R&D enterprise with contributing substantially to the Allied victory in World War II, as well as to the development of subsequent U.S. industrial strength. In November 1944, President Roosevelt wrote a letter to OSRD Director Vannevar Bush seeking recommendations on how research and the research infrastructure established to support America's war effort could be "profitably employed in times of peace." OSRD Director Bush's response, Science: The Endless Frontier , laid out a framework that asserted the essential role of scientific progress in meeting the nation's economic, national security, and social needs. Experts widely view the Bush report as foundational to today's U.S. science and technology policy. Among its recommendations, the report asserted: The Federal Government should accept new responsibilities for promoting the creation of new scientific knowledge and the development of scientific talent in our youth. The next several Presidents used a variety of mechanisms to obtain S&T advice within the EOP, to enhance interagency coordination, and to receive counsel from outside advisors. Organizations within the EOP included the Office of the Special Assistant to the President for Science and Technology (Eisenhower) and the Office of Science and Technology (OST; Kennedy, Johnson). Organizations focused on interagency coordination included the President's Scientific Research Board (Truman), the Federal Council for Science and Technology (FCST; Eisenhower, Kennedy, Johnson, Nixon), and the Federal Coordinating Council for Science, Engineering, and Technology (FCCSET; Ford, Carter, Reagan, George H. W. Bush). External advisory committees included the Science Advisory Committee (Truman, Eisenhower), and the President's Science Advisory Committee (PSAC; Eisenhower, Kennedy, Johnson). President Nixon abolished the Office of Science and Technology—the S&T policy office then extant in the Executive Office of the President (EOP). The National Science Foundation (NSF) assumed its civilian functions and the National Security Council (NSC) its security functions. In addition, President Nixon opted not to appoint new members to PSAC after accepting the pro forma resignation of its members. President Ford supported the return of a science advisory mechanism to the White House, but he wished to establish it through legislation, not executive order. He signed the National Science and Technology Policy, Organization, and Priorities Act of 1976 ( P.L. 94-282 ) into law on May 11, 1976. This act established OSTP and the position of OSTP Director. Policy tensions and power struggles between OSTP and other EOP offices and between presidential Administrations and the science community are not new. Carter Administration OSTP Director Frank Press, for example, battled the Council on Environmental Quality (CEQ), opposing the CEQ-advocated use of federal subsidies to the then-infant solar power industry and instead supporting a balanced pace between market demand and scientific discovery. In July 1981, George Keyworth, Reagan Administration OSTP Director, stirred controversy in the science community on his first speech to the American Association for the Advancement of Science (AAAS) by asserting "Nowhere is it indicated that the OSTP or its director is to represent the interests of the scientific community as a constituency." Further, he added that serving as an "inside lobbyist" for the science community would work against the community's interest by reducing his influence within the White House. Keyworth's view of the role of the President's science advisor was at odds with many in the science community at that time. During the George H. W. Bush Administration, tension existed between OSTP Director D. Allan Bromley and other high-ranking White House officials over the extent of Administration support for federal funding of commercial technology development. These tensions became public when the Wall Street Journal published articles asserting Bromley's success in advancing an industrial policy in the Administration, including "picking technological winners and losers." Following criticism from Chairman of the Council of Economic Advisors (CEA) Michael Boskin, White House Chief of Staff John Sununu, and OMB Director Richard Darman, Bromley issued a statement clarifying that the Administration's "principles are inconsistent with an industrial policy of targeting particular industries for support or particular technologies for commercialization." Appendix A provides a historical compilation of presidential S&T policy advisors with their titles, EOP S&T agencies/offices, interagency coordination organizations, and advisory committees. As illustrated in Table A-1 , the Presidents subsequent to President Ford continued to adapt OSTP and related organizations to suit their needs. For example, P.L. 94-282 established a President's Committee on Science and Technology (PCST) with the OSTP Director as a member. PCAST largely assumed the role of PCST with the OSTP Director serving as a co-chair along with one or two nonfederal PCAST members. More recently, P.L. 112-282 included provisions for the OSTP Director to chair an Intergovernmental Science, Engineering, and Technology Advisory Panel (ISETAP). An executive branch, Cabinet-level council established by presidential Executive Order, the National Science and Technology Council, which is chaired by the President and managed by the OSTP Director, has subsumed ISETAP's responsibilities. Overview of OSTP Congress established the Office of Science and Technology Policy as an office within the EOP to, among other things, "serve as a source of scientific and technological analysis and judgment for the President with respect to major policies, plans, and programs of the Federal Government." Within the context of its organic statute, OSTP currently defines its mission as having three components: Provide the President and his senior staff with accurate, relevant, and timely scientific and technical advice on all matters of consequence. Ensure that the policies of the Executive Branch are informed by sound science. Ensure that the scientific and technical work of the Executive Branch is properly coordinated so as to provide the greatest benefit to society. To this end, OSTP has established the following strategic goals and objectives: Ensure that federal investments in science and technology are making the greatest possible contribution to economic prosperity, public health, environmental quality, and national security. Energize and nurture the processes by which government programs in science and technology are resourced, evaluated, and coordinated. Sustain the core professional and scientific relationships with government officials, academics, and industry representatives that are required to understand the depth and breadth of the Nation's scientific and technical enterprise, evaluate scientific advances, and identify potential policy proposals. Generate a core workforce of world-class expertise capable of providing policy-relevant advice, analysis, and judgment for the President and his senior staff regarding the scientific and technical aspects of the major policies, plans, and programs of the Federal government. The OSTP also has several roles not articulated in these formal statements. These include serving as a sounding board and conduit of information for agency executives seeking to understand, clarify, and help shape science and technology-related policy objectives and priorities; helping agencies to coordinate and integrate their S&T strategies and activities; and helping to resolve interagency conflicts over areas of S&T responsibility and leadership. The role and influence of OSTP, NSTC, PCAST, and their predecessor organizations have varied among Administrations, depending on the President, the individual serving as OSTP Director, and the rapport between them. The following sections provide an overview of the current responsibilities and roles of the OSTP Director and Associate Directors, NSTC, and PCAST, followed by information on OSTP's budget and staffing. Roles of the OSTP Director/APST and Associate Directors P.L. 94-282 establishes the position of OSTP Director, whose primary function is "to provide, within the Executive Office of the President, advice on the scientific, engineering, and technological aspects of issues that require attention at the highest level of Government." In addition, the OSTP Director is to: advise the President of scientific and technological considerations involved in areas of national concern including, but not limited to, the economy, national security, homeland security, health, foreign relations, the environment, and the technological recovery and use of resources; evaluate the scale, quality, and effectiveness of the federal effort in science and technology and advise on appropriate actions; advise the President on scientific and technological considerations with regard to federal budgets, assist the Office of Management and Budget (OMB) with an annual review and analysis of funding proposed for research and development in budgets of all federal agencies, and aid [OMB] and the agencies throughout the budget development process; and assist the President in providing general leadership and coordination of the research and development programs of the Federal Government. By statute, the President appoints the OSTP Director, who is sometimes referred to colloquially as the President's science advisor. The OSTP Director is subject to Senate confirmation and receives compensation at the rate provided for level II of the Executive Schedule. The OSTP Director has never been a member of the President's Cabinet or a Cabinet-level official. In addition to establishing the position of OSTP Director, P.L. 94-282 authorizes the President to appoint not more than four OSTP Associate Directors, subject to Senate confirmation, who are compensated at a rate not to exceed that provided for level III of the Executive Schedule. The number of Associate Director positions has varied under different Presidents. For example, under President George W. Bush there were two OSTP Associate Directors—one focused on science and the other on technology—each with a Deputy Director. During the Clinton Administration, four Associate Directors focused on science; technology; environment; and national security and international affairs. President Obama has established four OSTP Associate Director positions with discrete areas of responsibility: environment and energy; national security and international affairs; science; and technology. See Figure 1 . The section below, " Number and Policy Foci of OSTP Associate Directors ," provides a more detailed discussion of the role of OSTP Associate Directors. Presidential Appointment Status and Congress The formal positions held by the President's science advisor may affect his or her degree of access to the President and other EOP decision makers. Although Presidents have differed in their management of EOP staff, Cabinet members and assistants to the President generally have greater access to the President than other White House staff. Some members of the S&T policy community question the degree of presidential access available to the OSTP Director. The OSTP Director is not a Cabinet-level official. Some Presidents have appointed their science advisors, however, not only to the Senate-confirmed position of OSTP Director, but also as Assistant to the President for Science and Technology (APST). The APST position does not require Senate confirmation and may confer additional status and access to the President. President Obama appointed John Holdren to serve as both Director of OSTP and APST. In contrast, President George W. Bush appointed John Marburger only to the position of OSTP Director and did not appoint an APST during his two terms. The relationship between Congress and the individual serving as the President's science advisor varies depending on whether the individual serves as OSTP Director, APST, or both. Congress can require the OSTP Director to testify before Congress. In contrast, APSTs may assert the right not to testify before Congress in accordance with the principles of separation of powers and/or executive privilege. There may be ambiguity about Congress's authority to require testimony from an individual who holds both the Director of OSTP and APST title, depending on the capacity in which the individual would testify and the subject matter of the testimony. Roles and Responsibilities Historically, the OSTP Director advises the President on policy formulation; presidential appointments; S&T-related budget issues, including budgets for R&D; the policy significance of scientific and technical developments; and science, technology, engineering, and mathematics (STEM) education. OSTP Directors historically have also served as communication conduits between the EOP and the federal and non-federal S&T community. Some OSTP Directors have emphasized communicating the views of the S&T community to the EOP, while others have focused on communicating the views of the EOP to the S&T community. The OSTP Director (when serving as APST) manages the National Science and Technology Council, established by Executive Order 12881, which is charged with coordinating S&T policy across the federal government, establishing national goals for federal S&T investments, and preparing coordinated R&D strategies. As NSTC manager, the APST can provide federal agency coordination, information, and guidance when special events occur, such as national emergencies, disasters, or S&T-related international negotiations. In addition, the APST co-chairs the President's Council of Advisors on Science and Technology, established by Executive Order 13226. As co-chair of PCAST, the APST can ascertain the consensus of the S&T community on issues of interest to the Administration. The OSTP Director performs special roles with respect to National Security and Emergency Preparedness (NS/EP) communications policies, programs, and capabilities. Under Executive Order 13618, "Assignment of National Security and Emergency Preparedness Communications Functions," the OSTP Director advises the President on the prioritization of radio spectrum and wired communications that support NS/EP communications functions, and provides selected evaluation of appropriate information related to the test, exercise, evaluation, and readiness of the capabilities of existing and planned NS/EP communications. In addition, the OSTP Director issues annually priorities for NS/EP Executive Committee analyses, studies, research, and development regarding NS/EP communications. Relationship with the Office of Management and Budget The OSTP Director does not have direct authority over federal agencies or the Office of Management and Budget. Its participation with OMB in the budget process involves four steps: (1) overall priority setting by OSTP and OMB, (2) agency preparation of budget proposals to the OMB, (3) agency negotiations with OMB, and (4) final budget decisions by the President and the OMB Director. 1. Priority setting. A key activity in the first step is OSTP's request to federal agencies for their recommendations on R&D priorities. In addition, interagency working groups meet to determine individual agency responsibilities for specific activities when multiple agencies share responsibility for broad issue areas. The OSTP and OMB use this information in their development of a joint memorandum that articulates the Administration's R&D priorities and R&D investment criteria. Agencies are to use this memorandum as an aid in the second step, preparation of their budgets. 2. Agency budget preparation. In the second step, OSTP continually interacts with agencies as they develop their budgets, providing advice and working with them on their priorities. In general, OSTP provides more guidance to agencies with large R&D budgets and to programs that cross agency boundaries. Federal agencies submit their completed budget proposals to OMB. The OSTP does not review proposed agency budgets before they are sent to OMB. 3. Agency negotiations with OMB. In the third step, OSTP works with OMB to review proposed agency budgets to ensure they reflect Administration plans and priorities. The OSTP also participates in OMB budget examiner presentations to the OMB Director and provides advice on priorities at that time. In addition, OSTP provides direct feedback to agencies as they negotiate with OMB over funding levels and the programs on which that funding is to be spent. 4. Final budget decisions. OSTP's primary role in the fourth step in the budget process is to advise on the quality of the proposals and alignment with the President's established priorities. The President, the OMB Director, and the Cabinet, however, make the ultimate choices. National Science and Technology Council On November 23, 1993, President Clinton established the National Science and Technology Council (NSTC) by Executive Order 12881. The NSTC is a council composed of department and agency heads, as well as selected assistants and advisors to the President. Executive Order 12881 specifies that the APST is a member of the NSTC; the OSTP Director is not. The NSTC aims to coordinate science and technology policy across the federal government. According to the executive order, the NSTC has the following principal functions: Coordinate the S&T policymaking process. Ensure S&T policy decisions and programs are consistent with the President's stated goals. Help integrate the President's S&T policy agenda across the federal government. Ensure science and technology are considered in development and implementation of federal policies and programs. Further international cooperation in science and technology. In addition to these principal functions, the NSTC assists the OMB Director by recommending R&D budgets that reflect national goals and advising on agency R&D submissions. The President chairs the NSTC; in the President's absence, the Vice President or the APST serves as chair. In practice, the NSTC rarely meets with the President or Cabinet-level officials present. Rather, OSTP staff and detailees manage NSTC activities in conjunction with federal agency staff. The NSTC has five committees: Science; Technology; Environment, Natural Resources, and Sustainability; Homeland and National Security; and Science, Technology, Engineering, and Math Education. As shown in Table 1 , each NSTC committee has subcommittees, interagency working groups, and/or taskforces focused on specialized topics. The members of these committees and subcommittees are generally not Cabinet officials, but instead lower-ranking staff. In some cases, Congress has charged the NSTC with specific statutory responsibilities. Congress mandated the NSTC to coordinate federal activities on ocean acidification and develop an implementation plan for a coordinated national research program on the role of the oceans in human health and to annually report on these activities. Congress also directed the NSTC to oversee the planning, management, and coordination of the National Nanotechnology Program and annually report on these activities. In addition, Congress directed the OSTP Director to establish an NSTC committee responsible for coordinating federal programs and activities in support of STEM education, to establish a committee responsible for planning and coordinating federal programs and activities in advanced manufacturing research and development, to establish a working group responsible for coordinating federal science agency research and policies related to the dissemination and long-term stewardship of the results of unclassified research, and to use the NSTC to annually identify and prioritize deficiencies in federal research facilities and major instrumentation. In other cases, the NSTC may be assigned responsibilities to meet non-specific congressional mandates. For example, the America COMPETES Act ( P.L. 110-69 ) directs the establishment of a President's Council on Innovation and Competitiveness. The act states that the council is to include the Secretary or head of a number of federal agencies, OSTP, and OMB. Congress provided the President with the option of establishing a new organization to service as the Council on Innovation and Competitiveness or to designate an existing council to carry out the requirement. Rather than establish a new, independent council, President George W. Bush assigned this responsibility to the NSTC Committee on Technology. President's Council of Advisors on Science and Technology The President's Council of Advisors on Science and Technology (PCAST) is an advisory board composed of individuals and representatives from outside the federal government with diverse perspectives and expertise. PCAST advises the President, both directly and through the APST, on science, technology, and innovation policy. In addition, PCAST responds to requests for advice from the National Science and Technology Council. President George H. W. Bush created PCAST in 1990. Presidents Clinton, George W. Bush, and Obama reestablished slightly different versions of PCAST during their Administrations. The current executive order gives PCAST a broad remit, stating that its advice "shall include, but not be limited to, policy that affects science, technology, and innovation, as well as scientific and technical information that is needed to inform public policy relating to the economy, energy, environment, public health, national and homeland security, and other topics." PCAST also serves as two other statutorily created advisory committees: the President's Innovation and Technology Advisory Committee created by the High Performance Computing Act of 1991 ( P.L. 102-194 as amended) and the National Nanotechnology Advisory Panel created by the 21 st Century Nanotechnology Research and Development Act ( P.L. 108-153 ). PCAST's members include approximately 20-25 distinguished individuals from industry, education and research institutions, and other organizations outside the federal government. The APST co-chairs PCAST along with one or two other council members. Until recently, OSTP provided funding and support for PCAST. In 2011, President Obama directed the Department of Energy to provide PCAST with funding and administrative and technical support. Though these functions were transferred to DOE, OSTP asserts that it continues to exercise policy and programmatic oversight of PCAST through co-chair John Holdren and PCAST's staff, whose physical office location remains at OSTP. OSTP further asserts that it expects that PCAST's funding level at DOE will be comparable to PCAST's historic funding levels at OSTP, noting that Congress has not provided additional appropriations to DOE specifically to support PCAST. OSTP Budget and Staffing OTSP's budget and staffing affect the degree to which OSTP can provide advice to the President and respond to congressional direction and mandates. Figure 2 shows OSTP's budget from FY1990 to FY2014, and Figure 3 shows OSTP's staffing level from FY1990 to FY2013. For FY2014, P.L. 113-76 funds OSTP at $5.6 million, $0.1 million more than in FY2013. The Administration had requested $5.7 million for FY2014. The OSTP is also supported by a federally funded research and development center (FFRDC), the Science and Technology Policy Institute (STPI; see box below). As illustrated in Figure 2 and Figure 3 , OSTP funding and staffing levels have varied considerably over time. In constant dollars, OSTP funding was at its highest at the end of the George H. W. Bush Administration and at its lowest during the Reagan Administration. OSTP's staffing has also fluctuated. Some analysts have expressed concern that the uneven funding and staffing of OSTP may result in inconsistent provision of S&T advice within the EOP over time. The OSTP has 40 full-time equivalent staff positions. As of February 2012, OSTP had a total of 93 staff members, detailees, fellows, and individuals working under an Intergovernmental Personnel Agreement (IPAs). According to OSTP, this total includes 11 political staff, 20 career staff, 3 consultants, 41 detailees, 10 IPAs, and 8 fellows. Political staff, career staff, and two of the consultants are funded by OSTP (the third consultant serves on a voluntary basis); detailees are funded by their home agencies; fellows are funded by a variety of organizations; and IPAs may be funded by OSTP, their home agencies/organizations, or a combination of the two. The Clinton, G.W. Bush, and Obama Administrations have all relied on detailees and fellows to conduct much of OSTP's activities. The OSTP does not include information on detailees and fellows in its annual budget requests to Congress, so their number is harder to track than other staff. Toward the end of the Clinton Administration, OSTP had approximately 60 detailees and fellows. During the G.W. Bush Administration, OSTP had approximately 30-40 detailees per year. Approximately 60 detailees and fellows support the current OSTP.  In contrast, 11 detailees worked at OSTP in FY1992. Issues and Options for Congress Congress may opt to consider a variety of issues and legislative options related to OSTP. These include: the need for science advice within the Executive Office of the President; the title, rank, roles, and responsibilities of the OSTP Director; the number and policy foci of OSTP Associate Directors; the funding and staffing levels provided for OSTP; the compliance of OSTP with statutory restrictions on the use of appropriated funds; the participation of OSTP and NSTC in federal agency coordination, priority-setting, and budget allocation; the role of OSTP in ensuring scientific integrity in federally funded and supported research, including the communication of scientific and technical information by federal agency scientists and engineers; the efforts by OSTP to effect change in federal policies regarding public access to the results of federally funded research and development; the attempt by OSTP to consolidate federal science, technology, engineering, and mathematics (STEM) education programs; and the stature and influence of PCAST. The following sections address each of these issues, along with Obama Administration efforts and policy options for Congress. Need for Science Advice within the Executive Office of the President One fundamental question is whether the President requires high-level S&T advice, and, if so, whether this advice should take the form of a full-time advisor or presidential advisory committee. Further, if the President does require such advice, should part of the EOP, part of a federal department or agency, or an independent agency perform these roles and functions. Presidents and their senior advisors may believe that they base most of their decisions on factors other than detailed scientific knowledge, such that they perceive a need for only very general S&T knowledge. They may consider opinions from an S&T advisor or a related presidential advisory committee unnecessary and observe no need for such entities to build support for White House decisions. Even when Presidents and their senior advisors rely on high-level S&T advice, certain tensions permeate this process. A President may believe that high-level S&T advice will do more harm than good if the S&T advisor or presidential advisory committee does not commit to the President's agenda or represent the Administration's perspective. Conversely, the S&T community may fear that a close relationship between the S&T advisor and the President could lead to the politicization of S&T advice and subvert the S&T advisor's independence and objectivity. A historical review of presidential S&T activities since the Franklin D. Roosevelt Administration illustrates that differences in opinion between the President and the majority of the S&T community place a presidential S&T advisor or advisory committee in a challenging position. Dismissal or marginalization of S&T consideration from the White House inner circle may result. On the other hand, an Administration may benefit from an S&T advisor who understands these sensitivities, as the S&T advisor may provide confidential advice privately and speak authoritatively on S&T-related issues for the Administration publicly. The S&T advisor can help assess S&T-related departments and agencies, resolve competing claims among these agencies, coordinate the efforts of R&D agencies and the external S&T community in national emergencies, and anticipate new and emerging S&T issues. In addition, presidential advisory committees provide an ongoing ability to engage the S&T community when the President feels the need for external advice. Consider OSTP Organizational Position Congress formalized a mechanism for EOP S&T advice when it created OSTP. After assessing the success of OSTP in providing the type of S&T advice envisioned by Congress, Congress may choose to alter the formal mechanisms for EOP S&T advice by changing OSTP's authorization and organizational location. Some have recommended the elimination of OSTP, characterizing its role as duplicative and ambiguous. Doing so would effectively remove the formal S&T advice mechanism from the EOP. This might lead the EOP to rely on outside groups for S&T advice and lower the overall consideration given to S&T during the policy-making process. If Congress opted to eliminate OSTP, a President might opt to rely on Cabinet Secretaries and other federal agency officials for S&T advice in their agencies' field(s) of expertise; Congress might opt to formalize the provision of such advice by agency heads by making it a statutory responsibility. In assessing whether to eliminate OSTP, Congress may wish to note that it has eliminated other legislative and executive branch agencies engaged in S&T policy, notably Congress's Office of Technology Assessment in 1995 and the Department of Commerce's Technology Administration and its Office of Technology Policy in 2007. Currently, the Office of Science and Technology Policy is the only federal agency whose principal responsibility is the broad tableau of federal S&T policy. Some S&T policy experts assert that the elimination of other S&T policy agencies has made consideration of broad S&T policies more challenging for both the executive branch and Congress. Another alternative is to move OSTP out of the EOP. Congress might establish OSTP as part of an existing department or agency or as a new independent agency. Removing OSTP from the EOP might increase OSTP independence. If OSTP became a separate agency, Congress might also benefit from having more control over OSTP's interagency coordination and other activities. If Congress removed OSTP from the EOP, however, OSTP's greater distance from presidential decisions might mean that neither the Administration nor federal agencies would respond sufficiently to its advice or requests. The S&T community objected when President Nixon moved the precursor to OSTP from the EOP to NSF; they might launch a similar objection now. If Congress elects to maintain the OSTP function and keep it within the EOP, it might instead consider OSTP's autonomy. Congressional options regarding OSTP autonomy include continuing to provide OSTP with legislative guidance, increasing the intensity with which it provides such guidance, and increasing presidential authority over OSTP. These options are discussed in more depth below. Continue Current OSTP Legislative Guidance Mechanisms Some Members of Congress may believe that no changes need to be made in OSTP operations. Others may believe that taking legislative action regarding OSTP would be neither efficient nor effective given its presence in the EOP, the nature of its activities, and its ability to make operational changes on its own. As described in this report, OSTP and its affiliated organizations have continually evolved, responding to the changing needs of the Administration and society, as well as to new scientific and technical challenges and opportunities. Currently, the President has discretion over the policies, structure, and personnel of OSTP, NSTC, and PCAST. Congress oversees OSTP through the annual regular authorization and appropriation processes and introduces issue-specific bills that identify issues, actions, and functions on which Members of Congress believe OSTP should focus. This approach may be appropriate given the separation of powers between the legislative and executive branches inherent in the U.S. Constitution. Congress currently holds hearings as part of the presidential appointee confirmation process, part of the appropriation process, and on issues of interest to a given committee. Through the hearing process and other legislative actions, such as introducing bills, passing laws, and writing related report language, Congress provides direction and guidance to OSTP. Congress may also mandate specific activities or priorities. In such cases, OSTP might need to choose between prioritizing its general statutory roles and responsibilities and specific activities and priorities mandated by Congress. Another issue for the current mechanisms for legislative guidance is that congressional language, either in statute or report, may sometimes conflict with presidential activities. For example, a constitutional issue related to executive branch authority is OSTP's use of appropriated funds for international activities that Congress has proscribed. This issue is discussed in detail in the section, " OSTP Compliance with Statutory Restrictions on the Use of Appropriated Funds ." Increase Intensity of OSTP Oversight Mechanisms Should Congress wish to take a greater role in directing the activities of OSTP, it might consider holding additional specific oversight hearings on OSTP or amending OSTP's organic legislation to reflect current congressional priorities. For example, Congress might legislatively direct OSTP to designate staff or undertake activities focused on an issue of concern. Such legislative language might lead to investment of effort more appropriate to congressional priorities. Establishing such specific priorities and personnel in statute could limit agency discretion, potentially reducing its ability to address other parts of its statutory mission, while securing a focus on specified topics. In addition, this approach could largely consume OSTP's staff and budget, inhibiting its ability to respond to new and emerging S&T topics. Allow President Autonomy over OSTP Given OSTP's presence within the EOP, Congress might opt to allow the President to manage OSTP as he or she wishes. In this case, Congress might reduce the amount of direction provided to OSTP through oversight hearings, legislation, and report language. The President, with Senate confirmation, would continue to appoint the OSTP Director and Associate Directors; determine OSTP's policy agenda; and organize the management of the office. The President could also continue to use executive orders to manage other activities, such as the formation of NSTC and PCAST. General Considerations The personal relationship between a President and the OSTP director/APST/science advisor, together with the President's perspective on the role of science and technology advice in the development and selection of policy options, may have a significant effect on the provision and effectiveness of S&T policy advice. For example, a President who places a high premium on objective, independent advice might seek out the counsel of his S&T advisor and rely heavily upon it in making a policy decision. This approach might be further strengthened if the President and S&T advisor have a long-term collegial relationship based on mutual trust and respect. A different President may see S&T advice as important, but not controlling; such a President might seek S&T advice and incorporate it with other factors in decision making. Yet another President might place a premium on factors other than science and technology (e.g., economic interests, foreign policy objectives, domestic political considerations). Rather than seeking S&T advice to guide decision making, such a President might instead look to the S&T advisor to explain and advocate the position of the Administration, particularly to the S&T community. A President who does not consider science and technology important may not solicit input from an S&T advisor, regardless of the title or position the S&T advisor holds. Title, Rank, Roles, and Responsibilities Under President Obama, John Holdren serves as both OSTP Director and APST. In contrast, under George W. Bush, John Marburger was given only the title of OSTP Director. Some experts in the S&T community have proposed that the OSTP Director also be given the title of APST or Cabinet rank. A related issue is whether the roles and responsibilities of the OSTP Director should be undertaken by several appointees rather than one. To a large extent, the appointment of an advisor to a particular position or title arises from presidential discretion. This presidential discretion may limit the ability of Congress to require greater or lesser degrees of access to the President and other key Administration decision makers. Title and Rank As shown in the Appendix A , presidential science advisors have held a variety of titles since the Franklin D. Roosevelt Administration. Of the 13 Administrations reviewed, the most common title has been some variation of Science Advisor to the President (five Administrations), followed by Special Assistant to the President (four Administrations). The OSTP Director held the title of APST in the George H. W. Bush and Clinton Administrations but not in the George W. Bush Administration. President Obama appointed John Holdren as APST and OSTP Director; the Senate subsequently confirmed Dr. Holdren's nomination as OSTP Director. The difference between an individual being the OSTP Director and the APST is more than semantic. This section outlines some of the policy issues related to whether the OSTP Director is also the APST or has Cabinet rank. Congressional Testimony Some Members of Congress may wish to oversee who is appointed as the president's science advisor and to have the option of hearing testimony from the individual serving in that role. Others may not place great emphasis on overseeing the role of OSTP Director or APST and may have other sources from which they can obtain S&T analysis and information. Congress expects that an executive branch official who administers a department or agency established by law will testify before it. This contrasts with an individual whose sole responsibility is to advise the President. Some presidential advisors, such as the Director of OSTP, are in units of the EOP established by law and are also subject to confirmation by the Senate. Accordingly, Congress often asks OSTP Directors to testify before it, and may, if necessary, compel them to do so. However, an APST may assert the right to not testify before Congress in accordance with the principles of separation of powers and/or executive privilege. Some members of the S&T community contend that Congress should permit an individual serving as APST to discriminate between privileged advice to the President that should not be disclosed to Congress and information appropriate to disclose to Congress. If Congress desires to ensure the availability of the APST for testimony, it might opt to establish the position of APST by statute and require Senate confirmation. Some experts have expressed concern regarding confusion that might arise if Congress could require some Administration staff with "Assistant to the President" titles to testify, but not others. Others have suggested that this might not be an effective approach since, even if such a position were established by statute, a President might opt not to nominate someone for that position or possibly even appoint someone to a similarly titled position that does not exist in statute. Cabinet Rank Some members of the S&T community have expressed their desire for the OSTP Director to have a greater role and influence in the development of Administration policy. They assert that statutorily designating the OSTP Director as a Cabinet-level position would provide such an enhanced role and influence. In their view, the President would identify an individual nominated for the Cabinet-level OSTP Director position at the same time as other Cabinet members, shortly after the election of a new Administration. If also appointed to serve as APST, the individual could begin work immediately, though exercise of the duties of OSTP Director, with its enhanced stature, would have to await formal nomination and Senate confirmation. If appointed early in a new Administration, some experts in the S&T community contend, the individual filling the APST position could help identify and recruit the best scientists, engineers, health professionals, and other public policy professionals for the approximately 100 S&T policy-related presidential appointments. Additionally, some contend that an APST/OSTP Director with Cabinet rank would have greater access to the President and other senior Administration staff. They assert that Cabinet rank would enhance the OSTP Director's authority and influence in incorporating scientific and technical viewpoints into Administration decision-making. Others contend that the issue of Cabinet rank for the APST/OSTP Director status is trivial and would be unlikely to substantially improve the APST/OSTP Director's role and influence in EOP activities, including Cabinet meetings. From a historical perspective, some experts believe that Presidents and their science advisors have unique and idiosyncratic relationships. To these experts, a more important question is how an Administration manages and uses the extensive infrastructure of expert S&T advice that that supports all aspects of federal decision making. Scientists, engineers, and S&T policy professionals—both within and outside of the federal government—play a substantial role in providing S&T input to federal policy decision making in areas such as R&D, regulation, procurement, and standards development. Other experts assert that the organization of the White House determines the S&T advisor's status and access. According to this perspective, if the President relies primarily on a group of White House staff members for advice, the advisor should be the APST. Conversely, if the Cabinet is the primary source of advice, than the science advisor should be made a member of the Cabinet. From this perspective, the title itself is less important than the access to the President that it provides. Other critics contend that rather than focusing on the title, the S&T community should instead focus on the degree to which a presidential Administration is transparent about its operations. Roles and Responsibilities As discussed above, historically OSTP Directors have advised presidents on S&T policy formulation, R&D budget issues, the policy significance of scientific and technical developments, and STEM education, among other things. When holding the APST title, the OSTP Director manages the NSTC and co-chairs PCAST. In addition, OSTP Directors can serve as a communication conduit between the EOP and the federal and non-federal S&T community. The Obama Administration has opted to consolidate all of these functions under a single individual, John Holdren, who has the dual roles of OSTP Director and APST. Under the Obama Administration, the OSTP Director: Works with OMB in the development of the President's R&D budget request. Provides advice to the President and senior Administration officials on policies for science and technology (including R&D and STEM education). Provides advice to the President and senior Administration officials on the application of science and technology in support of a wide range of national policies (e.g., economic, military, space, health, environmental, and agricultural policies). Represents the United States in international S&T policy related meetings. Manages the NSTC and co-chairs PCAST in his capacity as APST. Is responsible for performing functions related to disaster communications as assigned in Executive Order 12472, Assignment of National Security and Emergency Preparedness Telecommunications Functions. One alternative for Congress is to change the current statutory structure and duties of OSTP, separating the various OSTP roles and responsibilities and establishing separate positions and/or organizations for each. For example, the S&T community has debated the utility of having two different individuals serve as APST and OSTP Director. While some believe having two people serve in these roles might enhance the ability and potential of an APST to be part of the President's inner circle, others believe the potential for conflict between the two is high. Similarly, some members of the S&T community have suggested that the President appoint co-equal officials, one responsible for science policy and the other for technology policy. Shortly after assuming office, President Obama created the new title of Chief Technology Officer within the EOP, but assigned it to his choice for Associate Director of OSTP for Technology. While signaling that this appointee is the Administration's point person for technology issues, the individual holding the title is in a position subordinate to the OSTP Director. Some S&T policy experts have expressed concerns that bifurcation of authorities and responsibilities might create conflicts and a lack of integration. Another challenge in splitting the functions of OSTP and assigning them to separate individuals or organizations is the size of OSTP's budget and staff. For example, current resources might not effectively support two senior officials and their associated staffs. Congress might opt to increase funding and authorized staffing levels to support such a reorganization. Number and Policy Foci of OSTP Associate Directors Current statutory authority provides flexibility to the President with respect to the number of OSTP Associate Directors (up to four) and the scope of their areas of responsibility (entirely at the discretion of the President). Under President George W. Bush there were two: an Associate Director for Science and an Associate Director for Technology. President Obama has established four Associate Directors with responsibility for discrete policy areas: Science, Technology, Environment and Energy, and National Security and International Affairs. Congress could opt to specify a fixed number of Associate Directors, and could assign some or all of them specific policy foci. Some Members of Congress have undertaken efforts in this regard. For example, in its report ( S.Rept. 110-124 ) on the Departments of Commerce and Justice, Science, and Related Agencies Appropriations Act, 2008 ( S. 1745 , 110 th Congress), the Senate Committee on Appropriations recommended that OSTP create the position of Associate Director for Earth Science and Applications to coordinate all federal efforts to better understand and predict changes in the Earth's climate and oceans. Another bill ( H.R. 5116 , 111 th Congress) would have required the OSTP Director to appoint an Associate Director to serve as the Coordinator for Societal Dimensions of Nanotechnology. In addition, some members of the S&T community have proposed that one or more of the OSTP Associate Director positions should be a joint appointment to the National Economic Council (NEC), National Security Council (NSC), Domestic Policy Council (DPC), or Office of Management and Budget. In this vein, President Obama appointed the OSTP Director and the CTO to the DPC; made Dr. Holdren a member of the NEC by providing him with the APST title; added the Chief Technology Officer (who currently also holds the position of OSTP Associate Director for Technology) as a member of the NEC; and issued Presidential Policy Directive 1 (PPD-1) stating that "When science and technology related issues are on the agenda, the NSC's regular attendees will include the Director of the Office of Science and Technology Policy." Shortly after his appointment Dr. Holdren stated that he expected that the OSTP associate director for national security would "be dual-hatted" in the National Security Council. According to OSTP, the Associate Director for National Security and International Affairs "necessarily works in close collaboration with the National Security Staff on a wide variety of issues, though the position has not been officially 'dual-hatted' during the Obama Administration." OSTP Budget and Staffing The ability of OSTP to perform its statutory duties depends, in part, on the size of its budget and staff. Figure 2 and Figure 3 , above, illustrate OSTP's historical budget and staffing. Between FY1996 and FY2013, the budgets of Presidents Clinton, Bush, and Obama included requests for the authorization of 35-40 full-time equivalent (FTE) positions while the actual number of OSTP-funded staff ranged from 23 to 31. The OSTP has used detailees and fellows to supplement its core staffing. During the George W. Bush Administration, detailees and fellows provided approximately half of OSTP's total staff; during the Clinton Administration, as many as 61 detailees and fellows accounted for approximately two-thirds of total OSTP staff. Some in the S&T community have expressed concerns that OSTP needs to have more career civil service professional staff and a larger budget. In their view, additional career staff, who would continue to serve from one presidential Administration to the next, would help maintain institutional knowledge and provide a solid understanding of government operations. More career staff might also enable a new Administration to move more quickly on S&T policy issues and provide enhanced support to political appointees during presidential transitions. Reports expressing these views assert that this change would make OSTP staff similar to other EOP expert staff, such as those employed at OMB. Additional funding, these reports assert, would also provide OSTP with sufficient staff to conduct special analyses on emerging issues. Currently, such analyses are generally provided by OSTP's federally funded research and development center (FFRDC), the Science and Technology Policy Institute (STPI). (See "Science and Technology Policy Institute" box, above, for more information.) Congress may wish to maintain the current staffing approach. Should Congress wish to enhance the funding and staffing of OSTP, it can do so through the appropriations process. The OSTP received $5.6 million for FY2014 ( P.L. 113-76 ). For comparison, Congress provided $6.6 million for OSTP in FY2011, but cut OSTP funding to $4.5 million in FY2012 amid concerns over OSTP's use of funds for activities proscribed in report language accompanying its FY2011 appropriations (see next section). Congress restored OSTP funding to $5.7 million in FY2013. OSTP Compliance with Statutory Restrictions on the Use of Appropriated Funds Congress has sought to restrict OSTP from engaging in certain activities by prohibiting the use of appropriated funds for those activities. The FY2014, FY2013, FY2012, and FY2011 appropriations acts that funded OSTP all included such restrictions. Section 1340(a) of the Department of Defense and Full-Year Continuing Appropriations Act, 2011 ( P.L. 112-10 ) prohibited OSTP from expending funds made available under Division B of the act to develop, design, plan, promulgate, implement, or execute a bilateral policy, program, order, or contract of any kind to participate, collaborate, or coordinate bilaterally in any way with China or any Chinese-owned company unless such activities are specifically authorized by a law enacted after the date of enactment of this division. The Department of Justice (DOJ) and OSTP have asserted that the President's constitutional authority to conduct foreign diplomacy precludes Congress from proscribing the use of funds for such specific activities. The OSTP expended a portion of its FY2011 appropriation to engage in activities with China that Section 1340(a) sought to proscribe. The OSTP has asserted that "certain applications of Section 1340 ... would infringe upon the President's constitutional authority to conduct foreign diplomacy." Subsequently, DOJ issued a supporting opinion on the constitutionality of the application of Section 1340 to OSTP's activities concluding, in part: Section 1340(a) of the Department of Defense and Full-Year Continuing Appropriations Act, 2011 is unconstitutional as applied to certain activities undertaken pursuant to the President's constitutional authority to conduct the foreign relations of the United States. Most, if not all, of the activities of the Office of Science and Technology Policy that we have been asked to consider fall within the President's exclusive power to conduct diplomacy, and OSTP's officers and employees therefore may engage in those activities as agents designated by the President for the conduct of diplomacy, notwithstanding Section 1340(a). The Government Accountability Office (GAO), in response to a request from the House Commerce, Justice, Science, and Related Agencies Subcommittee Chairman, Representative Frank Wolf, concluded that ... OSTP's use of appropriations to fund its participation in the [U.S.-China Dialogue on Innovation Policy] and [U.S.-China Strategic and Economic Dialogue] violated the prohibition in Section 1340. In addition, because Section 1340 prohibited the use of OSTP's appropriations for this purpose, OSTP's involvement in the Innovation Dialogue and the S&ED resulted in obligations in excess of appropriated funds available to OSTP; as such, OSTP violated the Antideficiency Act, 31 U.S.C. §1341(a)(1)(A). With respect to the issue of the constitutionality of the law, GAO stated: It is not our role nor within our province to opine or adjudicate the constitutionality of duly enacted statutes such as Section 1340. In our view, legislation that was passed by Congress and signed by the President, thereby satisfying the Constitution's bicameralism and presentment requirements, is entitled to a heavy presumption in favor of constitutionality. Citing the GAO conclusion, Chairman Wolf sent a letter to Attorney General Eric Holder stating his expectation that the Attorney General would "ensure comprehensive enforcement of section 1340" of P.L. 112-10 and "hold [OSTP Director] Dr. Holdren to full account for his violation of the Anti-Deficiency Act." Congress subsequently reduced OSTP's FY2012 appropriations by nearly a third (32.3%). The House Committee on Appropriations had sought to reduce OSTP funding by half. Further, statutory language in OSTP's FY2012 appropriations act ( P.L. 112-55 ) and language in the accompanying report ( H.Rept. 112-284 ) prohibit OSTP from using appropriated funds to support activities that would carry the risk of transferring sensitive technology to China. In contrast with the FY2011 language, Section 539 of the law allows OSTP to proceed with activities that it certifies pose no risk of transfer. P.L. 113-6 , the Consolidated and Further Continuing Appropriations Act, 2013, restored OSTP funding levels and continued the statutory language prohibiting expenditure of OSTP funds to develop, design, plan, promulgate, implement, or execute a bilateral policy, program, order, or contract of any kind to participate, collaborate, or coordinate bilaterally in any way with China or any Chinese-owned company unless such activities are specifically authorized by a law enacted after the date of enactment of this Act. The Consolidated and Further Continuing Appropriations Act, 2013, retained the prior clarification that this prohibition shall not apply to activities that OSTP certifies have no risk but adds a requirement that OSTP certify that such activities will not involve knowing interactions with officials who have been determined by the United States to have direct involvement with violations of human rights. The OSTP must submit any such certification to Congress at least 30 days prior to the activity. These requirements reportedly reflect an existing agreement between Congress and OSTP. P.L. 113-76 , the Consolidated Appropriations Act, 2014, reaffirms and extends the above requirements for FY2014. OSTP and NSTC Participation in Federal Agency Coordination, Priority-Setting, and Budget Allocation As discussed above, OSTP, the OSTP Director and Associate Directors, and the NSTC participate in coordinating, setting priorities for, and allocating the budget for federal S&T activities. S&T policy organizations have suggested enhancing this participation. Role of OSTP Director Some reports from the S&T community suggest that the OSTP Director should take a greater role in coordination, priority-setting, and budget allocation regarding the federal R&D budget; energy; STEM education; international S&T policy; and federal-state S&T policy. In addition, some members of the S&T policy community have suggested that the OSTP Director play a greater role in EOP policy bodies involved in priority-setting and budget allocation, such as the OMB, NEC, CEQ, DPC, and NSC. For example, Congress could require the OSTP Director to play a greater role (e.g., certification of priorities or budgets) in setting priorities at the federal agencies, particularly for multi-agency and inter-agency activities. Role of NSTC Another recommendation found in these S&T community reports is to make the NSTC's authority equivalent to that of the NSC. The NSTC, they assert, lacks the influence of NSC. The differences in statutory authority, staff, and budget are among the reasons cited for this disparity. The NSTC has participated in presidential decision-making processes in different ways in different Administrations. For example, during the Clinton Administration, the NSTC issued six Presidential Review Directives (PRDs). The PRDs served as the basis for gathering information and policy options for the President. President Clinton then had this information available as he developed eight Presidential Decision Directives (PDD) establishing new policy. As during the G.W. Bush Administration, the NSTC has developed no PRDs or their equivalents during the Obama Administration. Some experts in the S&T community believe that incorporating NSTC deliberations into policy documents rather than basing the policy documents on formal directives puts S&T and the NSTC in a supportive role. These experts assert that, in some situations, S&T input and ramifications should have a more prominent influence on public policy. During his Senate confirmation hearing, Dr. Holdren discussed his vision for the NSTC: There is an entity called the National Science and Technology Council which has existed in the White House, organized by the Office of Science and Technology Policy, but bringing together all of the executive branch agencies, typically at the deputy level, that have roles in science and technology. This is a place where in the past one has been able to address crosscutting and overlapping jurisdiction issues effectively. In the last 8 years, it has languished. It was not really fully utilized in the last administration, but our intention—certainly my intention, if confirmed—would be to revive it and utilize it fully to try to reduce the sorts of problems that you point to here. In this regard, the Obama Administration asserts that it has undertaken efforts to revitalize and streamline the efforts of the NSTC. The Administration cites its establishment of a fifth NSTC committee—the Committee on Science, Technology, Engineering, and Math (STEM) Education—to coordinate Federal programs and activities in support of STEM education. The Administration states that under President Obama NSTC committees meet two or three times annually and each subcommittee meets at least quarterly. The Administration also asserts that it "oversaw the restructuring of the original NSTC committees, with elimination of interagency efforts, where appropriate, and initiation of new efforts, as indicated by Administration priorities and/or Congressional mandates." Options for Congress Congress might choose to leave the roles of the OSTP Director and the NSTC in the budget process unchanged, might choose to increase their authorities, or might choose to increase its oversight of their roles. Congress might mandate that OSTP review agency S&T budgets prior to submission to OMB and empower OSTP to alter the distribution of funding between S&T priorities based on their relative importance. Such authority might increase the ability of OSTP to harmonize and coordinate S&T expenditures among federal agencies. Federal agencies might resist such a change in authority, as it might further complicate the budget development and submission process and create competition between OSTP and OMB directives. Congress might require that NSTC or OSTP review agency S&T budgets to assess the correspondence between NSTC multi-agency R&D strategies and proposed federal investments. A hallmark of multi-agency R&D investment is the need to coordinate the magnitude and mission goals of agency investments in order to achieve broader federal R&D goals. Such a review might increase transparency regarding progress towards these broader federal R&D goals, but it might also require increases in expenditures. Identifying cross-cutting funding and efforts might require dedicated program offices and staff to track and report on multi-agency activities. Congress might choose to formalize the NSTC structure and organization and provide additional funding and personnel to increase the robustness of its process. Providing statutory underpinnings for the NSTC might enable Congress to obtain greater insight into the activities of the NSTC through reporting requirements and oversight of its activities. Alternatively, Congress could mandate that the OSTP Director provide regular reports on the activities of the NSTC. OSTP Role in Ensuring Scientific Integrity The OSTP plays a role in ensuring the scientific integrity of research conducted and supported by the federal government, as well as in the communication of scientific and technical information developed and analyzed by federal scientists and engineers. For example, OSTP, as part of a process managed by OMB, reviews S&T-related testimony to Congress. George W. Bush Administration During the George W. Bush Administration, advocacy groups charged that politicization adversely affected the integrity of science, primarily that related to environment, public health, and national security issues. These groups contended that Administration officials restricted the ability of federal scientists and engineers to provide information, instructed them to change their research reports, or modified the congressional testimony of federal scientific and technical agency leadership that did not support the Administration's views. OSTP Director Marburger stated that such allegations were "sweeping generalizations based on a patchwork of disjointed facts and accusations that reach conclusions that are wrong and misleading." Policy makers responded to these concerns in several ways. In the America COMPETES Act ( P.L. 110-69 , §1009), Congress directed OSTP to develop an overarching set of principles to ensure the communication and open exchange of data by federal scientists and engineers. On May 28, 2008, in response to this requirement, OSTP sent a memorandum to federal agencies that sponsor research. The memorandum provides guidance and what OSTP termed the "Core Principle for Communication of the Results of Scientific Research Conducted by Scientists Employed by Federal Civilian Agencies." It states: Robust and open communication of scientific information is critical not only for advancing science, but also for ensuring that society is informed and provided with objective and factual information to make sound decisions. Accordingly, the Federal government is committed to a culture of scientific openness that fosters and protects the open exchange of ideas, data and information to the scientific community, policymakers, and the public. The memorandum also indicated that NASA's science communications policy should be a model for other federal agencies: NASA policy states that, "In keeping with the desire for a culture of openness, NASA employees may, consistent with this policy, speak to the press and the public about their work," with exceptions for privileged and other controlled information. Bush-Obama Transition Recommendations Prior to President Obama's inauguration, some S&T policy advocacy groups proposed that the executive branch change its scientific communication policy. One proposal was for the issuance of an executive order requiring federal agency leadership to monitor scientific integrity within their agencies and submit an annual report to OSTP with their observations and actions. Other proposals included reversing Executive Order 13422 to prevent OMB from conducting political reviews of scientific documents; enhancing whistleblower protections, including strengthening the Office of Special Counsel; requiring that scientific studies used to inform regulatory policy be disclosed and docketed prior to the decision-making process; reforming agency communication and media policies; and providing the public with both the scientific results or analysis used in policymaking and the ability to include a minority report if there are any significant dissenting scientific evidence or opinions. Some organizations suggested that the Obama Administration also address the use of science in regulatory policy, including explicitly differentiating between questions that involve scientific judgments and questions that involve judgments about economics, ethics, and other matters of policy; and develop guidelines on when to consult advisory panels on scientific questions, how to appoint them, how they should operate, and how to deal with conflicts of interest. Obama Administration Shortly after taking office, President Obama issued a memorandum for the heads of executive departments and agencies on the subject of scientific integrity. In the memorandum, the President articulated his view of the importance of ensuring scientific integrity; identified several overarching principles; charged the OSTP Director with ensuring "the highest level of scientific integrity in all aspects of the executive branch's involvement with scientific and technological processes"; required the Director to confer with heads of executive departments and agencies, the OMB, and other offices within the EOP in the development of a plan to achieve the identified principles; and directed the OSTP Director to develop recommendations for presidential action to guarantee scientific integrity throughout the executive branch. OSTP Director Holdren subsequently issued a memorandum to the heads of executive departments and agencies providing further guidance on implementing the Administration's policies on scientific integrity. Director Holdren's memorandum provided principles in four broad areas: foundations of scientific integrity, public communications, use of federal advisory committees, and professional development of government scientists and engineers. In a separate section addressing implementation, Director Holdren stated that OMB would be issuing guidance to OMB staff regarding standards to be applied to the review of testimony on scientific issues prepared for presentation to Congress. He also noted that "the scope of an agency's scientific work and its relationship to the mission of each department or agency may necessitate distinct mechanisms be used by each to implement this guidance." The OSTP reviewed the guidelines developed by each agency to ensure consistency with the guidance provided in President Obama's original memorandum. According to OSTP, some departments decided to develop policies that will apply broadly to a number of their component agencies. The OSTP has also stated that individual agencies covered by their departments' policies may develop their own policies with additional elements specific to their missions. According to the OSTP website, 19 federal agencies have released final policies. Four others have released draft policies and are in the process of finalizing them for release. The agencies' policies have met with mixed reviews. An analysis published by the Union of Concerned Scientists, a not-for-profit advocacy group, lauded the policies of some agencies for their active support for "a culture of scientific integrity," while criticizing the policies of other agencies as inadequate. Some policy makers have asserted that the Obama Administration has failed to protect scientific integrity. For example, in a letter to the OSTP Director, several Members of Congress alleged scientific misconduct by the Department of the Interior, the Environmental Protection Agency, the Department of Energy, and the Nuclear Regulatory Commission. Among the concerns raised in the letter were data quality, integrity of methodologies and collection of information, agency misrepresentation of the weight of what they asserted were scientific facts, misrepresentation of scientific conclusions in federal courts, and rigorous application of the scientific method. Congress might opt to influence the direction of the existing executive branch activities, provide oversight of their implementation, or establish alternative reporting mechanisms for issues related to scientific integrity. Congress might establish guidance regarding how agencies should craft and implement scientific integrity policies. Alternatively, Congress might leave establishing and implementing such policies to agency discretion, and require regular reporting from agencies regarding scientific integrity issues and the effectiveness of policy enforcement. Finally, Congress could further empower the Inspectors General to address issues of scientific integrity or establish alternative reporting mechanisms, such as a federal ombudsman, to receive complaints regarding scientific integrity issues. Public Access to Results of Federally Funded R&D In "open access" or "public access" publishing, the entity that holds the copyright to an article grants all users unlimited, free access to the article. In traditional scientific publishing, subscriptions generally fund the costs of journal publication and distribution; in some cases, authors may also pay fees. This contrasts with open access publishers, which typically fund the costs of journal publication and distribution through author fees and give readers free online access to the full text of articles. Some traditional publishers have implemented a hybrid model where authors may choose to provide their articles free to readers in exchange for increased author fees. Since 2008, Congress has authorized the National Institutes of Health (NIH) to require recipients of NIH grants to submit an electronic version of their final, peer-reviewed articles to NIH. The NIH places these articles in a public repository no later than 12 months after publication. This congressionally authorized policy has raised issues regarding protection of intellectual property and government competition with the private publishing industry. Supporters of federal open access publishing policies have a variety of motivations, including the rising cost of traditional journal subscriptions; beliefs regarding improved scientific collaboration and utilization from free information access; and wishes for the public to access the results of research and development funded by their taxes. These supporters urge increased federal support for open access publishing. In contrast, traditional publishers and some scholarly associations object to federal open access policies because they believe it may weaken the publishing industry, erode profits, and consequently restrict the activities of associations whose main source of income is publishing. Opponents of federal open access publishing policies cite potential negative consequences, such as uncertain long-term maintenance of electronic archives; increased publication costs for researchers; and the perceptions of the academic community and the academic reward system, which appear to give more status to articles published in traditional journals. The America COMPETES Reauthorization Act of 2010 ( P.L. 111-358 ) required the OSTP Director to establish a working group to coordinate agency policies "related to the dissemination and long-term stewardship of the results of unclassified research, including digital data and peer-reviewed scholarly publications, supported wholly, or in part, by funding from the Federal science agencies" and report to Congress on these efforts. The OSTP issued a public request for information seeking perspectives on various facets of the public access issue. Respondents generally supported increasing public access to such research results. In February 2013, the OSTP Director affirmed the Obama Administration's commitment "to ensuring that … the direct results of federally funded scientific research are made available to and useful for the public, industry, and the scientific community. Such results include peer-reviewed publications and digital data." The Director instructed federal agencies that fund more than $100 million of R&D per year to develop plans to make the published results of federally funded research freely available to the public and provided a guideline of within one year of publication. The OSTP identified 20 agencies from which it expected draft public access plans. Not all agencies submitted their plans by the August 2013 deadline. The OSTP has reviewed the plans that were submitted and provided feedback to those agencies. Once all EOP comments on the draft plans are given back to agencies, agencies will have an opportunity to revise their plans and resubmit them for EOP approval. Once a plan is approved, each agency will determine its own release date. The joint explanatory statement to P.L. 113-76 directs OSTP to report to the congressional appropriations committees on each agency's progress in developing and implementing its plan for public access to federally funded research findings. This OSTP report is due within 45 days of enactment with semi-annual updates thereafter. Division H of P.L. 113-76 , the Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act, 2014, directed those entities receiving funding through that act to implement public access plans if they had research and development expenditures in excess of $100 million. The statute mandates that these policies shall establish "free online public access to such final peer-reviewed manuscripts or published versions not later than 12 months after the official date of publication" and require that "a machine-readable version of the author's final peer-reviewed manuscripts that have been accepted for publication in peer-reviewed journals describing research supported, in whole or in part, from funding by the Federal Government" be submitted "to the agency, agency bureau, or designated entity acting on behalf of the agency." This provision is similar in effect to that identified in the OSTP memorandum but specifies the period of embargo rather than leaving it to agency discretion, as under the OSTP approach. FY2014 STEM Education Reorganization Policy makers in Congress and the Administration have undertaken efforts in recent years to address governance concerns about the federal science, technology, engineering, and mathematics (STEM) education program portfolio. The OSTP has been a focus of these efforts due, in part, to the OSTP Director's role as manager of the NSTC. The America COMPETES Reauthorization Act of 2010 ( P.L. 111-358 ) directed OSTP to establish an NSTC committee "to coordinate Federal programs and activities in support of STEM education." The act charges the committee (known as "CoSTEM") with, among other things: conducting a review of STEM education activities and programs to identify potential duplication of efforts, developing a five-year STEM education strategic plan, and establishing an inventory of federally sponsored STEM education programs and activities. P.L. 111-358 gave the OSTP Director responsibility for ensuring that the strategic plan is developed and executed and that the objectives of the plan are met. The act also required the OSTP Director to submit an annual report to Congress at the time of the submission of the President's budget request. This report is to include, among other things, a description of the STEM education programs and activities for the previous and current fiscal years, the levels of funding for each program and activity, and an evaluation of duplication and fragmentation of the programs and activities. In December 2011, CoSTEM published a detailed inventory of federal STEM education "investments." The inventory included an evaluation of federal STEM education programs (e.g., their purposes, objectives, and funding agencies) and a list of federal STEM education investments, by agency, with FY2008 to FY2010 funding levels. In April 2012, CoSTEM published the 2010 Federal STEM Education Inventory Data Set. Following the release of the inventory, CoSTEM published a progress report on its efforts to coordinate federal STEM education investments. Among other things, this document reported on the status of the five-year strategic plan mandated by the America COMPETES Reauthorization Act and assessed the federal STEM education effort. The report identified four coordination goals: use evidence-based approaches, identify and share evidence-based approaches, increase efficiency and coherence, and focus federal efforts on four priority areas. The priority areas were identified according to three criteria (national needs, presidential priorities, and federal assets) and included kindergarten-through-grade-12 (K-12) STEM teacher education, engagement in STEM, undergraduate STEM education, and serving groups traditionally underrepresented in STEM fields. In March 2013, the explanatory statement for the FY2013 Consolidated and Further Continuing Appropriations Act ( P.L. 113-6 ) required OSTP to produce a federal STEM education strategic plan within 45 days of enactment of the law. Shortly thereafter, in its FY2014 budget request (released in April 2013), the Administration proposed a reorganization of the federal STEM education effort. The proposed reorganization would have eliminated or consolidated about half the federal STEM education effort while increasing total FY2014 funding for federal STEM education activities by about 6% over FY2012 levels. The Department of Education, National Science Foundation, and Smithsonian Institution would have become lead agencies for K-12, postsecondary, and informal STEM education, respectively. Some other federal STEM education programs, including those at the lead agencies, would have been consolidated under the plan. Publication of the proposed reorganization raised concerns among some STEM education stakeholders, especially among those who disagreed with the Administration's proposed approach. In particular, some stakeholders expressed concern that the proposed reorganization was informed by the perspective of budget analysts at OMB, who some analysts believe focused primarily on a certain type of program evaluation (randomized controlled trials) without incorporating the expertise of the STEM education community. Several policy makers expressed concern that reorganization decisions were made prior to publication of the congressionally mandated strategic plan (OSTP has asserted that unpublished draft versions of the strategic plan informed the proposed reorganization plan). Additionally, some policy makers questioned the capacity of lead agencies to take on their new roles and expressed support, instead, for the activities to remain with their existing agencies (e.g., NASA). Advocates for the Administration's proposed reorganization of federal STEM education activities generally assert that the wide diversity of small STEM education programs distributed across numerous federal agencies presents a substantial barrier to coordination and contributes to fragmentation and incoherence in the federal STEM education effort. By establishing clear agency responsibilities for the three broad areas of federal STEM education activities (graduate/undergraduate STEM education, kindergarten-through-grade 12 STEM education, and informal science education) and aligning programs and funding accordingly, advocates assert that program evaluation would be improved, that fragmentation would be reduced and coordination enhanced, and that existing resources would be directed to high-priority programs. One potential complicating factor in the execution of the reorganization proposal is its inclusion as part of the President's budget request. As a budget proposal affecting programs whose funding is provided by many of the 12 regular appropriations bills, the reorganization (i.e., the appropriations for each activity) would not be dealt with comprehensively, but rather on a piecemeal basis. A "ceding" appropriations subcommittee might agree to eliminate funding for a program under its jurisdiction with the expectation that it would instead be funded through one of the three lead agencies, under a different regular appropriations bill. However, the "receiving" appropriations subcommittee, operating independently, might opt not to provide funding for the program. The end effect, in some cases, might be the unintended elimination of programs, rather than a comprehensive and intentional reorganization. In deliberations on FY2014 Commerce, Justice, Science and Related Agencies appropriations acts, neither the House Committee on Appropriations nor the Senate Committee on Appropriations supported the proposed reorganization. (House Energy and Water Development appropriators, in contrast, accepted some portions of the reorganization within their jurisdiction.) In addition, the House committee identified flaws in the subsequent federal STEM strategic plan, including the proposed mechanism for dissemination of federal STEM education research and findings. The House committee report would direct OSTP to report within 180 days of passage on the resources and authorities necessary to develop a "one stop" style website containing findings from federal research on STEM education. The Senate committee report would defer action on such consolidation until OSTP finalizes STEM program assessments and require OSTP to work with non-federal education and outreach communities on any subsequent reorganization proposal. The joint explanatory statement accompanying P.L. 113-76 , the Consolidated Appropriations Act, 2014, was critical of the proposed reorganization, stating: While the Congress is supportive of attempts to improve efficiency and effectiveness in Federal STEM education programs, the proposed reorganization of these programs contained in the budget request was incomplete and lacked sufficient detail. The proposal contained no clearly defined implementation plan, had no buy-in from the education community and failed to sufficiently recognize or support a number of proven, successful programs. Accordingly, the agreement does not adopt the reorganization; all STEM activities are funded in their existing programmatic structures unless explicitly noted otherwise elsewhere in this statement or through language in either the House or Senate report that is not modified or superseded by this statement. The joint explanatory statement further directs OSTP to reexamine other possible reorganizations of federal STEM programs after engaging in an inclusive development process and taking into consideration evaluations and other evidence of program success. Stature and Influence of PCAST As discussed above, PCAST advises the President on science, technology, and innovation-related issues. PCAST's members include individuals from industry, education and research institutions, and other organizations outside the federal government. Legislative activity has focused less on PCAST than on the NSTC. In a 2008 report, some experts in the S&T policy community asserted that the stature and influence of PCAST has declined as PCAST focused on a narrower set of issues less likely to garner presidential interest. These experts note that while President George H. W. Bush held the first PCAST meeting at Camp David and participated in PCAST meetings, Presidents Clinton and George W. Bush only met occasionally for short periods of time with PCAST chair or committee members. According to OSTP, through January 2012, President Obama met with PCAST four times during his first three years in office, with each discussion lasting an hour or more. In addition, PCAST co-chairs met with the President and senior EOP officials several times for focused discussions on specific topics that PCAST should undertake for its studies, updates on studies in progress, briefings on completed studies prior to public release, and actions the President could consider in response to PCAST's recommendations. As a federal advisory committee, PCAST is unusual in that its original executive order states that the OSTP Director and one of its members will co-chair it, as opposed to having an independent chair not directly associated with the Administration. This joint-chair approach has continued through succeeding Administrations, with the APST co-chairing the Obama Administration PCAST. Federal advisory committees generally do not have Administration staff as chairs. Administration staff are more commonly included as ex-officio members. The inclusion of the APST as co-chair may reduce PCAST's ability to provide independent thinking to the White House and may place the APST in an awkward position if PCAST members disagree with White House policy. Some S&T policy organizations have suggested strengthening PCAST by broadening its mandate, explicitly including national and homeland security issues within its remit, enhancing its independence, and increasing its staff significantly. Other suggestions include selecting the chair of PCAST solely from its non-Administration members; appointing members to staggered, overlapping terms unrelated to presidential and congressional election cycles; and providing all members with security clearances. The Obama Administration has undertaken to provide PCAST members with security clearances. Some experts in the S&T community have also suggested increasing the number of presidential advisory committees. For example, they propose advisory committees focused on specific S&T policy issues, such as a Federal-State Science and Technology Council to enhance dialogue with the states, particularly on STEM education. The costs of establishing such new advisory committees may pose a challenge to their creation. In addition, requirements of the Federal Advisory Committee Act (P.L. 92-463) regarding justification of any new advisory committee, its membership, and associated ethics rules (including financial disclosure) may complicate the establishment of new committees and the recruitment of committee members. As noted above, PCAST has taken on the responsibilities of several topic-specific advisory committees established in statute. If Congress would like the President to establish additional presidential advisory committees—either to address areas not currently covered by PCAST or to address issues currently covered by PCAST but with separate committees focused on a particular area (e.g., nanotechnology, networking and information technology)—it might opt to provided additional funding to OSTP expressly for this purpose. On November 20, 2008, the members of PCAST in the Bush Administration wrote a letter to the individuals who would succeed them as PCAST members. The letter recommended certain actions to the next PCAST. Among these recommendations were: Play a more active role in advising Congress on issues related to science and technology policy, at the direction of the President, rather than just delivering reports to Congress; Consider more congressional activity, where it is needed for the Administration to implement PCAST's recommendations; and Increase interactions of PCAST, as a group, with the President, OMB, and CEA. President Obama stated that PCAST would be "a vigorous external advisory council that will shape my thinking on the scientific aspects of my policy priorities." He announced the new members of PCAST on April 27, 2009, stating, We also need to engage the scientific community directly in the work of public policy. And that's why, today, I am announcing the appointment—we are filling out the President's Council of Advisors on Science and Technology, known as PCAST, and I intend to work with them closely. Our co-chairs have already been introduced—Dr. Varmus and Dr. Lander along with John. And this council represents leaders from many scientific disciplines who will bring a diversity of experiences and views. And I will charge PCAST with advising me about national strategies to nurture and sustain a culture of scientific innovation.... The OSTP asserts that President Obama has increased the role and influence of PCAST by considering and taking action on PCAST recommendations, including: Funding a new influenza vaccine manufacturing improvement initiative to shorten the time frame for production of pandemic influenza vaccines, including dedication of the first U.S. cell-based influenza vaccine plant; Proposing preparation of an additional 100,000 K-12 STEM teachers by the end of the decade and establishment of an Advanced Research Projects Agency-Education (ARPA-ED); Accelerating adoption of Electronic Health Records and developing standards for health information exchange over the Internet, and metadata for Stages 2 and 3 of the electronic health records meaningful use criteria; Establishing the Advanced Manufacturing Partnership, including initial funding for new initiatives; and Undertaking a Quadrennial Technology Review at the Department of Energy. The OSTP asserts that during the Obama Administration PCAST has met six times per year compared to three or four times per year during the George W. Bush Administration, and that the current PCAST "has met with every major Administration leader in science and technology, including Cabinet-level Secretaries, to gather their views on the topics most useful for PCAST to address, and to discuss implementation of PCAST's recommendations." In addition, OSTP states that the Obama Administration has provided PCAST with the staff and financial resources necessary to develop reports in a timely fashion for Congress and the Administration. These resources, according to OSTP, have increased the ability of PCAST to provide reports and recommendations. PCAST released 18 reports during the eight years of the Bush Administration; through the first five years of the Obama Administration, PCAST had released 20 reports through December 2013. Also, OSTP asserts that the Obama Administration has provided travel support to enable experts to provide advice to PCAST in person and has ensured that most of the current PCAST members have obtained security clearances so that PCAST may undertake studies related to national security. Activities in the 113th Congress The 113 th Congress has taken several legislative actions regarding OSTP and NSTC. Some of these actions have resulted in passage of public law, while others remain as proposed legislation. Public Law P.L. 113-76 , the Consolidated Appropriations Act, 2014, provided FY2014 appropriations of $5.6 million for OSTP (along with appropriations for the rest of the federal government). It also contained statutory language prohibiting the expenditure of the OSTP funds develop, design, plan, promulgate, implement, or execute a bilateral policy, program, order, or contract of any kind to participate, collaborate, or coordinate bilaterally in any way with China or any Chinese-owned company unless such activities are specifically authorized by a law enacted after the date of enactment of this Act. This prohibition does not apply to activities that OSTP certifies pose no risk of resulting in the transfer of technology, data, or other information with national security or economic security implications to China or a Chinese-owned company; and do not involve knowing interactions with officials who have been determined by the United States to have direct involvement with violations of human rights. The OSTP must submit any such certification to Congress at least 30 days prior to the activity. This prohibition was also present in FY2013 through P.L. 113-6 as described below. The reports accompanying P.L. 113-76 directed OSTP to reexamine possible reorganizations of federal STEM programs for consideration in a future fiscal year after engaging in an inclusive development process involving the interagency community and external stakeholders and taking into consideration program evaluations and other evidence of program success; report on the funding, authorities, and other resources necessary to support dissemination of federal STEM education research findings; report on federal agency progress in developing plans for public access to federally funded research findings; and report on the assessment of rare earth mineral criticality. In addition, OSTP is encouraged to report on collaborative relationships and activities and directed identify international collaborative opportunities is the area of neuroscience. P.L. 113-73 , which made further continuing appropriations for FY2014, was a continuing resolution providing funding through January 18, 2014, for OSTP operations (along with the rest of the federal government) at a rate equal to FY2013. P.L. 113-46 , the Continuing Appropriations Act, 2014, was a continuing resolution providing funding through January 15, 2014, for OSTP operations (along with the rest of the federal government) at a rate equal to FY2013. P.L. 113-6 , the Consolidated and Further Continuing Appropriations Act, 2013, provided FY2013 appropriations of $5.7 million, following rescission, for OSTP (along with appropriations for the rest of the federal government). It also contained statutory language prohibiting expenditure of the OSTP funds to develop, design, plan, promulgate, implement, or execute a bilateral policy, program, order, or contract of any kind to participate, collaborate, or coordinate bilaterally in any way with China or any Chinese-owned company unless such activities are specifically authorized by a law enacted after the date of enactment of this Act. This prohibition extended the original prohibition established for FY2011. The Consolidated and Further Continuing Appropriations Act, 2013, further clarified that this prohibition shall not apply to activities that OSTP certifies (1) pose no risk of resulting in the transfer of technology, data, or other information with national security or economic security implications to China or a Chinese-owned company; and (2) will not involve knowing interactions with officials who have been determined by the United States to have direct involvement with violations of human rights. The OSTP must submit any such certification to Congress at least 30 days prior to the activity. While the former requirement was also present in the FY2012 appropriations act, the latter requirement is new to FY2013 and reportedly reflects an existing agreement between Congress and OSTP. The reports accompanying P.L. 113-6 also express support for Science, Technology, Engineering, and Math (STEM) education, directing OSTP to provide to the appropriations committees a STEM education strategic plan within 45 days; inform the committees of OSTP's continued development of a strategy to disseminate the results of K-16 STEM education research; and provide a detailed report containing actions of OSTP and other federal agencies to avoid duplication in STEM education programs, including a list of programs targeted for elimination, consolidation, or joint administration within 60 days. In addition, the House report directs OSTP to report semiannually on NSTC's progress in coordinating agency policies relating to the dissemination of unclassified scientific research, and encourages OSTP to ensure that sufficient investment is made in studying the potential environmental, health, and safety risks of engineered nanomaterials. Proposed Legislation The Cybersecurity Enhancement Act of 2013 ( H.R. 756 ) would direct certain federal agencies to work through the NSTC to transmit and triennially maintain a strategic plan for federal cybersecurity and information assurance research and development. This bill would also require the OSTP Director to convene a university-industry task force to explore mechanisms for carrying out collaborative R&D, education, and training activities for cybersecurity and report to Congress on its findings and recommendations. The Advancing America's Networking and Information Technology Research and Development Act of 2013 ( H.R. 967 ) would amend the High-Performance Computing Act of 1991 to rename the National High-Performance Computing Program as the NITRD Program and direct the federal agencies participating in the program to (1) periodically assess the contents and funding levels of program component areas and restructure the Program when warranted; and (2) ensure that the Program includes large-scale, long-term, interdisciplinary R&D activities. It would also require the participating federal agencies to develop, and update every three years, a five-year strategic plan to guide program activities; require the OSTP Director to encourage and monitor the efforts of participating agencies to allocate the resources and management attention necessary to ensure that the strategic plan is executed effectively and that program objectives are met; require the program, in addition to its current requirements, to provide for (1) increased understanding of the scientific principles of cyber-physical systems and improve the methods available for the design, development, and operation of such systems, and (2) research and development on human-computer interactions, visualization, and big data, and require continuation of a national coordinating office; and require the Director of OSTP to convene (1) a task force to explore mechanisms for carrying out collaborative R&D activities on cyber-physical systems, and (2) through the NSTC, an interagency working group to examine issues around funding mechanisms and policies for the use of cloud computing services for federally funded science and engineering research. The Securing Energy Critical Elements and American Jobs Act of 2013 ( H.R. 1022 ) would, among other provisions, require the President, acting through OSTP, to coordinate the actions of federal agencies to promote an adequate and stable supply of energy critical elements; identify energy critical elements and establish early warning systems for supply problems of energy critical elements; establish a mechanism for the coordination and evaluation of federal programs with energy critical element needs; promote and encourage private sector development of a domestic energy critical elements supply chain; promote and encourage the recycling of energy critical elements; assess the need for and make recommendations concerning the availability and adequacy of the supply of necessary technically trained personnel; and report to Congress on these activities. The Sound Science Act of 2013 ( H.R. 1287 ) would require federal agencies to develop guidelines for ensuring and maximizing the quality, objectivity, utility, and integrity of scientific information relied upon by such agency. The OSTP Director would approve such guidelines. A policy decision that did not comply with such approved guidelines would be deemed not in accordance with the law. The STEM Opportunities Act of 2013 ( H.R. 1358 ) would, among other provisions, require the OSTP Director to carry out programs and activities to ensure that federal science agencies and institutions of higher education receiving federal R&D funding are fully engaging their entire talent pool. The Strengthening The Resiliency of Our Nation on the Ground Act ( H.R. 2322 / S. 904 ) would, among other provisions, require the OSTP Director to establish an interagency working group to establish a strategic vision for extreme weather resilience, conduct a gap and overlap analysis of federal activities, and develop a National Extreme Weather Resilience Plan. The American Manufacturing Competiveness Act of 2013 ( H.R. 2447 / S. 1709 ) would direct the Committee on Technology under the National Science and Technology Council to develop a national manufacturing competitiveness strategic plan. The Quadrennial Energy Review Act of 2013 ( S. 552 ) would, among other provisions, direct the Secretary of the Energy and the OSTP Director to co-chair an Interagency Energy Coordination Council. This council would meet every four years in order to coordinate a Quadrennial Energy Review to be submitted to Congress. The Cybersecurity Act of 2013 ( S. 1353 ) would, among other provisions, direct the OSTP Director, in coordination with the head of any relevant federal agency, to develop a federal cybersecurity research and development plan. The OSTP Director would submit this plan to Congress. In addition, the OSTP Director would coordinate ongoing cybersecurity research and development with other activities and, in coordination with the Director of the National Science Foundation, conduct a review of existing cybersecurity test beds. Appendix A. President's Science and Technology Policy Advisors Appendix B. Historical OSTP Funding

Congress established the Office of Science and Technology Policy (OSTP) through the National Science and Technology Policy, Organization, and Priorities Act of 1976 (P.L. 94-282). The act states that "The primary function of the OSTP Director is to provide, within the Executive Office of the President [EOP], advice on the scientific, engineering, and technological aspects of issues that require attention at the highest level of Government." Further, "The Office shall serve as a source of scientific and technological analysis and judgment for the President with respect to major policies, plans, and programs of the Federal Government." The President nominates the OSTP Director, who is subject to confirmation by the Senate. In many Administrations, the President has concurrently appointed the OSTP Director to the position of Assistant to the President for Science and Technology (APST), a position that allows for the provision of confidential advice to the President on matters of science and technology. While Congress can require the OSTP Director to testify, the APST may decline requests to testify on the basis of separation of powers and/or executive privilege. The APST manages the National Science and Technology Council (NSTC), an interagency body established by Executive Order 12881 that coordinates science and technology (S&T) policy across the federal government. The APST also co-chairs the President's Council of Advisors on Science and Technology (PCAST), a council established by Executive Order 13539 and composed of external advisors who provide advice to the President. In the Obama Administration, John Holdren is both the OSTP Director and the APST. The OSTP has engaged in several activities of interest to the 113th Congress. Following disagreements starting in FY2011 between OSTP and Congress regarding OSTP participation in certain activities with China and Chinese-owned companies, Congress statutorily restricted OSTP's ability to use appropriated funds in certain ways. This restriction was continued explicitly in P.L. 113-6, implicitly in P.L. 113-46 and P.L. 113-73, and explicitly in P.L. 113-76. In February 2013, OSTP Director Holdren issued a memorandum requiring federal agencies annually investing at least $100 million in research and development to develop policies allowing the general public access to the results of this investment. Finally, OSTP has inventoried federal science, technology, engineering, and mathematics (STEM) education investments and developed a strategic plan for them. The President also proposed in his FY2014 budget request a reorganization of STEM education programs, which Congress did not approve. Among other issues Congress may wish to consider are the need for science advice within the EOP; the title, rank, and responsibilities of the OSTP Director; the policy foci of OSTP; the funding and staffing for OSTP; the roles and functions of OSTP and NSTC in setting federal science and technology policy; and the status and influence of PCAST. Some in the S&T community support raising the OSTP Director to Cabinet rank, contending that this would imbue the position with greater influence within the EOP. Others have proposed that the OSTP Director play a greater role in federal agency coordination, priority setting, and budget allocation. Both the Administration and Congress have identified areas of policy focus for OSTP staff, raising questions of policy setting and oversight. Some experts say NSTC has insufficient authority over federal agencies engaged in science and technology activities and PCAST insufficient influence on S&T policy; they question the overall coordination of federal science and technology activities. Finally, some in the scientific community support increasing the authority of the OSTP Director in the budget process to bring greater science and technology expertise to federal investment decision making.

Conditions in the Region The Latin America and Caribbean region has made enormous strides over the past two decades in political development, with all countries but Cuba having regular free and fair elections for head of state. Despite this democratic progress, several nations face considerable challenges that could threaten political stability, including persistent poverty, violent guerrilla conflicts, autocratic leaders, drug trafficking, increasing crime, and the rise of radical populism in several Latin American countries. In some countries, weaknesses remain in the state's ability to deliver public services, ensure accountability and transparency, and advance the rule of law. In 2006, 12 countries held successful elections for head of state: Chile, Costa Rica, Haiti, Peru, Colombia, Mexico, Guyana, Brazil, Ecuador, Nicaragua, Venezuela, and St. Lucia. In Mexico, the narrow official victory of conservative candidate Felipe Calderón over leftist Andrés López Obrador elicited a dramatic response from López Obrador who protested the electoral outcome. Presidents were re-elected in four races—Brazil, Colombia, Guyana, and Venezuela—and in five countries, former heads of government returned to power—Costa Rica, Haiti, Nicaragua, Peru, and St. Lucia. In terms of economic growth, while the Latin America and Caribbean region overall experienced a gross domestic product (GDP) decline of 0.6% in 2002 and only a modest growth rate of 1.5% in 2003, the region rebounded with an estimated growth rate of 5.9% in 2004, surpassing even the most optimistic predictions. Every country in the region, with the exception of Grenada and Haiti, experienced positive economic growth, and even per capita income for the region as a whole increased by more than 4% for the year. Countries that had suffered the deepest recessions in recent years—Argentina, Uruguay, and Venezuela—all experienced significant economic growth in 2004. Growth continued in 2005 at a rate of 4.5%, with Argentina, the Dominican Republic, Grenada, Trinidad and Tobago and Venezuela all registering growth rates over 8%. Only Guyana experienced an economic setback of 3% in 2005. For 2006, a growth rate of 5.3% is projected for the region, with Antigua and Barbuda, Argentina, the Dominican Republic, Trinidad and Tobago, and Venezuela leading the way with projected growth rates over 8%. The Andean region still faces considerable challenges, including the rise of a form of populism in several countries. Colombia continues to be threatened by drug trafficking organizations and by two left-wing guerrilla groups and a rightist paramilitary group, all of which, combined, have been responsible for thousands of deaths each year. Bolivia has experienced political unrest over the last few years, including the resignation of presidents in 2003 and 2005. The election of indigenous leader Evo Morales as president in December 2005 complicated U.S. relations given Morales' efforts to decriminalize coca growing. In Ecuador, Rafael Correa, a left-leaning U.S.-trained economist won the November 2006 presidential elections and has vowed to reform Ecuador's political system, renegotiate Ecuador's foreign debt, and reassert state control over foreign oil companies operating in the country. Many analysts believe that Correa could have difficultly enacting his populist agenda because his political party lacks representation in the legislature. Venezuela under President Hugo Chávez has been plagued by several years of political polarization, although Chávez's rule was strengthened when he survived a recall referendum in August 2004, when his supporters swept legislative elections in December 2005, and when he won another six-year term decisively in early December 2006. Windfall oil profits have bolstered economic growth and his government's revenue, allowing it to boost social spending significantly. In Peru, the presidential electoral victory in early June 2006 of former President Alan Garcia over retired military officer Ollanta Humala, an admirer of Hugo Chávez, eased U.S. concerns about the future of democracy in the country and the future of U.S.-Peruvian relations. In Central America, countries such as El Salvador, Honduras, and Nicaragua emerged from the turbulent 1980s and 1990s with democratic institutions more firmly entrenched, yet violent crime is a major problem in all countries. Honduras and Nicaragua are among the poorest countries in the hemisphere. While Guatemala has made significant progress in improving the government's human rights policy, significant problems remain. In Nicaragua, former President and Sandinista party leader Daniel Ortega won the November 2006 presidential election. Observers are uncertain how his government will proceed since his campaign vacillated between anti-U.S. rhetoric and reassurances that his government would respect private property, free trade policies, and work toward a cooperative relationship with the United States. In the Caribbean, Haiti—the hemisphere's poorest nation—continues to be plagued by political challenges. In the aftermath of President Aristide's departure in February 2004, Haiti's interim government was supported by a U.N. Stabilization Mission with the goals of ensuring a secure and stable environment and restoring the rule of law. After several postponements, new elections were ultimately held February 7, 2006. Former president Rene Preval was declared the winner after several days of protests by his supporters when it appeared that a run-off election would be necessary. Preval took office on May 14, 2006, marking the beginning a new era in Haiti. His goals include building governmental institutions and establishing conditions for foreign investment in order to create jobs. Cuba remains a hardline communist state with a human rights situation that has deteriorated significantly since 2003. In late July 2006, Cuban leader Fidel Castro's announcement that he was temporarily ceding political power to his brother for several weeks in order to recover from surgery prompted widespread speculation about the island's political future and the future of U.S.-Cuban relations after Fidel departs the political scene. Several Caribbean nations, especially Grenada, Haiti, Jamaica, and Cuba, were hard hit by several devastating storms in 2004 and 2005. The AIDS epidemic in the Caribbean, where infection rates are among the highest outside of sub-Saharan Africa, has also been a major challenge for the region. U.S. Policy Overview Legislative and oversight attention to Latin America and the Caribbean in the 109 th Congress focused on continued counternarcotics efforts in the region; trade issues, including the approval of implementing legislation for the Dominican Republic-Central America-United States Free Trade Agreement (DR-CAFTA); challenges to democracy in the region, especially in Venezuela; efforts to bring political stability and ameliorate poverty in Haiti; efforts to foster political change in Cuba; and cooperation on migration, border security, and anti-terrorism measures, especially with Mexico. From FY2000-FY2006, the United States has provided around $5 billion for the Andean Counterdrug Initiative (ACI), the primary U.S. program supporting the Colombian government's efforts to combat drug trafficking and terrorist activity perpetrated by guerrilla and paramilitary groups. The ACI has also provided interdiction and development support to six of Colombia's neighbors: Bolivia, Peru, Ecuador, Venezuela, Brazil, and Panama. The 109 th Congress approved the Administration's request to continue ACI funding in FY2006 at approximately the same levels as in previous years. In 2006, Congress considered the Administration's FY2007 request for $721.5 million in ACI funding with human rights and the environmental consequences of aerial fumigation remaining issues in the congressional debate. Action was not completed on FY2007 foreign aid appropriations, so the 110 th Congress will need to take action early in 2007. In the trade arena, Congress approved legislation in July 2005 ( P.L. 109-53 , signed into law August 2, 2005) implementing the DR-CAFTA that had been completed in 2004. The Bush Administration viewed the agreement as a way for the region to help create jobs, attract foreign investment, and advance good governance. As reflected in the narrow passage in the House, congressional consideration of the DR-CAFTA was controversial, with opposition from labor advocates and some industry groups. In 2006, free trade agreements (FTAs) with Peru and Colombia were signed in April and November, respectively, and on December 19, U.S.-Panamanian FTA negotiations were completed. Implementing legislation for all three countries could be introduced early in the 110 th Congress. In late 2006, Congress also extended trade preferences for Andean imports and approved a special trade preferences measure for imports from Haiti as part of a trade and tax-extension bill ( P.L. 109-432 , Division D, Titles V and VII). With regard to democracy and political stability, Congress focused on continued support to Haiti, the hemisphere's poorest nation, under the new government of Rene Preval. Venezuela—a major supplier of oil to the United States—remained a congressional concern because of fears that President Hugo Chávez was using his political power to push toward authoritarian rule and to support leftist groups in other Latin American countries. In Bolivia, the new government of President Evo Morales, a former leader of the coca growers union, has complicated U.S. relations not only because of his criticism of U.S. counternarcotics policy but also because of his leftist orientation and close relations with Venezuela's Hugo Chávez and Cuba's Fidel Castro. With regard to U.S. policy toward Communist Cuba, Congress has continued to focus on the poor human rights situation and to debate whether loosening or tightening the U.S. embargo will encourage political change. Fidel Castro's announcement that he was ceding power to his brother temporarily could foster a re-examination of U.S. policy. Congress has maintained an active interest in neighboring Mexico, focusing especially on border security and migration issues. In May 2005, Congress approved legislation (as part of P.L. 109-13 , the FY2005 Emergency Supplemental Appropriations Act) that established identity card standards for the issuance of drivers' licenses, waived laws to facilitate the construction of a border fence, and required a pilot test of ground surveillance technologies at the border. In September 2006, Congress approved the Secure Fence Act of 2006 ( P.L. 109-367 ), which authorized the construction of a fence and other barriers along 700 miles of the U.S.-Mexico border. Both the House and Senate approved separate immigration reform measures in 2006 ( H.R. 4437 and S. 2611 ), but did not complete action on the measures. The House bill would have strengthened border and immigration controls and would have made unlawful presence in the United States a felony, while the Senate measure also included enforcement measures (but would not make unlawful presence a felony) as well as a guest worker program, and would have allowed most illegal immigrants to normalize their status in the United States. Congressional consideration of the annual foreign operations appropriations legislation that funds foreign aid remained an important way for Congress to influence U.S. policy toward the region. U.S. foreign aid is largely administered by the U.S. Agency for International Development (USAID). The agency supports such activities as education, poverty reduction, health care, conservation, natural disaster mitigation and reconstruction, counternarcotics and alternative development, and HIV/AIDS prevention and education. In addition, the United States provides food assistance, anti-terrorism assistance, and security assistance. In the aftermath of several devastating storms in 2004, the United States provided disaster and reconstruction assistance to several Caribbean nations. Overall U.S. foreign aid to the Latin America and Caribbean region amounted to about $1.82 billion in FY2005, and an estimated $1.68 billion in FY2006. The FY2007 request for the region was for $1.63 billion, but as noted above, action was not completed on the FY2007 foreign aid appropriations measure, so the 110 th Congress will face the task in early 2007. In addition, the Millennium Challenge Account (MCA) also has increased U.S. aid to several Latin American nations. Since 2005, the Millennium Challenge Corporation has approved five-year compacts with Honduras, Nicaragua, and El Salvador. Regional Issues U.S. Foreign Assistance The United States maintains a variety of foreign assistance programs in Latin America and the Caribbean, including security assistance, counternarcotics, economic development, and trade capacity building programs. Aid to the region increased during the 1960s with the Alliance for Progress and during the 1980s with aid to Central America. Since 2000, U.S. assistance has focused on counternarcotics especially in the Andean region. Current aid levels to Latin America and the Caribbean comprise about 11.8% of the worldwide FY2006 bilateral aid budget. Appropriations for FY2007 have not been finalized, and will likely be determined in early 2007. Amounts requested for FY2007 would reduce this ratio to 10.6%, despite concerns expressed by Members of Congress about decreasing levels of aid to the region. Current aid levels could increase as more countries are deemed eligible for Millennium Challenge Account grants. The annual Foreign Operations Appropriations bills have been the vehicles by which Congress provides funding for, and sets conditions on foreign assistance programs. For FY2006, U.S. assistance to Latin America and the Caribbean amounted to an estimated $1.68 billion, the largest portion of which, $919 million, was allocated to the Andean region. Mexico and Central America received $292 million, while the Caribbean received $307 million. Brazil and the Southern Cone of South America received an estimated $36 million. The United States also maintains programs of a regional nature that totaled an estimated $133 million in FY2006. The FY2007 request of $1.6 billion represents the lowest levels of U.S. foreign assistance to the region in more than four decades, measured in constant dollars. The FY2007 request is 3% lower than FY2006. The largest decrease occurs in the Development Assistance Account, which sustains a 28% reduction. The largest increase is for Economic Support Funds (up 26%) and the Global HIV/AIDS Initiative (up 35%). The increase in Economic Support Funds includes trade assistance for DR-CAFTA countries. The Child Survival and Health Account would be cut by 9%. These figures do not include Millennium Challenge Compacts signed with Honduras ($215 million over five years), Nicaragua ($175 million over five years), and El Salvador ($461 million over five years). Aid programs are designed to achieve a variety of goals, from poverty reduction to economic growth. Child Survival and Health (CSH) funds focus on combating infectious diseases and promoting child and maternal health. Development Assistance (DA) funds improvements in key areas—such as trade, agriculture, education, the environment, and democracy—in order to foster sustainable economic growth. Economic Support Funds (ESF) assist countries of strategic importance to the United States and fund programs relating to justice sector reforms, local governance, anti-corruption, and respect for human rights. P.L. 480 food assistance is provided to countries facing emergency situations, such as natural disasters. Counternarcotics programs seek to assist countries to reduce drug production, to interdict trafficking, and to promote alternative crop development. Foreign Military Financing (FMF) provides grants to nations for the purchase of U.S. defense equipment, services, and training. On June 9, 2006, the House passed H.R. 5522 , the FY2007 Foreign Operations Appropriations Act, cutting the President's overall request for foreign assistance worldwide by $2.4 billion, which could affect aid levels to Latin America. However, the report accompanying the bill cautioned the Administration on providing levels of assistance to Latin America in FY2007 that would be below that provided in FY2006. The Senate Appropriations Committee marked up its bill on June 29, 2006. As the bill has not been completed, three continuing resolutions have maintained funding into 2007. Some Latin American countries have been affected by a cutoff of U.S. assistance as a result of not signing Article 98 agreements that exempt U.S. citizens from the jurisdiction of the International Criminal Court. The American Service Members Protection Act (ASPA, Title II of P.L. 107-206 ) applies the aid cutoff to FMF and International Military Education and Training (IMET) funds. However, the conference report to the FY2007 Defense Authorization measure ( P.L. 109-364 , signed into law in October 2006) modified ASPA to end the ban on IMET aid to countries that are members of the ICC and that do not have Article 98 agreements in place. The FY2005 and FY2006 Foreign Operations Appropriations acts extended the prohibition to ESF assistance. Colombia, the major recipient of U.S. assistance in Latin America, has signed an agreement. Others that have not, such as Bolivia, Brazil, Ecuador, Mexico, Paraguay, Peru, and Venezuela, could see their assistance withheld. The Millennium Challenge Account (MCA) is a new initiative that provides sizable aid grants to a few low-income nations that have been determined, through a competitive process, to have the strongest policy reform records and where new investments are most likely to achieve their intended development results. In Latin America, Bolivia, Honduras, and Nicaragua were deemed eligible to participate in the first round; El Salvador became eligible for FY2006. In 2005, the Millennium Challenge Corporation (MCC) approved five-year compacts with Honduras and Nicaragua, and in 2006 it approved a five-year compact with El Salvador. Both Guyana and Paraguay have received threshold assistance from the MCC to help assist the countries become eligible for an MCC compact. Other Latin American or Caribbean nations could be eligible to receive assistance in future years. Although the Administration's MCC request for FY2007 was $3 billion, the House cut funding by $1 million and the Senate by $1.23 million. U.S. support to counter the HIV/AIDS epidemic in the region is provided through programs administered by several U.S. agencies, although the U.S. Agency for International Development (USAID) is the lead agency in the international fight against AIDS. The United States also provides contributions to multilateral efforts, such as the Global Fund to Fight AIDS, Tuberculosis, and Malaria. Both the House and Senate foreign operations bills meet the Administration's request for HIV/AIDS programs, but the House reduces funding for malaria by $47 million. Andean Counterdrug Initiative The Andean Counterdrug Initiative (ACI) is the primary U.S. program that addresses counternarcotics and alternative development in the Andean region of South America. The ACI supports Plan Colombia, a six-year plan developed by the Colombian government in 1999 to combat drug trafficking and related guerrilla activity. The ACI program is regional in nature because organizations in countries bordering Colombia also produce and traffic in narcotics and because it is affected by other cross-border issues. The ACI began in 2000, when Congress passed legislation providing $1.3 billion in interdiction and development assistance ( P.L. 106-246 ) for Colombia and six regional neighbors: Bolivia, Peru, Ecuador, Venezuela, Brazil, and Panama. Funding for ACI from FY2000 through FY2006 totals approximately $5 billion. For FY2007, the Administration requested $721.5 million, of which $65.7 million was proposed for the Critical Flight Safety Program, to upgrade aging aircraft. Funding for the Air Bridge Denial program, an air interdiction program in operation over Colombia, was included in the request for Colombia. On June 9, 2006, the House passed H.R. 5522 , the FY2007 Foreign Operations Appropriations Act, that makes significant changes to the way foreign aid to Colombia is provided but largely approves the Administration's request with regard to funding levels. The most significant change is to provide some funding for Colombia from traditional aid accounts rather than the Andean Counterdrug Initiative (ACI) and to create a new account, the Trade Capacity Enhancement Fund, to which some ACI funds would be transferred. The bill provides a total of $545.2 million for Colombia, an increase of $80.4 million over the FY2006 level. Instead of funding alternative development and institution building from the ACI account, the bill provides $135 million in Economic Support Funds (ESF) for alternative development, a $10 million increase from the request. In addition, the bill provides $26.2 million in International Narcotics Control and Law Enforcement (INCLE) funds for rule of law programs, equal to the request, that were previously provided from the ACI account. Funding for drug interdiction programs at $313.9 million, equal to the request, is maintained in the ACI account. The provision of some funds from non-ACI accounts is characterized as beginning the process of treating Colombia as a strategic partner. The bill also provides $70.2 million for the Critical Flight Safety Program, earmarked for operations in Colombia. This is $4.5 million above the request. The bill increases funding for Peru by $10.5 million over the request, providing $46 million for alternative development and $63 million for interdiction programs. These funds remain in the ACI account. The bill cuts ACI funding for Bolivia by $15 million from the request, all of it in interdiction programs. Funding for alternative development is set at $31 million, and $20 million for interdiction. The cut was made in response to reports that Bolivia's commitment to fighting drugs was lessening. ACI funding for Brazil ($4 million), Ecuador ($17.3 million), and Panama ($4 million) is equal to the request. The $1 million requested for Venezuela was not provided. The bill creates a new account, the Trade Capacity Enhancement Fund, and a new position at USAID to oversee and coordinate trade assistance programs. Although the total amount provided is $522 million, the bill transfers $62.5 million of ACI funds to the new account for use in ACI countries. The House report notes that this is the amount of ACI funds that would have been committed to trade promotion activities. The Senate Appropriations Committee reported its version of the Foreign Operations bill on June 29. The Senate bill provides $699.4 million for ACI, a decrease of $22 million. A portion of the decrease ($9.8 million) is transferred to a Democracy Fund for similar types of programs as that provided by ACI. The remaining decrease is from interdiction activities and the Critical Flight Safety Program, which was cut by $12.3 million. Both the House and Senate bills maintain reporting requirements from previous appropriations bills. Congress did not complete its work on the Foreign Operations bill, instead passing three continuing resolutions to maintain funding into 2007. In the FY2006 Foreign Operations Appropriations Act ( H.R. 3057 , P.L. 109-102 ) Congress provided the Administration's request for $734.5 million, but reduced the amounts for some of its components. The Critical Flight Safety Program would receive $30 million instead of $40 million, and the Air Bridge denial program would receive $14 million rather than $21 million. FY2006 funding for ACI is estimated at $727.2 million (reflecting a 1% across-the-board rescission). Supporters of U.S. policy argue that assistance to Colombia is necessary to help a democratic government besieged by drug-supported leftist and rightist armed groups. Assistance to Colombia's neighbors, according to supporters, is merited because of an increasing threat from the spillover of violence and drug production from Colombia. While some critics agree with this assessment, they argue that U.S. assistance overemphasizes military and counter-drug assistance and provides inadequate support for protecting human rights. Critics also assert that U.S. assistance is disproportionately targeted to eradication of crops and military training rather than to alternative development projects that could provide alternative livelihoods for growers who voluntarily give up illicit crops. For a broader discussion of Colombia beyond the ACI, see section on " Colombia " below. Free Trade Agreements Dominican Republic-Central America-United States Free Trade Agreement (DR-CAFTA) On August 5, 2004, the United States, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic signed the DR-CAFTA. Nearly one year later, it faced a contentious debate and close vote in both houses of the U.S. Congress. The Senate passed implementing legislation by a vote of 54 to 45 on June 30, 2005. The House did the same on July 28, 2005, by a vote of 217 to 215. President Bush signed the legislation into law on August 2, 2005 ( P.L. 109-53 , 119 Stat. 462). In addition to the United States, all countries except Costa Rica have ratified the agreement. The DR-CAFTA was expected to take effect on January 1, 2006, but none of the countries were able to make the necessary legal and regulatory changes in time. Since then, all ratifying countries except the Dominican Republic have implemented the agreement. The Dominican Republic is expected to do so in early 2007. Costa Rica still faces a two-vote ratification process in the National Assembly for the agreement itself and passage of conforming legislation necessary to be in compliance with its commitments. All this legislation is expected to be voted on by the National Assembly in 2007 and, if passed, will be supported by President Arias. The DR-CAFTA, however, still faces some opposition in Costa Rica and the final outcome cannot be predicted with certainty. The DR-CAFTA is a regional agreement to reduce barriers to trade in which all parties are subject to "the same set of obligations and commitments," although each country negotiated a separate market access schedule. It is a comprehensive and reciprocal trade agreement, which distinguishes it from, and replaces, U.S. commitments made under unilateral preferential trade arrangements—the Caribbean Basin Initiative (CBI), the Caribbean Basin Trade Partnership Act (CBTPA), and the Generalized System of Preferences (GSP). The DR-CAFTA covers market access tariff reductions and non-tariff barriers to trade including government procurement, intellectual property, investment, labor, and environment rules, among other issues. The DR-CAFTA was controversial. Supporters saw it as part of a policy foundation that can enhance intraregional trade, which in turn is seen as contributing to long-term social, political, and economic development in an area of strategic importance to the United States. Opponents were especially concerned over some of the countries' poor labor standards, the perception of inadequate labor laws, and lax enforcement, arguing that DR-CAFTA's labor provisions should have included some minimum labor standards with noncompliance subject to suspension of trade benefits similar to provisions found in the CBI and GSP. The investor-state and pharmaceutical data protection sections were also repeatedly criticized as inadequate. With added concerns from select import-sensitive industry groups (e.g., sugar and textiles), the politics of DR-CAFTA led to the very narrow margin of approval. U.S.-Panama Free Trade Agreement (FTA) On November 16, 2003, President Bush formally notified Congress of his intention to negotiate a bilateral FTA with Panama. Negotiations commenced in April 2004 and after an extended hiatus, the tenth and final round concluded on December 19, 2006. The negotiations were delayed by two factors. The first was difficulty in coming to an agreement on sensitive agriculture issues, particularly sanitary and phytosantiary (SPS) measures. The second was the Panamanian government's decision to put off negotiations for much of 2006 while it focused the nation's attention on another controversial issue, the national referendum on the Panama Canal expansion project. The canal expansion referendum passed on October 22, 2006, and so attention turned again to completing the FTA negotiations. With the encroaching July 1, 2007 scheduled expiration of the Trade Promotion Authority (TPA) in mind, negotiators on both sides appeared to move quickly to find common ground. Panama is largely a services-based economy, which distinguishes it, and the trade negotiations with the United States, from those of its Central American neighbors. The U.S.-Panama FTA is a comprehensive agreement similar to other bilateral FTAs entered into by the United States. According to a summary provided by the United States Trade Representative (USTR), 88% of U.S. exports become duty right away, with remaining tariffs phased out over a ten-year period. Approximately half of U.S. farms exports to Panama achieve duty-free status immediately, with many products restricted by tariff-rate quotas winning additional market access, as do Panamanian sugar exports to the United States. Tariffs on most other farm products are phased out over 15 years. Panama and the United States signed a detailed bilateral agreement to resolve SPS issues. Panama agreed to recognized U.S. food safety inspection as equivalent to Panamanian standards, which will expedite entry of U.S. meat and poultry exports. The FTA also consummates additional provisions for services trade, telecommunications, intellectual property rights, labor, environment, and government procurement, while including support for trade capacity building. U.S.-Peru Trade Promotion Agreement On April 12, 2006, U.S. Trade Representative Rob Portman and Peruvian Minister of Foreign Trade and Tourism Alfredo Ferrero Diez Canseco signed the U.S.-Peru Trade Promotion Agreement (PTPA). The PTPA negotiations began in May 2004, when the United States, Colombia, Peru, and Ecuador participated in the first round of negotiations for a U.S.-Andean free trade agreement (FTA). After talks among the four countries failed, Peru continued negotiations with the United States and the two countries concluded an agreement in December 2005. On January 6, 2006, President Bush notified the Congress of his intention to enter into a free trade agreement with Peru. Under the Trade Promotion Authority Act of 2002 (TPA), the PTPA would be considered by the Congress on an expedited basis that is limited in debate and with no amendments. TPA procedures require the President to submit the draft agreement and implementing legislation to Congress, but with no time limit to do so. However, TPA authority is scheduled to expire on July 1, 2007. Implementing legislation could be introduced early in the 110 th Congress. In Peru, the Peruvian Congress voted 79-14 to approve the PTPA in June 2006. The PTPA would likely have a have a small net economic effect on the United States because of the small size of Peru's economy in relation to the U.S. economy. The PTPA's labor provisions are the most controversial. Supporters of the agreement argue that Peru has ratified all eight International Labor Organization (ILO) core labor standards and that the PTPA would reinforce Peru's labor reform measures of recent years. Critics would like to see the PTPA include enforceable ILO labor standards and argue that Peru has failed to comply with U.S. internationally recognized worker rights and ILO standards. In considering the agreement, policymakers may look at the labor provisions but may also take into account Peru's commitments to labor reforms and alleviating poverty. The United States currently extends duty free treatment to selected imports from Peru under the Andean Trade Preferences Act (ATPA), a regional trade preference program that expires at the end of June 2007. In 2005, 44% of all U.S. imports from Peru received preferential duty treatment. In the absence of a PTPA, and if the ATPA is not renewed, Peruvian goods entering the United States would be subject to higher duties. U.S.-Colombia Trade Promotion Agreement On February 27, 2006, U.S. Trade Representative Portman and Colombia's Minister of Trade, Industry, and Tourism, Jorge Humberto Botero, announced the conclusion of a U.S.-Colombia bilateral free trade agreement. A free trade agreement with Colombia was originally intended to be part of a broader U.S.-Andean free trade agreement FTA, but after negotiations failed and the Peru Trade Promotion Agreement was concluded, Colombia continued negotiations with the United States on a bilateral basis. The two countries finalized the text of the agreement on July 8, 2006. President Bush notified Congress on August 24, 2006, of his intention to sign the U.S.-Colombia Trade Promotion Agreement (CTPA). The CTPA was signed on November 22, 2006. Under TPA, there is no deadline for the President to submit the final text of the agreement and draft implementing legislation to Congress after the agreement is signed. However, TPA authority is scheduled to expire on July 1, 2007. If ratified, the CTPA would likely have a have a small net economic effect on the United States because of the relatively small size of Colombia's economy in relation to the U.S. economy. The United States currently extends duty-free treatment to selected imports from Colombia under the ATPA, a regional trade preference program that expires at the end of June 2007. In 2005, 51% of all U.S. imports from Colombia received preferential duty treatment under this program. In the absence of a CTPA, and if the ATPA is not renewed, many Colombian products entering the U.S. market may be subject to higher duties. In November 2006, Colombian President Alvaro Uribe met with policymakers to urge an extension of the ATPA trade preferences to prevent a disruption of business for Colombian and U.S. companies. President Bush has stated that he supports an extension of the ATPA. The Bush Administration and President Uribe view the extension of the trade preferences program as a temporary measure in reducing tariffs from Andean countries. They have stated that the long-term goal is a free trade agreement so that tariff reductions are permanent. Free Trade Area of the Americas The proposed Free Trade Area of the Americas (FTAA) was originally conceived over 10 years ago as a regional (presumably WTO-plus) trade agreement that would include 34 nations of the Western Hemisphere. Since then, three drafts of an incomplete agreement have been released, but the original January 2005 date for signing it has long since passed. At the center of the delay are deep differences dividing the United States and Brazil, the co-chairs of the Trade Negotiating Committee, which is charged with defining the framework under which the FTAA negotiations can continue. The United States and Brazil agreed at the November 2003 Miami Ministerial to a two-tier approach that would include a set of "common rights and obligations" to which all countries would agree, augmented by optional plurilateral arrangements for countries wishing to make deeper reciprocal commitments. To date, the United States and Brazil have been unable to define how this two-tier concept would work, and the United States has declined Brazil's offer to move ahead with the "4+1" market access talks with the Mercosur (Southern Common Market) countries (Brazil, Argentina, Uruguay, Paraguay, and as of July 1, 2006, Venezuela). The breadth of an emerging resistance to the FTAA became clearer at the fourth Summit of the Americas held on November 4-5, 2005, in Mar del Plata, Argentina. Amidst dramatic and sometimes violent protests against President George W. Bush and the FTAA, which was not scheduled as the major topic of this summit, it became clear that Latin America was divided over how to proceed. A total of 29 countries supported restarting negotiations, and the United States pushed to set a specific date in 2006. The Mercosur countries rejected this idea, arguing that the conditions for a balanced and equitable FTAA did not yet exist. Venezuela lobbied independently to end any further effort on the FTAA and called for a unified resistance against U.S. policies and presence in Latin America. On July 4, 2006, Venezuela formally joined Mercosur as its first new full member since its inception in 1991. Although Mercosur has resisted the FTAA, Venezuela is the only country in Latin America to reject the idea unequivocally. With Venezuela's new-found status as a member of Mercosur, the United States may find it even more difficult to isolate its unabashedly negative influence on the FTAA negotiations. The Summit declaration called for a time to reflect on the problems of the FTAA process while awaiting the outcome of the upcoming WTO Doha Round ministerial, particularly with respect to agricultural issues. Given that the WTO talks have also bogged down, it seems unlikely that the FTAA will find the support to move ahead in the near future, particularly with Venezuela now potentially influencing policy in the Mercosur group. In the meantime, both Brazil and the United States are meeting on an informal bilateral basis and continue to court other Latin American countries to join them in subregional trade pacts, making the future of U.S. trade policy in the region less certain. Terrorism Issues In the aftermath of the September 2001 terrorist attacks on New York and Washington, D.C., U.S. attention to terrorism in Latin America intensified, with an increase in bilateral and regional cooperation. Latin American nations strongly condemned the attacks, and took action through the Organization of American States to strengthen hemispheric cooperation. In June 2002, OAS members signed an Inter-American Convention Against Terrorism in order to improve regional cooperation, including a commitment by parties to deny safe haven to suspected terrorists. President Bush submitted the convention to the Senate in mid-November 2002 for its advice and consent, and it was referred to the Senate Foreign Relations Committee (Treaty Doc. 107-18). The committee held a hearing on the treaty on June 17, 2004, and on July 28, 2005, the committee favorably reported the treaty (Senate Exec. Rept. 109-3). On October 7, 2005, the Senate agreed to the resolution of advice and consent on the convention, and the United States deposited its instruments of ratification for the convention on November 15, 2005. In the aftermath of 9/11, the OAS also reinvigorated the Inter-American Committee on Terrorism (CICTE), which was first established in 1999 to cooperate in preventing, combating, and eliminating terrorist acts and activities. The CICTE has programs on cyber security, port security, airport security, legislation against terrorism, customs and border protection, terrorist financing, and terrorism policy engagement exercises. The State Department, in its annual report on worldwide terrorism ( Country Reports on Terrorism 2005 , April 2006), highlighted terrorist threats in Colombia, Peru, and the tri-border area (TBA) of Argentina, Brazil, and Paraguay, which has been a regional hub for Hizballah and Hamas fundraising activities. The report asserted that terrorism in the Western Hemisphere was "primarily perpetrated by narcoterrorist organizations based in Colombia and by the remnants of radical leftist Andean groups." According to the report, there is no corroborated information that Islamic extremist groups have an operational presence in the TBA or elsewhere in Latin America. The report also maintained that Cuba remained a state sponsor of terrorism, while Venezuela "virtually ceased its cooperation in the global war on terror, tolerating terrorists in its territory and seeking close relations with Cuba and Iran, both state sponsors of terrorism." In mid-May 2006, the Department of State, pursuant to Section 40A of the Arms Export Control Act, prohibited the sale or license of defense article and services to Venezuela because of its lack of cooperation on antiterrorism efforts. Other countries on the Section 40A list include Cuba, Iran, North Korea, and Syria, not to be confused with the "state sponsors of terrorism" list under Section 6(j) of the Export Administration Act of 1979, which includes Cuba, Iran, North Korea, Sudan, and Syria. Through the State Department, the United States has provided Anti-Terrorism Assistance (ATA) training and equipment to Latin American countries to help improve their capabilities in such areas as airport security management, hostage negotiations, bomb detection and deactivation, and countering terrorism financing. ATA financing is provided through the annual foreign operations appropriations measure under the Nonproliferation, Anti-terrorism, Demining, and Related Programs (NADR) account. For FY2005, $7.9 million in ATA was provided for the Western Hemisphere, with $5.1 million for training anti-kidnapping units in Colombia and $0.5 million for the tri-border area of Brazil, Paraguay, and Argentina. For FY2006, an estimated $12.3 million in ATA was provided for the Western Hemisphere, with $5.3 million for Colombia and $1.5 million for the Bahamas. The FY2007 Western Hemisphere request was for $11.9 million, with $3.1 million for Colombia, $2.8 million for Trinidad and Tobago, and $1.4 million for Jamaica. In the second session of the 109 th Congress, the House approved H.Con.Res. 338 on June 12, 2006, which expressed the sense of Congress regarding the activities of Islamic terrorist organizations in the Western Hemisphere. The resolution "recognizes the potential threat that sympathizers and financiers of Islamist terrorist organizations that operate in the Western Hemisphere pose to the United States, our allies, and interests." The resolution also encourages the President to direct the U.S. representative to the OAS to seek support for the creation of a special task force of the CICTE to assist governments in investigating and combating the proliferation of Islamist terrorist organizations in the region. Gangs in Central America In the past two years, there has been increasing attention by the press and policymakers on the effects of crime and gang violence in Central America, and its spillover effects on the United States. Since February 2005, some 1,274 members of the violent Mara Salvatrucha (MS-13) have been arrested in cities across the United States. These arrests have raised concerns about the transnational activities of Central American gangs. Citizens in several Central American countries have consistently identified crime and gang violence among the top issues of popular concern. Governments throughout the region are struggling to find the right combination of suppressive and preventive policies to effectively deal with the gang problem as well as more effective ways to solve related issues such as police corruption, overcrowded prisons, and weak judicial systems. Gang violence may threaten political stability, inhibit social development, and discourage foreign investment in Central America. Many analysts predict that illicit gang activities may accelerate illegal immigration, drug smuggling, and trafficking in persons and weapons to the United States. Some analysts maintain that contact between gang members in both regions is increasing, and that this tendency may serve to increase gang-related violent crime in the United States. Others assert that unless the root causes of gang violence—poverty, joblessness, ineffective judicial systems, easy access to arms, and the social exclusion of at-risk youth—are addressed in a holistic manner, the problem will continue to escalate. In the 109 th Congress, legislation was introduced— S. 853 (Lugar) and H.R. 2672 (Harris), the North American Cooperative Security Act—that included provisions to increase cooperation among U.S., Mexican, and Central American officials in the tracking of gang activity and in the handling of deported gang members. Similar provisions were included in both House and Senate versions of broader immigration legislation, H.R. 4437 (Sensennbrenner) and S. 2611 (Specter), which were considered but not enacted. On June 7, 2005, the OAS passed a resolution to hold conferences and workshops on the gang issue and to urge member states to support the creation of holistic solutions to the gang problem. Within the U.S. government, the National Security Council created an inter-agency task force to develop a comprehensive, three-year strategy to deal with international gang activity. The strategy, which is now being implemented, states that the U.S. government will pursue coordinated anti-gang activities in five broad areas: diplomacy, repatriation, law enforcement, capacity enhancement, and prevention. Some observers maintain that these efforts to deal with criminal gang activity on the international front need to be better coordinated with domestic policies aimed at stiffening penalties for gang-related crime. AIDS in the Caribbean and Central America The AIDS epidemic in the Caribbean and Central America has begun to have negative consequences for economic and social development, and continued increases in infection rates threaten future development prospects. In contrast to other parts of Latin America, the mode of transmission in several Caribbean and Central American countries has been primarily through heterosexual contact, making the disease difficult to contain because it affects the general population. The Caribbean countries with the highest prevalence or infection rates are Haiti, with a rate over 3%; the Bahamas, Guyana, and Trinidad and Tobago, with rates over 2%; and Barbados, Belize, the Dominican Republic, Jamaica, and Suriname, with rates over 1%. In Central America, Honduras has the highest prevalence rate of 1.8%, while Guatemala has a rate over 1%. The response to the AIDS epidemic in the Caribbean and Central America has involved a mix of support by governments in the region, bilateral donors (such as the United States, Canada, and European nations), regional and multilateral organizations, and nongovernmental organizations (NGOs). Many countries in the region have national AIDS programs that are supported through these efforts. USAID has been the lead U.S. agency fighting the epidemic abroad since 1986. USAID's funding for HIV/AIDS in Central America and the Caribbean region rose from $11.2 million in FY2000 to $33.8 million in FY2003. Because of the inclusion of Guyana and Haiti as focus countries in the President's Emergency Plan for AIDS Relief (PEPFAR), funded through the Global HIV/AIDS Initiative (GHAI) account, U.S. assistance to the Caribbean and Central America for HIV/AIDS increased to $47 million in FY2004, $82.5 million in FY2005, and an estimated $92.7 million in FY2006. For FY2007, the Administration requested $113 million. This included $88 million in GHAI funding for Guyana ($25 million) and Haiti ($63 million), and another $25 million for non-focus countries and programs in Central America and the Caribbean through the Child Survival and Health account. Some Members of Congress wanted to expand the list of focus countries to include 14 additional Caribbean countries. In the 109 th Congress, S. 600 , the Foreign Affairs Authorization Act, FY2006 and FY2007, contained a provision (Section 2516) that would have added 14 Caribbean countries to the list of focus countries targeted for increased HIV/AIDS assistance, but action on S. 600 was not completed. In other action, the 109 th Congress approved H.R. 1409 ( P.L. 109-95 ), similar to S. 350 introduced in the Senate, which authorized assistance for orphans and other vulnerable children in developing countries, including in the Caribbean. Legislative initiatives in the 109 th Congress that were not considered include H.R. 164 , which would have provided for the establishment of pediatric centers in developing countries, including Guyana, to provide treatment and care for children with HIV/AIDS; and H.R. 945 , which would have provided assistance to combat infectious diseases in Haiti, including HIV/AIDS. Afro-Latinos In recent years, people of African descent in the Spanish- and Portuguese-speaking nations of Latin America—also known as "Afro-Latinos"—have been pushing for increased rights and representation. Afro-Latinos comprise some 150 million of the region's 540 million total population, and, along with women and indigenous populations, are among the poorest, most marginalized groups in the region. Afro-Latinos have begun forming groups that, with the help of international organizations, are seeking political representation, human rights protection, land rights, and greater social and economic rights and benefits. Improvement in the status of Afro-Latinos could be difficult and contentious, however, depending on the size and circumstances of the Afro-descendant populations in each country. As treated in this paper, Afro-Latinos are, generally, descendants of the millions of West African slaves brought to the Americas by European traders during the colonial period. Afro-Latinos comprise a majority of the population in Cuba and the Dominican Republic, while in Brazil, Colombia, Panama, Venezuela, Ecuador, and Nicaragua, they form a significant minority. Assisting Afro-Latinos has never been a primary U.S. foreign policy objective, although a number of foreign aid programs benefit Afro-Latino populations. Those programs are funded through the U.S. Agency for International Development (USAID), the State Department, the Inter-American Foundation (IAF), the Peace Corps, and the National Endowment for Democracy (NED). They include agricultural, micro-credit, health, democracy, and bilingual education programs. During the 109 th Congress, the House passed H.Con.Res. 175 , recognizing the injustices suffered by African descendants of the transatlantic slave trade in all of the Americas and recommending that the United States and the international community work to improve the situation of Afro-Latino communities. A concurrent resolution, S.Con.Res. 90 , was submitted in the Senate. Some Members of Congress expressed specific concerns about the situation of Afro-Colombians affected by the conflict in Colombia. Legislation was introduced— H.R. 4886 (McGovern) the Colombian Temporary Protected Status Act of 2006—that would have made Colombian nationals, including Afro-Colombians affected by the country's ongoing conflict, eligible for Temporary Protected Status (TPS). Another resolution, H.Res. 822 (McCollum), was introduced that recognized the efforts of Afro-Colombian and other peace-building communities in Colombia and urged the Secretary of State to monitor acts of violence committed against them. The Senate Appropriations Committee report to the FY2007 foreign operations appropriations bill ( H.R. 5522 ; S.Rept. 109-277 ) would have required the State Department to certify that the Colombian military is not violating the land and property rights of Afro-Colombians in order to continue to receive U.S. assistance. Trafficking in Persons in Latin America and the Caribbean Trafficking in persons for sexual exploitation or forced labor, both within a country and across international borders, is a lucrative criminal activity that is of major concern to the United States and the international community. Trafficking in persons affects nearly every country and region in the world. While most trafficking victims still appear to originate from South and Southeast Asia or the former Soviet Union, human trafficking is a growing problem in Latin America and the Caribbean. Countries in Latin America serve as source, transit, and destination countries for trafficking victims. Latin America is also a primary source for the estimated 14,500 to 17,500 people that are trafficked to the United States each year. In Latin America, trafficking in persons occurs both within countries and across borders as children and adults are trafficked for prostitution, forced labor, and domestic servitude. Traffickers take advantage of poor young people with minimal education in countries with political instability, high unemployment, and corruption. Trafficking is increasingly tied to organized criminal groups who exploit undocumented migrants, especially in the U.S.-Mexico border region. Congress has taken a leading role in fighting human trafficking by passing the Victims of Trafficking and Violence Protection Act of 2000 ( P.L. 106-386 ) and the Trafficking Victims Protection Reauthorization Act of 2003 ( P.L. 108-193 ). As a result of that legislation, the State Department and other U.S. agencies provided more than $94.7 million in anti-trafficking assistance to foreign governments in FY2005. On June 5, 2006, the State Department released its sixth annual report on human trafficking, Trafficking in Persons Report (TIP) dividing countries into four groups according to the efforts they were making to combat trafficking. Tier 3 countries are those that have not made an adequate effort to combat trafficking and are subject to sanctions. Latin America had a higher percentage of Tier 3 countries in the 2004 and 2005 TIP reports than any other region. In 2005, Bolivia, Ecuador, Jamaica, Venezuela, and Cuba were placed on Tier 3, but only Venezuela and Cuba were subject to sanctions. In the 2006 TIP report, Belize, Cuba, and Venezuela were the only countries identified as Tier 3 in the region, but six others—including Brazil and Mexico—were on the Tier 2 Watch List and could fall into the Tier 3 category by 2007. In September 2006, President Bush announced that Belize would not be subject to sanctions because its government had taken significant counter-trafficking actions since the end of the 2006 reporting period, but Venezuela and Cuba would be sanctioned. During the 109 th Congress, the Senate approved the ratification of the United Nations Protocol to Prevent, Suppress, and Punish Trafficking in Persons. The United States became a party to the Protocol on December 3, 2005. Congress also passed the Trafficking Victims Reauthorization Act of 2005 ( P.L. 109-164 ). This law will provide some $361 million over the next two years to combat trafficking in persons. Congress continues to monitor both U.S. and international efforts to fight human trafficking, especially in regions such as Latin America, where it is an emerging problem. Country Issues Argentina Argentina's restructuring of over $100 billion in defaulted bond debt in June 2005 demonstrated the country's emergence from its economic crisis. Although the country was under considerable economic stress in 2001 and 2002, the democratic political system weathered the crisis. President Néstor Kirchner, elected in 2003, has made bold policy moves in the areas of human rights, institutional reform, and economic policy that have helped restore Argentines' faith in democracy. The October 2005 legislative elections demonstrated strong support for President Kirchner. Economic growth has rebounded, from a decline of almost 11% in 2002 to 8.8% in 2003, 9% in 2004, 9.2% in 2005, and an estimate of 8.3% for 2006. In January 2006, Argentina paid off its $9.5 billion debt to the International Monetary Fund (IMF). The government faces such challenges as reducing poverty and controlling inflation while maintaining economic growth. President Kirchner strongly supported the Supreme Court's June 2005 overturning of two amnesty laws from the 1980s that had blocked prosecution for killings under military rule. The action opened the door for trials of former military and police officials. In August 2006, a former federal police official was sentenced to 25 years in prison in the first trial since the Supreme Court's action, and in September 2006, the former police commissioner of Buenos Aires, Miguel Etchecolatz, was sentenced to life in prison. A key witness in the Etchecolatz case, Jorge Julio Lopez, disappeared after his testimony, provoking widespread concerns about a potential return of death squads intended to intimidate witnesses in future human rights trials. President Kirchner has called for Argentines to stay on alert so that the past is not repeated, and has urged the judicial system to move more quickly in prosecuting past human rights violations. Issues of concern to the U.S. Congress include continued cooperation with Argentina on counterterrorism issues and progress in Argentina's investigation of the 1994 Argentine-Israeli Mutual Association (AMIA) bombing that killed 85 people. In late October 2006, Argentina's prosecutor in the AMIA case accused Iran of masterminding the attack, and in November, an Argentine judge issued arrest warrants for nine former Iranian officials, including former President Hashemi Rafsanjani. Bolivia In the past few years, Bolivia has experienced extreme political unrest resulting in the country having six presidents since 2001. President Evo Morales, an indigenous leader of the leftist Movement Toward Socialism (MAS) party, was elected in a convincing first-round victory on December 18, 2005 with 54% of the votes. He was inaugurated to a five-year term on January 22, 2006. The MAS won control of the lower chamber of the Bolivian Congress, 12 of 27 seats in the Senate, and three of the country's nine governorships. President Morales moved to fulfill his campaign promises to decriminalize coca cultivation and to nationalize the country's natural gas industry. These policies pleased his supporters within Bolivia, but have complicated Bolivia's relations with some of its neighboring countries, foreign investors, and the United States. Morales' drug policy—combining the allowance of limited coca production for traditional uses and coca-derived products, voluntary eradication, and aggressive interdiction—has resulted in record drug seizures, but rising coca cultivation levels for "licit" uses. In the same vein, his nationalization move, which began in May and culminated in the December 2006 signing of new contracts giving Bolivia control over all foreign energy companies operating in its territory, have raised state tax revenues, but jeopardized desperately-needed foreign investment. Any progress that President Morales has made on advancing these campaign pledges has been overshadowed in recent months by an escalating domestic crisis between the MAS government in La Paz and opposition leaders in the country's wealthy eastern provinces. In August 2006, many Bolivians hoped that the constituent assembly elected in July would be able to carry out meaningful constitutional reforms and effectively respond to the eastern province's ongoing demands for regional autonomy. Four months later, the assembly is in shambles and the eastern provinces have launched large protests against the Morales government that could escalate out of control. For some 20 years, U.S. interest in Bolivia has centered on its role as a coca producer and its relationship to Colombia and Peru, the two other major coca- and cocaine-producing countries in the Andes. U.S.-Bolivian relations have become tense in 2006 in the wake of the Morales government's questionable commitment to combating illegal drugs, increasing ties with Venezuela and Cuba, and the nationalization measure. In September 2006, President Bush again designated Bolivia as a major drug production country and expressed concerns about the Morales' governments counternarcotics efforts. In FY2006, Congress provided an estimated $116.6 million in foreign assistance to Bolivia, including some $79.2 million in counternarcotics funds. For FY2007, the Administration proposed spending $99.8 million on Bolivia, including roughly $66 million in counternarcotics funds. Foreign Operations programs are currently operating under the terms of a continuing appropriations resolution ( H.R. 5631 / P.L. 109-289 , as amended) which provides funding at the FY2006 level or the House-passed FY2007 level, whichever is less. The continuing appropriations resolution expires on February 15, 2007. In December 2006, Congress voted to extend trade preferences for Bolivia, along with Colombia, Ecuador, and Peru, under the Andean Trade Preferences and Drug Eradication Act through June 30, 2007. Brazil In January 2007, Luis Inácio "Lula" da Silva, of the leftist Workers' Party (PT), will be inaugurated for a second four-year term as President of Brazil. President Lula was re-elected after defeating Geraldo Alckmin, former governor of the state of São Paulo, of the Brazilian Social Democratic Party (PSDB), in a run-off presidential election held on October 29, 2006. Lula captured 61% of the valid votes as compared to Alckmin's 39%, winning handily in the poorer, north and northeastern regions of the country, but failing to carry the more prosperous southern and western states or São Paulo, the country's industrial and financial hub. In the second round, Brazilians, though divided by class and region, voted in favor of continuing macroeconomic stability under a second Lula Administration, rather than removing President Lula because of the corruption scandals that had involved his party, including many of his closest advisers, during his first term. Despite winning on a leftist platform in 2002, President Lula maintained the orthodox economic policies associated with his predecessor, even surpassing fiscal and monetary targets. Inflation and interest rates have been on a downward trend, and Brazil's credit rating has improved, but economic growth remains modest (2.3% in 2005). In 2003, President Lula gained congressional approval of social security and tax reforms, and in 2004, a new law to increase private investment in public infrastructure projects. Despite these achievements, legislative progress stalled in 2005, and President Lula has been criticized for failing to develop effective social programs to address the perennial problems of land redistribution, social inequality, and crime. President Lula has been working to make cabinet appointments and form a governing coalition capable of pushing his agenda through Brazil's notoriously fractured legislature. He is seeking to formalize an alliance between his Worker's Party and the center-right Party of the Brazilian Democratic Movement (PMDB), now the largest party in Brazil's Chamber of Deputies (89 deputies) and the second largest in the Senate (18 seats). Upon taking office, his immediate task will be to boost Brazil's lagging economic growth, which many analysts predict could depend on enacting deep (and unpopular) structural reforms. Some analysts predict that ongoing investigations against President Lula's PT party may undermine the strength of his second term in office. Relations with the United States have been generally positive, although President Lula has made relations with neighboring countries in the Southern Common Market (Mercosul) his first priority, and has sought to strengthen ties with nontraditional partners, including India and China. Trade issues are central to the bilateral U.S.-Brazilian relationship, with both countries heavily involved in subregional, regional, and global trade talks in the Doha round of the World Trade Organization (WTO) negotiations. The United States and Brazil have different approaches to trade liberalization, which have put the two countries at odds over how to proceed with the Free Trade Area of the Americas (FTAA) negotiations. In addition to trade policy, U.S. interest in Brazil centers on its role as a stabilizing force in Latin America, especially with respect to populist governments in Venezuela and Bolivia. Brazil's nuclear enrichment capabilities and its role as an ethanol producer have generated growing interest in the United States. Brazil is also a key U.S. ally whose cooperation is sought on issues that include counternarcotics efforts; human rights concerns, such as race relations and trafficking in persons; the environment, including protection of the Amazon; and HIV/AIDS prevention. Colombia Colombian President Alvaro Uribe was re-elected on May 28, 2006, with 62% of the vote. Parties loyal to President Uribe also won a majority of both houses of congress in the March 12 congressional elections. His second term has thus far been marred by scandals, including a Supreme Court investigation into the alleged paramilitary ties of several pro-Uribe congressmen. President Uribe has been a strong ally of the United States and a supporter of U.S. counternarcotics efforts in the region and, through the Andean Counterdrug Initiative (ACI), Colombia is the largest U.S. foreign aid recipient in Latin America. Beyond ACI, congressional interest in Colombia relates to human rights conditions; trade; the expansion of U.S. assistance for counterterrorism and infrastructure protection; the health and environmental consequences of aerial fumigation of drug crops; the progress of alternative development to replace drug crops; the level of risk to U.S. personnel in Colombia, including the continued captivity of three American hostages by the Revolutionary Armed Forces of Colombia (FARC); and the current demobilization talks between the Colombian government and paramilitaries. (Also see sections above on " Andean Counterdrug Initiative " and " U.S.-Colombia Trade Promotion Agreement .") It is estimated that Colombia produces 70% of the world's supply of cocaine and 50% of the heroin entering the United States. Illegally armed groups of both the left and right are believed to participate in the drug trade. In March 2006, the United States indicted fifty commanders of the FARC for drug trafficking. The United States has also requested the extradition of 23 paramilitary leaders on drug trafficking charges. In 2004, Congress raised the cap on military personnel allowed to be deployed in Colombia in support of Plan Colombia from 400 to 800 for military personnel and from 400 to 600 for civilian contractors (FY2005 Ronald W. Reagan National Defense Authorization Act, P.L. 108-375 ). Since FY2002, Congress has authorized support for a unified campaign against narcotics trafficking and activities of organizations designated as terrorist organizations by the Department of State. In 2006, the United Nations Office on Drugs and Crime reported a 50% decline in opium poppy cultivation in Colombia in 2005 to 4,940 acres; or, 69% fewer acres than in 2000. However, the United Nations also reported an 8% increase in acreage devoted to coca cultivation; the first such increase since 2000. At 212,510 acres, the area of cultivation remains 47% less than in 2000 when 403,350 acres were under cultivation. It is believed that the Plan Colombia spraying goals are ahead of schedule. The Office of National Drug Control Policy (ONDCP) enlarged its area of survey in 2005, which showed 355,680 acres under cultivation. This figure represents a 26% increase over ONDCP data for 2004; however, when the survey area was limited to the same area as in 2004, the ONDCP found an 8% reduction in coca cultivation. Although the new survey area showed an increase in coca cultivation, ONDCP argues that this new data can be used to better target future eradication efforts the previous year because newly-planted crops are less productive. In 2005, the State Department reports that 343,000 acres of coca and 4,000 acres of opium poppy were sprayed. The spraying does not prevent, although it may discourage, the replanting of illicit crops. In November 2005, the ONDCP announced a slight increase in the street price of cocaine in 2004. The significance of this report was challenged by critics of U.S. policy because 2003 prices were the lowest since 1981. Critics also maintained that short-term fluctuations in price do not necessarily signal significant changes in supply. On July 15, 2003, the Uribe Administration announced an agreement with leaders of the paramilitary United Self-Defense Forces of Colombia (AUC) that was to result in the demobilization of its members by the end of 2005. The office of Colombia's High Commissioner for Peace estimates that nearly 31,000 paramilitaries demobilized as of July 2006. An estimated 2,000 paramilitaries remain outside of the disarmament process. The demobilization process has posed a number of controversial issues relating to ensuring accountability of militants while providing a large enough incentive for fighters to lay down their arms. The outcome of such a process could have effects on how Colombian citizens feel about the effectiveness of the country's judicial system, the rule of law, and the ability of the state to provide for a general level of safety. There are also concerns that some fighters that operate outside of the AUC umbrella will not demobilize and will continue to carry out their operations in rural areas. Critics also note that paramilitaries demobilized under the controversial Justice and Peace Law will receive reduced sentences of five to eight years and may be protected from extradition to the United States. Critics also are concerned that the demobilization process does not address the criminal enterprises, such as narcotics trafficking, that financed the AUC's political operations and that the paramilitaries are re-organizing, not demobilizing. Further concern has focused on the ability of the government to re-incorporate ex-fighters into law-abiding civilian life and to provide some type of restitution to their victims. The issue of drug trafficking is exacerbated by humanitarian conditions resulting from more than 40 years of civil war between the Colombian government, the FARC, National Liberation Army (ELN), and right-wing paramilitaries. Colombia has the second largest population of internally displaced persons (IDPs) in the world, behind Sudan. There are 3 million IDPs in Colombia, with an estimated 160,000 to 250,000 newly displaced in 2005. There are also nearly 258,000 Colombian refugees and asylum seekers outside of Colombia. The United States began resettling refugees from Colombia in 2002. Admissions peaked at 577 in FY2004 but declined to 323 in FY2005 due to provisions of the REAL ID Act of 2005 (included in P.L. 109-13 ), which bars admission of persons who have provided material support to terrorist groups. Only 115 Colombian refugees were admitted into the United States in FY2006. In 2005, the United Nations High Commissioner for Refugees (UNHCR) stopped referring Colombians for resettlement to the United States because of this issue. The State Department anticipates only 50 Colombian refugees will be resettled to the United States in FY2006. H.R. 5918 , introduced on July 27, 2006, but not considered, would have amended the Immigration and National Act so that persons who provided material support to a terrorist organization under duress or coercion could be admitted to the United States. Cuba Since the early 1960s, U.S. policy toward Cuba under Fidel Castro has consisted largely of isolating the communist nation through comprehensive economic sanctions, which have been significantly tightened by the Bush Administration. Another component of U.S. policy consists of support measures for the Cuban people, including private humanitarian donations and U.S.-sponsored radio and television broadcasting to Cuba. While there appears to be broad agreement on the overall objective of U.S. policy toward Cuba—to help bring democracy and respect for human rights to the island—there are several schools of thought on how to achieve that objective: some advocate maximum pressure on Cuba until reforms are enacted; others argue for lifting some U.S. sanctions judged to be hurting the Cuban people; and still others call for a swift normalization of U.S.-Cuban relations. Fidel Castro's July 31, 2006, announcement that he was ceding political power to his brother Raúl temporarily in order to recover from surgery could foster a re-examination of U.S. policy, especially if Fidel's departure from the political scene becomes permanent. In the new context of Fidel's transfer of power, there are two broad policy approaches to contend with political change in Cuba: a status-quo approach that would maintain the U.S. dual-track policy of isolating the Cuban government while providing support to the Cuban people; and an approach aimed at influencing the Cuban government and Cuban society through increased contact and engagement. In the 109 th Congress, legislative initiatives included the approval of five human rights resolutions: H.Con.Res. 81 , H.Res. 193 , H.Res. 388 , S.Res. 140 and S.Res. 469 . P.L. 109-102 funded Cuba democracy projects in FY2006. Action on several FY2007 appropriations measures were not completed so action will need to be completed in 2007: House-passed H.R. 5522 would have funded FY2007 democracy projects, and House and Senate versions of the bill had contrasting provisions on anti-drug cooperation; House-passed H.R. 5576 would have prohibited funds from being used to implement tightened restrictions on financing for agricultural exports to Cuba; the Senate version of H.R. 5384 would have liberalized travel related to the sale of agricultural and medical goods to Cuba; and H.R. 5522 and H.R. 5672 would have funded Cuba broadcasting. Other legislative initiatives not acted upon would have eased U.S. sanctions in various ways: suspension of sanctions after Hurricane Dennis ( H.Con.Res. 206 ); overall sanctions ( H.R. 208 and H.R. 579 ); overall travel ( S. 894 and H.R. 1814 ); family visits ( H.R. 2617 ); educational travel ( H.R. 3064 ); cash in advance for U.S. agricultural sales ( H.R. 1339 and S. 634 ); and facilitation of agricultural sales ( H.R. 719 and S. 328 ). Other measures had provisions on Cuba's trademark registrations ( H.R. 719 , S. 328 , H.R. 3372 , S. 1604 , H.R. 1689 and S. 69 ); Cuba broadcasting ( S. 600 , H.R. 2601 ); U.S. fugitives in Cuba ( H.R. 2601 , H.R. 332 ); sanctions related to Cuba's offshore oil development ( H.R. 5292 , S. 2682 , S. 2795 ); participation in Cuba's offshore oil development ( H.R. 5353 , S. 2787 ); support for U.S. diplomats in Cuba ( H.Con.Res. 428 ); repeal of the Cuban Adjustment Act ( H.R. 5670 ); assistance to facilitate a peaceful transition in Cuba ( S. 3769 ); and authorization of $5 million for scholarship and exchange programs (House-passed H.R. 2601 ). Dominican Republic President Leonel Fernández of the Dominican Liberation Party (PLD), who served as president previously (1996-2000), has entered the second half of his four-year term in a relatively strong position. Fernández has presided over a period of rapid economic growth (an estimated 10% in 2006), enjoys popular support, and has a majority in both legislative chambers. He has restored confidence in the Dominican economy and enacted some fiscal reforms recommended by the International Monetary Fund since signing a $665 million standby agreement with the Fund in February 2005. Analysts predict that Fernández has a good chance of being re-elected in May 2008 if he is able to address the country's ongoing problems with corruption, crime, and electricity shortages. President Fernández seeks to maintain close ties with the United States and to improve relations with neighboring Haiti. His government has been criticized, however, for repatriating large numbers of undocumented Haitian migrants, and for failing to comply with a 2005 ruling against it by the Inter-American Court of Human Rights, which mandated the provision of identity documents to Dominicans of Haitian descent. On September 6, 2005, the Dominican Republic approved the U.S.-Dominican Republic-Central America Free Trade Agreement (DR-CAFTA). The Dominican Republic was scheduled to implement the DR-CAFTA on July 1, 2006, but that date was postponed. In late November 2006, the Dominican Congress approved a package of seven laws that bring the country into compliance with the DR-CAFTA, but regulations related to intellectual property rights and customs fees must still be finalized. The Dominican Republic is expected to implement the DR-CAFTA in early 2007. Ecuador President-elect Rafael Correa, a left-leaning, U.S.-trained economist, is scheduled to take office on January 15, 2007. Correa, who will become Ecuador's eighth president in ten years, defeated Alvaro Noboa, a wealthy banana magnate, in a run-off election held in late November 2006. Contrary to analysts' predictions, Correa won the election decisively with 57% of the vote as compared to Noboa's 43%. Correa has vowed to dramatically reform Ecuador, a country whose economy is currently expanding because of high oil prices, but whose political institutions are extremely fragile. He has promised to call a constituent assembly with power to reform the country's constitution and dissolve its legislature, to renegotiate Ecuador's international debt, and to reassert state control over foreign oil companies operating in the country. These proposals, though popular among many Ecuadorians, have prompted serious concerns among foreign investors. Many analysts predict that Correa will have a difficult time enacting his agenda given that his party lacks representation in the legislature, a notoriously fractured institution that is now dominated by Noboa's party. Ecuador has traditionally had close relations with the United States, although recent trade disputes have strained bilateral relations. Ecuador continues to work with the United States on counternarcotics matters, but negotiations for a bilateral free trade agreement were suspended indefinitely in May 2006 following Ecuador's decision to expel a U.S. oil company, Occidental, from the country without compensation for an alleged breach of contract. U.S. officials congratulated Correa on his recent victory and pledged to cooperate with his government, but have also expressed concerns about his ties with Hugo Chávez of Venezuela and his stated policies regarding trade, energy, and counternarcotics matters. Several key issues could complicate U.S.-Ecuadorian relations early in the Correa government. For example, Correa has pledged to raise taxes and exert more state control over U.S. and other foreign oil companies. He opposes completing negotiations of a free trade agreement (FTA) with the United States, and is not willing to restart negotiations as a condition to continue receiving U.S. trade preferences under the Andean Trade Preferences and Drug Eradication Act (ATPDEA), which are due to expire on June 30, 2007. President-elect Correa has recently confirmed that his government will not renew the lease on the U.S. air base at Manta, which is currently used for U.S. aerial counter-drug detection and monitoring operations, when it expires in 2009. He has expressed reservations about any Ecuadorian involvement in Plan Colombia and publicly opposed the Colombian army's incursions into Ecuadorian territory and the Colombian government's recent resumption of aerial fumigation along the Ecuador-Colombian border. Some analysts have urged the U.S. government to adapt a similar policy towards the Correa government in Ecuador as it has with the Morales government in Bolivia. They maintain that the United States has the ability to influence Ecuador in terms of foreign aid, trade preferences, and international finance. They urge U.S. officials not to antagonize Correa, but to use pragmatic, low-profile means to urge him to maintain open-market and democratic policies. El Salvador Tony Saca, a businessman from the conservative National Republican Alliance (ARENA) party, was inaugurated as president for a five-year term in June 2004. President Saca is seeking to restart the country's stagnating economy, which has averaged only 2% growth in recent years, but recorded an estimated 4% growth in 2006; pass legislation in a polarized political environment; and combat gang violence. His legislative agenda is facing continuing opposition from the leftist Farabundo Marti National Liberation Front (FMLN), which recovered the seats it had lost due to previous defections in the March 2006 legislative elections. Although ARENA also increased its representation in the legislature and is still the largest party in El Salvador's National Assembly, it lacks a majority and will continue to have to rely on support from small parties to enact President Saca's agenda. Despite its tough anti-gang legislation, El Salvador, along with Guatemala and Honduras, has one of the highest murder rates in the hemisphere. Although a majority of Salvadorans approve of President Saca's job performance, a majority also disapprove of his decision to maintain Salvadoran soldiers in Iraq. The United States is working with President Saca to combat narco-trafficking, to resolve immigration issues, and to promote free trade, especially through the Dominican Republic-Central America-United States Free Trade Agreement (DR-CAFTA). In February 2006, the Bush Administration extended the Temporary Protected Status (TPS) of eligible Salvadoran migrants living in the United States until September 9, 2007. On March 1, 2006, El Salvador became the first country in the region to implement the DR-CAFTA with the United States. In November 2006, El Salvador signed a five-year, $461 million compact with the Millennium Challenge Corporation that focuses on development of its northern border region. The Salvadoran government is also seeking further assistance from the Bush Administration in dealing with the problem of criminal gangs. Haiti The main issue for U.S. policy during the second session of the 109 th Congress was how to promote greater stability and strengthen democratic processes in Haiti most effectively. With an elected President and legislature in place, the U.S. focus has shifted to assisting the new government. The Administration hopes that an elected government will ease the development of a functioning infrastructure and a reduction in violence, making it easier to pursue other U.S. goals in Haiti, such as promoting democracy, encouraging respect for human rights, alleviating poverty, and decreasing narcotics trafficking. A further Administration goal, of limiting illegal immigration, has been challenged by some Members as not affording adequate protection for Haitian asylum-seekers. Presidential and legislative elections were held on February 7, 2006, runoff legislative elections on April 21, and municipal elections on December 3, after being postponed several times since fall 2005 amidst technical and security concerns. Former President Rene Preval (1996-2000) was declared the winner after a week of controversy over the tabulation of votes, and inaugurated on May 14. Preval outlined the two main missions of his government to be building institutions as provided for in the constitution, and creating conditions for private investment in order to create jobs. He emphasized that these must be done through dialogue among all sectors and creating a secure environment. To that end, he has asked the United Nations Stabilization Mission in Haiti (MINUSTAH) to stay and has also said he will promote a constitutional change to formalize the dissolution of the Haitian army. Preval has placed the needs of Haitian children at the top of his political agenda, and UNICEF has pledged to mobilize international assistance to support those needs. Preval says he will cooperate fully with U.S. counternarcotics efforts; he asked for U.S. support for public works projects and passage of legislation to give Haiti trade preferences. On December 9, 2006, the 109 th Congress passed such a special trade preferences bill for Haiti, the Haitian Hemispheric Opportunity through Partnership Encouragement/HOPE Act of 2006 ( H.R. 6142 ) incorporated into H.R. 6111 ( P.L. 109-432 , Division D, Title V). Supporters said the bill, which expands U.S. preferential trade for Haiti by amending the Caribbean Basin Economic Recovery Act, could generate 40,000 jobs in Haiti. Some U.S. textile interests opposed it because it would provide preferences to some garments with components originating in China and other parts of Asia. The incoming Senate Finance Committee Chairman reportedly promised to hold a hearing in the 110 th Congress, before the HOPE act goes into effect, so that textile industry representatives may testify on the impact they say the bill will have ( National Journal , December 11, 2006). The HOPE legislation was presented as a compromise; it had more restrictive country of origin rules for apparel components than the Haiti Economic Recovery Opportunity Act (HERO, H.R. 4211 / S. 1937 ) which had been reintroduced for consideration in the fall of 2005. The House International Relations Committee unanimously approved a bill providing for recruitment of Haitian-Americans for Haitian reform efforts, the Haiti Economic and Infrastructure Reconstruction Act ( H.R. 611 ), on September 13, 2006, but action was not completed on the measure before the end of the 109 th Congress. The bill would have authorized $3 million annually from FY2006 to FY2011 for a USAID program to encourage U.S. professionals, especially Haitian-Americans, to help reform Haitian education, judicial, and health care systems. The bill would also have provided scholarship loans to talented Haitian students. The loans would be forgivable if the student returned to Haiti to help in revitalization efforts. Some Members had hoped to bring the bill to a vote before session's end, and may introduce a similar bill in the 110 th Congress. The Bush Administration provided an estimated $194 million for Haiti for FY2006 and requested $198 million for FY2007. Child survival and health, development assistance, and counter narcotics assistance funds would be decreased. HIV/AIDS Funding would be increased. Congress provided an additional $20 million for Haiti in an emergency supplemental bill ( H.R. 4939 , P.L. 109-234 , signed into law June 15, 2006). The bill includes $17.5 million in Economic Support Funds and $5 million in Child Survival and Health funds for Haiti. Former President Jean-Bertrand Aristide, who had maintained he was still Haiti's president since his departure in February 2004, acknowledged Preval as "my President" and said he wants to return to Haiti from exile. Preval has been estranged in recent years from Aristide, his former mentor. Publicly, Preval has said that Aristide has the constitutional right to return, but has also suggested that Aristide might want to consider that he will probably face corruption or other charges if he were to return. Privately, he is said to agree with foreign diplomats that Aristide's return would be destabilizing. But Preval must tread carefully, as much of his support came from Haiti's poor, Aristide's strongest supporters, many of whom now expect Aristide to return. In July 2006, international donors pledged $750 million to bridge Haiti's budget gap and fund economic, social, and democratic reconstruction projects from July 2006 through September 2007. The Haitian government is working with international donors, including the United States, to develop a long-term poverty reduction plan. Donors are also looking at how to ensure transparency as they consider providing more funds directly to the government rather than through non-governmental organizations. Honduras Honduras faces significant challenges in the areas of crime and human rights and improving overall economic and living conditions in one of the hemisphere's poorest countries. In November 2005, Hondurans elected Manuel Zelaya of the Liberal Party as president in a close race in which he defeated National Party candidate Porfirio Lobo Sosa. Zelaya was inaugurated on January 27, 2006 to a four-year term, succeeding President Ricardo Maduro of the National Party. Zelaya's Liberal Party failed to gain a majority in the National Congress, which has made it difficult for President Zelaya to enact his legislative agenda. Zelaya initially moved to replace President Maduro's zero-tolerance policy toward youth gangs, or maras, by using dialogue and other outreach techniques to convince gang members to give up violence and re-integrate into society. However, the Zelaya government also has resorted to more traditional crime control efforts such as arresting gang members, and has made promises to hire an additional 1,000 police officers each year. The government has been criticized by human rights organizations for proposing reforms to the national police force law that would include the creation of a Special Forces Battalion; these groups fear that such a move could lead to the "militarization" of the police. The United States has a close relationship with Honduras, characterized by significant foreign assistance, an important trade partnership, a military presence in the country, and cooperation on a range of transnational issues. Honduras is a party to the Dominican Republic-Central America-United States Free Trade Agreement (DR-CAFTA), which was approved by the Honduran Congress in March 2005 and by the U.S. Congress in July 2005 ( P.L. 109-53 ). The agreement entered into force with Honduras on April 1, 2006. On February 23, 2006, the Department of Homeland Security announced the extension of Temporary Protected Status (TPS) for some 75,000 eligible Hondurans in the United States until July 5, 2007. TPS, which had been scheduled to expire on July 5, 2006, initially was provided in the aftermath of Hurricane Mitch in 1998 and has been extended several times. In late March 2006, the Bush Administration announced that the Honduran port of Puerto Cortes was now included in the U.S. Container Security Initiative (CSI). In June 2006, President Zelaya announced that Honduras would seek to convert the Soto Cano Air Base (the location of Joint Task Force Bravo consisting of about 550 U.S. military personnel) into a commercial air cargo terminal, and in July, a Honduran military official announced that the government was looking to build a new military aircraft refueling facility—with U.S. support—in the Mosquito Coast region for anti-drug operations. In October 2006, however, the Honduran Defense Minister suggested that the conversion of Soto Cano, which would take more work than originally thought and cost some $100-200 million, might not be viable financially. Mexico Conservative Felipe Calderón of the National Action Party (PAN) was inaugurated as president on December 1, 2006, replacing President Vicente Fox (PAN) who served as President since 2000. Mexico's constitution limits presidents to one term in office. President Calderón narrowly defeated leftist Andrés Manuel López Obrador of the Party of the Democratic Revolution (PRD) in the July 2 election. López Obrador challenged the election results, but Mexico's Federal Electoral Tribunal (TEPJF) ruled in favor of Calderón. López Obrador rejects that decision and was sworn in as the "legitimate president" on November 20, 2006. President Calderón has focused on the budget and combating drug trafficking in the first weeks of his administration. His budget proposal includes a cut in the salaries of high-ranking officials, including the president, and controls on spending in the hopes of saving over $2 billion to spend on social programs. He did not suggest cuts in military salaries due to its role combating drugs. In mid-December he took back part of his budget request to reconsider proposed cuts in education, mostly at the university level. President Calderón sent over 6,000 soldiers and police to the western state of Michoacán to combat the high level of drug violence in that state. He also declared that he will loan 10,000 soldiers to the federal police to assist in the battle against drug cartels. Congressional interest in Mexico generally focuses on migration, border affairs, trade issues, and drug trafficking concerns. In September 2006, Congress approved the Secure Fence Act of 2006 ( P.L. 109-367 ) to authorize the construction of a border fence and other barriers along 700 miles of the U.S.-Mexico border as well as $1.2 billion in initial funding for fence construction through the FY2007 Department of Homeland Security Appropriations Act. Both the House and Senate approved immigration reform measures in the second session of the 109 th Congress, but did not enact comprehensive reform due to differences between the House measure ( H.R. 4437 , Border Protection, Antiterrorism, and Illegal Immigration Control Act of 2005), and the Senate measure ( S. 2611 , Comprehensive Immigration Reform Act of 2006). Principal differences include the House measure's criminalization of unlawful presence and the Senate measure's establishment of a temporary worker program. In May 2005, Congress passed the FY2005 Emergency Supplemental Appropriations ( H.R. 1268 / P.L. 109-13 ), which included the REAL ID Act of 2005, with provisions that strengthened border control and established identity card standards for drivers' licenses. On March 3, 2006, Homeland Security Secretary Michael Chertoff and Mexico's Secretary of Governance Carlos Abascal signed an action plan to combat border violence that calls for increased cooperation of law enforcement agencies and the establishment of communication protocols to facilitate such cooperation. In August 2006, U.S. and Mexican border governors agreed to share crime data. In March 2005, President Bush, President Fox, and Prime Minister Martin of Canada established the trilateral Security and Prosperity Partnership (SPP) of North America in an effort to advance the common security and the common prosperity of the countries through expanded cooperation and harmonization of policies. In August 2006, the SPP working groups submitted their second report to SPP leaders outlining completed initiatives and proposing new initiatives to ensure common security and prosperity. The working groups have established an Avian and Human Pandemic Influenza Coordinating Body and a North American Competitiveness Council. Increased cooperation between U.S. and Mexican Customs officials on money laundering has resulted in the seizure of millions of dollars. The three countries are working to more efficiently determine the risk of cargo at seaports. Mexico has implemented the Sea Cargo Initiative which allows gathers data electronically before loading at a port of origin. Earlier completed initiatives included measures to facilitate trade, such as the signing of a Framework of Common Principles for Electronic Commerce, and border security through, among other measures, an agreement between the U.S. and Mexico to create an Alien Smuggler Prosecution Program along the common border. Mexico is the United States' second most important trading partner, with two-way trade tripling since 1994 under the North American Free Trade Agreement (NAFTA), but there are various disputes between the countries. Mexico has complained, for example, that the United States is still failing to grant Mexican trucks access to U.S. highways, in part because of congressionally-imposed safety requirements. The United States, for example, initiated WTO dispute settlement proceedings in 2004 to dispute Mexico's 20% tax on soft drinks made with high fructose corn syrup (HFCS). The tax has had a devastating impact on HFCS sales. In November 2005, the Mexican Senate extended the tax on HFCS products. In March 2006, the WTO Appellate Body upheld the October 2005 decision in favor of the United States. For FY2006, the United States set a new tariff-rate quota of 250,000 metric tons of raw or refined sugar from Mexico, in keeping with Mexican claims under NAFTA, and Mexico followed suit by allowing up to 250,000 metric tons of HFCS from the United States in the same period. Mexico and the United States reached a sweetener agreement in August 2006. Under the agreement, Mexico will be able to export 500,000 metric tons of sugar duty free to the United States from October 1, 2006, to December 31, 2007. The United States can export the same amount of HFCS to Mexico during that period. On drug trafficking issues, Bush Administration officials have regularly praised Mexico's counternarcotics efforts under Fox, especially action against major traffickers and efforts to improve the judicial system. The State Department reported in March 2006, however, that Mexico remained the leading transit country for cocaine and the leading foreign supplier of methamphetamine and marijuana. Several bills ( H.R. 3889 , H.R. 2601 ) have been reported by committees to encourage a reduction of smuggling of methamphetamine from Mexico. In May 2006, President Fox vetoed counternarcotics legislation, including a provision that some said amounted to the decriminalization of small amounts of drugs for personal use. In his veto, President Fox included a suggested amendment for the Mexican Congress to consider. The U.S. Coast Guard captured Francisco Javier "El Tigrillo" Arellano Felix, head of the Tijuana cartel, off the coast of Baja California. Mexico extradited his brother and alleged drug kingpin, Francisco Rafael Arellano Felix, to the United States in September 2006. In November 2005, the Mexican Supreme Court ruled that life imprisonment without the possibility of parole does not constitute cruel and unusual punishment. As a result of this decision, criminals facing life imprisonment may be extradited to the United States. A January 2006 ruling that U.S. extradition requests only need to meet the requirements of the 1978 bilateral treaty, not the general law on international extradition, is likely to speed up the extradition of criminals wanted by the United States. In 2005, Mexico extradited an all-time high of 41 fugitives to the United States. Extraditions continued to increase in 2006 with 50 extraditions as of late October. The FY2006 Foreign Operations Appropriations Act ( H.R. 3057 / P.L. 109-102 ), enacted in November 2005, bars assistance to a country that refuses to extradite individuals accused of killing U.S. law enforcement officers, unless the Secretary of State certifies that application of the sanction is contrary to U.S. national interests. Similarly, the House-passed version of the FY2007 Foreign Operations appropriations bill, H.R. 5522 , would prohibit provision of State Department funds to countries that refuse to extradite a person indicted in the United States for killing a law enforcement officer. The bill also would prohibit all State Department assistance, except International Narcotics Control and Law Enforcement (INCLE) funds, to countries that refuse to extradite persons who may face a sentence of life imprisonment without the possibility of parole. As noted above, action on FY2007 foreign aid appropriations was not completed by the end of the 109 th Congress, so the 110 th Congress will need to complete action in early 2007. Nicaragua Sandinista leader and former President Daniel Ortega was elected President on November 5, 2006. Ortega's previous administration, from 1985-199, was marked by a civil war with U.S.-backed "contras," authoritarian tendencies, and charges of corruption. Since then, Ortega, who lost the last three presidential elections, has served as an opposition leader of the Sandinista National Liberation Front (FSLN) in the Nicaraguan Assembly. Two elements were key to Ortega's victory: a change in Nicaraguan electoral law, and a divided opposition. The Sandinistas negotiated a change in the electoral law with then-President Arnoldo Alemán's party eliminating the requirement that a candidate gain 45% of the vote to avoid a run-off election. The new law requires that a presidential candidate win either 40% of valid votes, or 35% of the vote plus at least 5% more votes than the second-place candidate in order to win in a first round. Ortega won only 37.9% of the vote, but was able to avoid a run-off vote because he was 9.6% ahead of the next closest candidate, Eduardo Montealegre of the Nicaraguan Liberal Alliance (ALN) party. The opposition was divided among four candidates. In the 2001 presidential elections, Ortega received 40% of the vote, but faced a united opposition and lost. Observers are unsure what Ortega's government positions will be, as he vacillated during his campaign between anti-U.S. rhetoric and pragmatic reassurances that his second administration would respect private property, pursue free-trade policies, and seek a cooperative relationship with the United States. Montealegre, who gained 28.3% of the vote, is a Harvard-educated banker and former finance minister who split from the conservative Liberal party dominated by Aleman, and advocated continued political reform. He was regarded by many as the U.S.-favored candidate. He will have a seat in the legislature. In third place with 26.2% was the Constitutional Liberal party (PLC) candidate José Rizo, an ally of Alemán and critic of President Bolaños. Edmundo Jarquin registered a distant fourth place at 6.4%. Jarquin, an economist who worked at the Inter-American Development Bank, left the FSLN in opposition to Ortega and in favor of political reform. He became the presidential candidate of the Sandinista Renewal Movement (MRS) when nominee Herty Lewites died suddenly in July 2006. Eden Pastora, a disaffected one-time Sandinista leader, won less than half a percent of the vote. The 90-member National Assembly was also elected; no party won an outright majority. The FSLN will have 38 seats, the PLC 25, the ALN 22, and the MRS 5. International and domestic observation groups pressed the government to address problems during the pre-election process such as a high rate of errors on voter registry lists, and difficulty getting voter identification cards needed to vote, and considered the elections to be fair. U.S. Agency for International Development (USAID) elections support for Nicaragua was expected to reach at least $12 million for election support activities by November 5, 2006. Critics accused both U.S. officials and Venezuelan President Hugo Chávez of trying to influence the election's outcome: the U.S. embassy for making critical remarks, such as alluding to Ortega and Rizo as "two corrupt bosses;" Chávez for supporting Ortega by providing fertilizer and oil under favorable terms through Sandinista-dominated groups. U.S. Ambassador Paul Trivelli, asserting his right to express his opinion, rejected calls to stop commenting on the elections. The elections followed more than a year of political tensions among current President Enrique Bolaños, the leftist Sandinista party, and allies of rightist former President Arnoldo Alemán (1997-2002). During the height of tensions, President Bolaños invoked the OAS Inter-American Democratic Charter, and the OAS sent several high-level delegations to help negotiate a solution. Bolaños had been isolated by his anti-corruption efforts against Alemán, who was sentenced to 20 years in prison in 2003 for fraud and money-laundering. Aleman still controls the PLC, and has obtained a conditional release. Ortega announced he was breaking the power-sharing pact between his party and the PLC that had defined national politics since it was negotiated in 1998 and hampered Bolaños' ability to govern. The FSLN and PLC still controlled many state institutions, however, including the electoral authority. After Ortega's announcement, the legislature passed reforms such as the passage of the 2006 budget, the first-ever tax code, local government transfers, and financial administration. Ortega and Bolaños then agreed to postpone the implementation of constitutional amendments at the root of the tensions. These amendments will transfer significant executive powers to the legislature in February 2007, unless Ortega's newly elected government seeks to change them. The National Assembly approved DR-CAFTA in October 2005 and passed intellectual property and other reforms in March 2006. It went into effect on April 1, 2006. Nicaragua is the second poorest nation in the hemisphere, rating only above Haiti. Nicaragua's poverty is widespread and acute. More than two-thirds of the rural population live in poverty. Some social indicators have shown little or no improvement since 1993. DR-CAFTA supporters say the agreement will promote economic growth, create jobs, and increase exports to the United States. In 2005, the Administration signed a five-year, $175 million agreement with Nicaragua under the Millennium Challenge Account program to promote rural development. The Bush Administration suspended military assistance to Nicaragua in March 2005, resuming it in October when an agreement was worked out to destroy anti-aircraft missiles the Administration says constitute a possible terrorist threat. The National Assembly suddenly voted on a law authorizing the missiles' destruction on July 13. Sandinista legislators walked out in protest, but PLC and Nicaraguan Liberal Alliance (ALN) legislators passed the bill 46 to 1. None of the missiles were destroyed, however, and with the election of Sandinista leader Ortega as President, their destruction does not appear likely to happen soon. Nicaragua hosted a meeting of hemispheric secretaries of defense in October 2006 at which regional security concerns were addressed. Resolution of property claims by U.S. citizens and immigration are contentious areas in U.S.-Nicaraguan relations. Nicaragua passed a law, scheduled to go into effect in 2007, creating a new Property Institute that could lead to the dismissal of property claim lawsuits arising from expropriations carried out by the Sandinista government in the 1980s. A House-passed immigration bill ( H.R. 4437 ) would have made unlawful presence in the United States a criminal, rather than a civil offense. A Senate-passed bill ( S. 2611 ) would have combined enforcement with guest-worker provisions. Nicaragua joined the Mexican and other Central American governments in criticizing U.S. efforts to increase border enforcement and demanded guest-worker programs. In February 2006, the Department of Homeland Security extended Temporary Protected Status (TPS) for about 4,000 eligible Nicaraguans living in the United States until July 5, 2007. Other issues of concern to Congress include improving respect for human rights, improving civilian control over defense policy, increasing Nicaragua's capacity to combat transnational crimes such as trafficking in people and narcotics, reforming the judicial system and implementing good governance. Panama With four successive elected civilian governments, the Central American nation of Panama has made notable political and economic progress since the 1989 U.S. military intervention that ousted the regime of General Manuel Noriega from power. The current President, Martín Torrijos of the Democratic Revolutionary Party (PRD), was elected in May 2004 and inaugurated to a four-year term on September 1, 2004. Torrijos, the son of former populist leader General Omar Torrijos, won a decisive electoral victory with almost 48% of the vote in a four-man race. He succeeded President Mireya Moscoso of the Arnulfist Party (PA), elected in 1999, whose administration was tainted by several high-profile corruption scandals. Torrijos' electoral alliance also won a majority of seats in the unicameral Legislative Assembly. The most significant challenges facing the Torrijos government have included dealing with the funding deficits of the country's social security fund; developing plans for the expansion of the Panama Canal; and combating unemployment and poverty. After protests and a protracted strike by construction workers, doctors, and teachers in 2005, the Torrijos government was forced to modify its plans for reforming the social security fund. In April 2006, the government unveiled its ambitious plans to build a third lane and new set of locks that will double the Canal's capacity. A constitutionally required referendum on the expansion project was held on October 22, 2006, with 78% of voters supporting the project. The United States has close relations with Panama, stemming in large part from the extensive linkages developed when the Panama Canal was under U.S. control and Panama hosted major U.S. military installations. The current bilateral relationship is characterized by extensive cooperation on counternarcotics efforts, assistance to help Panama assure the security of the Canal and its border with Colombia, and beginning in April 2004, negotiations for a bilateral free trade agreement (FTA). The United States provided Panama with $19 million in foreign aid in FY2005, and an estimated $14.4 million in FY2006. The FY2007 request was for $17.4 million, with $4 million under the Andean Counterdrug Initiative and $3.2 million in development assistance. After 10 rounds of negotiations, the United States and Panama announced the conclusion of a free trade agreement on December 19, 2006. U.S. Trade Representative Susan Schwab stated, however, that the agreement is subject to additional discussions on labor, and that the Administration would work with both sides of the aisle in Congress to ensure strong bipartisan support before submitting it to Congress. Panama has sought an FTA as a means of increasing U.S. investment in the country, while the Bush Administration has stressed that an FTA, in addition to enhancing trade, would further U.S. efforts to strengthen support for democracy and the rule of law. (Also see " U.S.-Panama Free Trade Agreement (FTA) " above.) Peru Since taking office on July 28, 2006, President Alan Garcia has embraced a free trade agreement with the United States, appointed a fiscal conservative as finance minister, and taken other steps to assure the international financial community that he is running the country as a moderate rather than as the leftist he had been in his early career. Garcia's earlier presidency (1985-1990), characterized by many observers as disastrous, was marked by hyper-inflation and a violent guerrilla insurgency. He also sought to reassure poor citizens that he was addressing their needs by pledging austerity measures such as halving the Government Palace's annual spending and redirecting the funds to a rural irrigation project. His initially high level of public support has begun to drop, however, as reflected in the poor showing of Garcia's APRA party in municipal and regional elections held on November 19, 2006. The former President was elected again on June 4, 2006, defeating populist Ollanta Humala. With conservative candidate Lourdes Flores edged out of the race in the first round, many observers cast Garcia as "the lesser of two evils" in the second round. Garcia also took advantage of a backlash of sentiment against Venezuela's President Hugo Chávez, who supported Humala. Chavez raised fears among middle- and upper-class Peruvians of expropriations reminiscent of those that occurred under a military dictator praised by both Chávez and Humala. Humala, a retired army officer who led an uprising against then-President Fujimori, espoused nationalist, anti-globalization policies. Many observers were concerned that Humala had authoritarian tendencies. The opposition leader was charged in August 2006 with murder in connection to his military actions in the 1990s. The previous President, Alejandro Toledo, presided over one of the highest economic growth rates in Latin America throughout his term. His popularity was extremely low, however, and he could not run for reelection because of term limits. Garcia has indicated he will continue pro-market economic policies, but will also find ways to use trade to reduce the level of poverty in Peru and widen the distribution of economic growth. Poverty is concentrated in rural and jungle areas, and among the indigenous population. The wealthiest 20% of the population receive 53% of the country's income, while the poorest 20% receive only 3%. Despite being barred from holding office until 2010 and being charged with ordering murder and torture, former President Alberto Fujimori (1990-2000) tried to return to Peru to run for president. The Chilean government arrested him in November 2005, released him on bail in May 2006, and is processing Peru's request for his extradition. His alliance won 15 seats in the legislature and is expected to press for his exoneration. In December 2006, Peru's prosecutor's office criticized Fujimori's delaying tactics and said it expected the Chilean courts to decide the issue in April 2007. Issues in U.S.-Peruvian relations include trade, drugs, security, and democracy. The United States completed negotiations for a free trade agreement with Peru in December 2005, and an agreement was signed in April 2006. The Peruvian legislature ratified the agreement in June. Some Members of the U.S. Congress have expressed concern over unresolved trade disputes with Peru and whether International Labor Organization standards should be included. Both the House and Senate held mock mark-ups of the U.S.-Peru Trade Promotion Agreement in July 2006, but did not vote on the measure before the end of the 109 th Congress. Congress did pass an extension of the Andean Trade Promotion and Drug Eradication Act ( P.L. 109-432 , Division D, Title VII) in December 2006 for six months, with a further six-month extension possible if a country enters into a free trade agreement with the United States. Peru is a major illicit drug-producing and transit country. Its anti-narcotics agency reported that coca planting outstripped eradication in 2004 and that the local drug industry appears to be producing pure cocaine now rather than sending it to Colombia to be processed. Garcia's administration has already begun a dialogue with coca growers and told the Bush administration that Peru would extradite convicted drug traffickers to the United States. A cell of the Shining Path, the extreme left guerrilla group active in the 1980s and early 1990s, rejected the 1992 cease-fire and carried out fatal attacks in coca growing areas. The Administration requested $98.5 million in FY2007 Andean Counterdrug Initiative funds for Peru, less than one-fourth of the funding Colombia receives. Democracy and human rights initiatives include the provision of $50 million over five years to support consolidating democratic reform. Also see sections above on the " Andean Counterdrug Initiative " and on the " U.S.-Peru Trade Promotion Agreement ." Venezuela Under the populist rule of President Hugo Chávez, first elected in 1998 and most recently re-elected to a six-year term in early December 2006, Venezuela has undergone enormous political changes, with a new constitution, a new unicameral legislature, and even a new name for the country, the Bolivarian Republic of Venezuela. U.S. officials and human rights organizations have expressed concerns about the deterioration of democratic institutions and threats to freedom of speech and press under the Chávez government. Chávez has survived several attempts to oust him from power, including an April 2002 coup attempt and an August 2004 recall referendum, which Chávez survived by a vote of 59% to 41%. The government has benefitted from the rise in world oil prices, which has sparked an economic boom. As a result, Chávez has been able to increase government expenditures on anti-poverty and other social programs associated with his populist agenda. In the country's December 3, 2006 presidential elections, President Chávez defeated opposition candidate Manuel Rosales 63% to 37% in polling that was monitored by international observers, including the Organization of American States. The United States traditionally has had close relations with Venezuela, the fourth major supplier of foreign oil to the United States, but there has been friction in relations with the Chávez government. U.S. officials have expressed concerns about President Chávez's plans for military arms purchases, his relations with such countries as Cuba and Iran, and his efforts to export his brand of populism to other Latin American countries. A dilemma for U.S. policymakers has been how to press the Chávez government to adhere to democratic principles without taking sides in Venezuela's polarized political conflict. In the 109 th Congress, the FY2006 Foreign Operations appropriations measure ( P.L. 109-102 ) provided $2 million in Democracy Funds for Venezuela, and $2.2 million in assistance under the Andean Counterdrug Initiative (ACI). For FY2007, the Administration requested $1 million in ACI funding, $1.5 million in Economic Support Funds (ESF) for democracy initiatives, and $45,000 for International Military Education and Training. The House-passed FY2007 Foreign Operations appropriation bill, H.R. 5522 , would have provided no ACI funding for Venezuela, while the Senate Appropriations Committee report to the bill ( S.Rept. 109-277 ) recommended full funding of the Administration's ACI and ESF requests. Final action on FY2007 foreign aid appropriations was not completed by the end of the year, leaving the 110 th Congress to complete action in 2007. Two resolutions on Venezuela were also approved in the 109 th Congress. H.Con.Res. 400 (Burton), approved July 26, 2006, condemned Venezuela's failures to stem the flow of narcotics through its territory and called for steps to restore cooperation between Venezuela and the Drug Enforcement Administration. S.Res. 607 (Bunning), approved by unanimous consent on December 6, 2006, condemned President Chávez's anti-American rhetoric during his September 20, 2006 speech before the U.N. General Assembly, and "the undemocratic actions of President Chávez." Other legislative initiatives not completed before the end of the 109 th Congress included H.R. 2601 , the House-passed version of which would have authorized $9 million for each of FY2006 and FY2007 for democracy programs in Venezuela and authorized funds for U.S.-government broadcasting to Venezuela; H.Con.Res. 224 (Fortuño), which would have called on the Venezuelan government to uphold human rights and civil liberties; H.Con.Res. 328 (Mack), which would have condemned President Chávez's anti-democratic actions; S. 2435 (Lugar), which would have increased hemispheric cooperation on energy issues; H.Res. 1033 (Graves), which would have condemned President Chávez's anti-American rhetoric at the United Nations; and S.Res. 587 (Santorum), which would have condemned the anti-democratic actions and statements of the leaders of Iran, Cuba, and Venezuela and expressed concern about the national security implications of the relationships between those leaders.

Over the past two decades, the Latin America and Caribbean region has made enormous strides in terms of political and economic development. In 2006, elections for head of government were held in 12 countries in the region, including the close election in Mexico in July, the re-election of presidents in Brazil, Colombia, Guyana, and Venezuela, and the election of former heads of government in Costa Rica, Haiti, Nicaragua, Peru, and St. Lucia. Although the region overall experienced an economic setback in 2002-2003, it has rebounded since 2004. Nevertheless, several nations faced considerable challenges that threatened political stability, including persistent poverty, violent guerrilla conflicts, autocratic leaders, drug trafficking, increasing crime, and the rise of a new form of populism in several countries. Legislative and oversight attention to Latin America and the Caribbean in the 109th Congress focused on continued counternarcotics efforts; trade issues; challenges to democracy, especially in Venezuela; efforts to bring political stability and ameliorate poverty in Haiti; efforts to foster political change in Cuba; and cooperation on migration and border security, especially with Mexico. Since 2000, the Andean Counterdrug Initiative (ACI) has been the primary U.S. program supporting the Colombian government's efforts to combat drug trafficking and terrorist activity perpetrated by guerrilla and paramilitary groups. In the first session, the 109th Congress approved the Administration's request to continue ACI funding in FY2006 at approximately the same levels as in previous years; the second session considered, but did not complete action, on the FY2007ACI request of $721.5 million, so the 110th Congress will need to take action early in 2007. In the trade arena, Congress approved legislation in 2005 (P.L. 109-53) implementing the Dominican Republic-Central America-United States Free Trade Agreement (DR-CAFTA) that had been completed in 2004. In 2006, free trade agreements (FTAs) with Peru and Colombia were signed in April and November, respectively, and on December 19, U.S.-Panamanian FTA negotiations were completed. Implementing legislation for all three countries could be introduced early in the 110th Congress. In late 2006, Congress also extended preferences for Andean imports and approved a special trade preferences measure for imports from Haiti as part of a trade and tax-extension bill (P.L. 109-432, Division D, Titles V and VII). With regard to democracy, Congress provided continued support to Haiti, the hemisphere's poorest nation, under the new government of Rene Preval. Venezuela remained a congressional concern because of fears that President Hugo Chávez has been using his political power to push toward authoritarian rule. With regard to U.S. policy toward Cuba, Congress continued to debate whether loosening or tightening the U.S. embargo would encourage political change. This report provides an overview of U.S. relations with Latin America and the Caribbean, focusing on the role of Congress and congressional concerns in the 109th Congress. It reflects final actions of the 109th Congress and will not be updated. For further information, see the CRS products listed after each topic.

Summary To summarize, the Director of OMB is authorized to oversee the development of, and ensure compliance with, policies, principles, standards and guidelines governing the security of all federal computer systems, except for national security computer systems. The Committee on National Security Systems has that authority for national security systems (which include both information and telecommunication systems). The Director of Central Intelligence cites similar authority for computer systems that contain intelligence information. NIST has the responsibility for developing security standards and guidelines for all federal computer systems, except national security systems. The National Security Agency has that authority for national security systems. Introduction This report provides a short summary of selected federal laws, executive orders, and presidential directives, currently in force, that govern computer security. The report focuses its discussion of the roles and responsibilities for computer security that have been assigned different federal departments and agencies, some of which were assigned 20 or more years ago. This report is primarily concerned with the security of computer systems and the electronic information contained on, or transmitted by, those systems from unauthorized access, use, disclosure, disruption, modification or destruction, in the context of information services. The report does not discuss broader issues associated with information assurance which includes such concerns as the marking and handling of information in both electronic and physical formats, the assignment of certain status to certain types of information, and determining who should and should not have authorized access to it. The report also touches on telecommunications to a limited extent. Even though the technologies associated with computers and telecommunications have become inextricable, there remains a distinction between the use of that technology for information services (i.e. the Internet) and its use, in some cases of the very same hardware, for telecommunication services. The major federal role and responsibility in computer security relate primarily to securing federally owned, leased, or operated systems (or those systems operated for the federal government under contract or by third parties). In general, the federal government does not regulate the security of non-government computer systems (other than those used by contractors for the federal government). However, the federal government does require certain information held on non-government systems to be protected against unauthorized access and disclosure. In addition, as part of its effort to enhance the security of the nation's critical infrastructure, the federal government is working with and encouraging the private sector to improve security of the nation's information infrastructure more generally. Another role the federal government plays in computer systems security is to investigate and prosecute federal computer crimes. The federal government also offers assistance to state and local law enforcement entities in their investigation and prosecution of computer activities made illegal at the state level. Finally, the federal government has programs in research and development and in the development of the nation's expertise in computer security. Securing Federal Computer Systems Non-National Security Systems Building upon the Computer Security Act of 1987 ( P.L. 100-35 ), the Paperwork Reduction Act of 1995 ( P.L. 104-13 ), and the Information Technology Management Reform Act of 1996 (i.e. Clinger-Cohen Act, P.L. 104-106 , Division E), the Federal Information Security Act of 2002 ( P.L. 107-347 , Title III) provides the basic statutory requirements for securing federal computer systems. The Federal Information Security Act (FISMA) requires each agency to inventory its major computer systems, to identify and provide appropriate security protections, and to develop, document, and implement an agency-wide information security program. FISMA authorizes the National Institute of Standards and Technology (NIST) to develop security standards and guidelines for systems used by the federal government. It authorizes the Secretary of Commerce to choose which of these standards and guidelines to promulgate. FISMA authorizes the Director of the Office of Management and Budget (OMB) to oversee the development and implementation of (including ensuring compliance with) these security policies, principles, standards and guidelines. To help fulfill his responsibilities, FISMA authorizes the Director of OMB to: require agencies to follow the standards and guidelines developed by NIST and prescribed by the Secretary of Commerce; review agency security programs annually and approve or disapprove them; and, take actions authorized by the Clinger-Cohen Act (including budgetary actions) to ensure compliance. FISMA also requires agencies to conduct, annually, an independent evaluation of their security programs which includes an assessment of the effectiveness of the program, plans, and practices and compliance with FISMA requirements. The result of those evaluations are forwarded to the Director of OMB, who is to summarize the results each year in a report to Congress. FISMA also directs the Director of OMB to "ensure the operation" of a federal information security incident center. Among the missions of this center are: providing timely technical assistance to federal agencies in detecting and handling computer incidents; and, compiling and analyzing incident data. Such a center existed prior to FISMA. The Federal Computer Incident Response Capability (FedCIRC) evolved out of a pilot project first begun at NIST in 1996. FedCIRC was transferred to the General Services Administration, before being transferred again to the Department of Homeland Security. This capability is now located within the National Cyber Security Division in the Information Analysis and Infrastructure Protection Directorate. The above mentioned roles and responsibilities of NIST, the Secretary of Commerce, and the Director of OMB (except for the Director's authority to take related budgetary actions and to report to Congress), do not extend to computer systems identified as national security systems. National Security Systems FISMA defines a national security system, in statute, as: Any computer system (including any telecommunications system) used or operated by an agency or by a contractor of an agency, or other organization on behalf of an agency— (i) the function of which— (I) involves intelligence activities; (II) involves cryptologic activities related to national security; (III) involves command and control of military forces; (IV) involves equipment that is an integral part of a weapon or weapons system; (V) ...is critical to the direct fulfillment of military or intelligence missions; or (ii) is protected at all times by procedures established for information that have been specifically authorized under criteria established by an Executive Order or an Act of Congress to be kept classified in the interest of national defense or foreign policy. The definition explicitly excludes systems that are used for routine administrative and business applications (including payroll, finance, logistics, and personnel management applications). The roles and responsibilities for securing national security systems are outlined in National Security Directive 42 (NSD-42) , signed July 5, 1990 by President George H. W. Bush. NSD-42 establishes the National Security Telecommunications and Information Systems Security Committee, now called the Committee on National Security Systems (CNSS). CNSS is an interagency committee, chaired by the Department of Defense. Among other assignments, NSD-42 directs the CNSS to: provide system security guidance for national security systems to executive departments and agencies; and, submit annually to the Executive Agent (see below) an evaluation of the security status of national security systems. NSD-42 also directs the Committee to interact, as necessary, with the National Communications System Committee of Principals (see below). NSD-42 assigns membership to the Committee to voting representatives of the Secretaries, Directors, and Administrators of the following departments and agencies: State, Treasury, Defense, Commerce, Transportation, Energy, Office of Management and Budget, Central Intelligence, Federal Bureau of Investigations, Federal Emergency Management Agency (FEMA), General Services Administration, National Security Agency, Defense Intelligence Agency. Also included are: the Attorney General, the Assistant to the President for National Security Affairs, Chairman of the Joint Chief of Staff, the Chiefs of Staff of the Army and the Air Force, the Chief of Naval Operations, the Commandant of the Marine Corps, and the Manager of the National Communications System (NCS). FEMA and NCS are now parts of the Department of Homeland Security. NSD-42 names the Secretary of Defense as the Executive Agent of the Government for National Security Telecommunications and Information Systems Security. NSD-42 directs the Executive Agent to implement policies and procedures that: ensure the development of plans and programs necessary to secure national security systems; procure for, and provide to, executive departments and agencies technical security materials, and other technical assistance; conduct, approve, or endorse research and development of security techniques and equipment; and to operate or coordinate the activities of federal technical centers related to national security systems. NSD-42 also assigns to the Executive Agent the responsibility for reviewing and assessing the National Manager's (see below) recommendations on national security systems programs and budgets for executive departments and agencies. The Executive Agent may make appropriate budgetary and programmatic recommendations to agency heads as well as to the National Security Council and to the Office of Management and Budget. In addition, NSD-42 instructs the Executive Agent to report the security status of national security systems to the President through the National Security Council. NSD-42 also designates the Director of the National Security Agency as the National Manager for National Security Telecommunications and Information Systems Security. Among the authorities granted the National Manager are: examine U.S. Government national security systems and evaluate their vulnerability to foreign interception and exploitation; conduct, approve, or endorse research and development of security techniques and equipment; review and approve all security related standards, techniques, systems, and equipment for national security systems; assess the overall security posture of and disseminate information on threats to and vulnerabilities of national security systems; operate a central technical center to evaluate and certify national security systems; prescribe minimum standards, methods, and procedures for protecting national security systems; annually review and assess the national security systems programs and budgets of department and agencies, individually and in the aggregate, and recommend alternatives to the Executive Agent; and, enter into agreements for the procurement of technical security materials and equipment and their provision to executive departments and agencies, and when appropriate, to government contractors and foreign governments. Summary To summarize, the Director of OMB is authorized to oversee the development of, and ensure compliance with, policies, principles, standards and guidelines governing the security of all federal computer systems, except for national security computer systems. The Committee on National Security Systems has that authority for national security systems (which include both information and telecommunication systems). The Director of Central Intelligence cites similar authority for computer systems that contain intelligence information. NIST has the responsibility for developing security standards and guidelines for all federal computer systems, except national security systems. The National Security Agency has that authority for national security systems. National Strategy Although carrying less authority than law, executive order, or presidential directive, the National Strategy to Secure Cyberspace , released in February 2003, makes a number of recommendations aimed at the largest computer network operators, including the federal government, to the smallest of home users. Three recommendations direct specific federal agencies to take specific actions to improve the security of federal systems. The Strategy recommends DHS use exercises to test the security of federal systems and to report the results of those exercises to the Director of OMB. It also directs DHS to work with the General Services Administration to develop an improved patch management system, to ensure that agencies have made up-to-date security modifications to their software. The Strategy also directs OMB to coordinate the development of a research and development strategy for information technology security and to update this annually. National Communication System Because of the reliance of computer networks on telecommunication assets and the use of computers in telecommunication networks, and the inextricable nature of the technologies involved, it is necessary to spend a few paragraphs discussing the National Communication System. NSD-42 makes reference to the National Communication System's Committee of Principals. The National Communication System (NCS) was first established by Presidential Memorandum No. 252, signed by President Kennedy in 1963 following the Cuban Missile Crisis. The Memorandum called for establishing a NCS by linking together, and improving on an evolutionary basis, the communication facilities and components of various federal agencies. This original memorandum since has been amended and superseded over time. The Executive Order currently in force is Executive Order 12472 , signed by President Reagan on April 3, 1984, which was amended slightly by President George W. Bush in Executive Order 13286, on February 28, 2003. E.O. 12472 established (i.e. defined) a national communication system as those telecommunication assets owned or leased by the federal government that can meet the national security and emergency preparedness needs of the federal government, together with an administrative structure that could ensure that a national telecommunications infrastructure is developed that is responsive to national security and emergency preparedness needs. The administrative structure includes a National Communication System Committee of Principals, an Executive Agent, and a Manager. The National Communication System Committee of Principals consists of those agencies, designated by the President, that own or lease telecommunication assets identified as part of the National Communication System, or which bear policy, regulatory, or enforcement responsibilities of importance to national security and emergency preparedness telecommunications. The mission of the Committee of Principals is: to assist (including making recommendations to) the President, the National Security Council, the Homeland Security Council, the Director of the Office of Science and Technology Policy (OSTP), and the Director of the Office of Management and Budget (OMB) in exercising their functions and responsibilities associated with the National Communication System. Together the National Security Council, the Homeland Security Council, the Director of OSTP, and the Director of OMB, in consultation with the Executive Agent and the Committee of Principals, determine the requirements for the national communication system. The Committee of Principals also works closely with private sector service providers, which own and operate some of the assets that make up the NCS, through the National Security Telecommunication Advisory Committee. The Committee of Principals also; acts as forum in which Members may discuss and report on ongoing and perspective national security and emergency planning plans and programs; and, ensures that the NCS is responsive, capable of satisfying priority telecommunication requirements, and survivable to the maximum extend practicable at all times, including times of crisis and emergency. Infrastructure security is specifically mentioned as one of the concerns of the NCS (Section 1(c)(3)). The responsibilities of the Executive Agent include: designating the NCS Manager; ensuring the NCS conduct unified planning and operations; and, ensuring coordination with emergency management activities of the Department of Homeland Security. The original EO designated the Secretary of Defense as the Executive Agent. The Homeland Security Act of 2002 transferred the NCS to the Department of Homeland Security. To reflect this change, Executive Order 13286 made the Secretary of Homeland Security Executive Agent. The responsibilities of the NCS Manager include preparing for consideration by the Committee of Principals: recommendations on an evolutionary telecommunications architecture to meet current and future national security and emergency preparedness needs; plans and procedures for the allocation and use, including the priorities and preferences, of federally owned or leased assets under all emergency or crisis conditions; plans and standards for reducing impediments to interoperability; tests and exercises for evaluating capabilities; budget reviews; and, implement any approved plans or programs. The Manager also chairs the Committee of Principals. As result of the transfer of the NCS to the Department of Homeland Security, the Secretary of Homeland Security, as Executive Agent, has designated the Assistant Secretary for Infrastructure Protection as the NCS Manager. EO 12472 also established a joint industry-government National Coordinating Center (NCC) which assists in the initiation, coordination, restoration, and reconstruction of national security and emergency preparedness telecommunication services or facilities under all conditions. Protecting Information on Private Systems There are currently no general federal requirements for private entities other than federal contractors operating systems for the federal government to secure their computer systems. However, there are requirements for entities who hold or process certain types of personal information to ensure the confidentiality of that information. To date, this includes financial information and medical information. There is also a federal requirement that certain firms that register with the Security and Exchange Commission (SEC) must include in the financial reports an assessment of their internal financial controls. To the extent that each of these types of information is held and or processed electronically, the security of some private computer systems come under federal regulation. Title V of the Gramm-Leach-Bliley Act ( P.L. 106-102 , 15 USC Chpt. 94, §6801 et seq. ) requires financial institutions to protect the security and confidentiality of their customers' nonpublic personal information. The Act authorizes various federal regulatory agencies, (the Comptroller of the Currency, the Security Exchange Commission, the Federal Deposit Insurance Corporation, et al.) to coordinate the development of regulations for meeting this requirement. Each of these federal agencies is authorized to enforce the regulations for those institutions in their jurisdiction. The regulations (16 CFR Part 314) require financial institutions to develop, implement, and maintain a comprehensive information security program that contains appropriate administrative, technical, and physical safeguards. Such a program should include the designation of an employee to coordinate the program, risk assessments, regular tests and monitoring of safeguards, and a process for making adjustments in light of test results and/or changes in operations or other circumstances that may impact the effectiveness of the program. The Health Insurance Portability and Accountability Act of 1996 , ( P.L. 104-191 , Title II, Subtitle F, Sec. 262, 42 USC 1320d et seq. ) authorizes the Secretary of Health and Human Services to adopt standards that require health plans, health care providers, and health care clearinghouses to take reasonable and appropriate administrative, technical and physical safeguards to: ensure the integrity and confidentiality of individually identifiable health information held or transferred by them; to protect against any reasonably anticipated threats, unauthorized use or disclosure; and to ensure compliance with these safeguards by officers and employees. These security standards were adopted in 45 CFR Part 164, Subpart C. The Secretary assigned responsibility for enforcing these security standards to the Center for Medicare and Medicaid Services. Besides these privacy-oriented rules, the Sarbanes-Oxley Act of 2002 ( P.L. 107-204 , §404) authorizes the Security Exchange Commission to prescribe regulations requiring entities that produce annual financial reports pursuant to sections 13(a) or 15(d) of the Securities Exchange Act of 1934 to contain a report on the firm's internal financial controls. The report must state the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting and assess the effectiveness of those structures and controls. External audits must attest to and report on management's assessments. "Internal control" is defined as a process that provides assurance regarding the reliability of financial reporting. It pertains to the maintenance of records that accurately reflect the transactions and dispositions of assets and prevents or detects unauthorized acquisition, use, or disposition of assets. While there is no specific mention of computer security, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Framework for Enterprise Risk Management, which is mentioned in the regulation (17 CFR Part 210, 228, et al.) as the kind of evaluation process that would be acceptable, specifically includes the security of information technology (systems, software, applications) as a critical element to assess. Working with the Private Sector Continuing the basic policy outlined in the Clinton Administration's Presidential Decision Directive No. 63, the Bush Administration's Homeland Security Presidential Directive No. 7 (HSPD-7) , released December 17, 2003 states that it is U.S. policy to enhance the protection of the nation's critical infrastructure. Certain agencies were designated as lead agencies to work with their private sector counterparts. In addition to assigning the Secretary of Homeland Security the responsibility of coordinating the nation's overall efforts in critical infrastructure protection across all sectors, HSPD-7 also designates the Department of Homeland Security (DHS) as lead agency for the nation's information and telecommunications sectors. As a lead agency, DHS is to share threat information, help assess vulnerabilities, and encourage appropriate protective action and the development of contingency plans. In addition, HSPD-7 directs the Secretary of Homeland Security to maintain an organization that serves as a focal point for securing cyberspace. That organization is to: facilitate collaboration between federal departments and agencies, state and local governments, the private sector, academia, and international organizations. Its mission includes: 24x7 analysis and warning; information sharing; vulnerability reduction; mitigation; and, aiding national recovery. The National Cyber Security Division was established within the Information Analysis and Infrastructure Protection (IA/IP) Directorate in June 2003, leveraging capabilities transferred to DHS by the Homeland Security Act of 2002, such as elements of the National Infrastructure Protection Center from the FBI and FedCIRC from the General Services Administration. Beyond making DHS responsible for coordinating the national effort to protect critical infrastructure across all sectors, the Homeland Security Act of 2002 also authorizes the DHS (through the Undersecretary for Information Analysis and Infrastructure Protection), as appropriate and upon request, to provide the private sector with analysis and warning of threats and vulnerabilities of computer systems. It also authorizes the Undersecretary for IA/IP, in coordination with the Undersecretary for Emergency Preparedness and Response, as appropriate and upon request, to provide the private sector with crisis management support in response to a threat or attack on critical computer systems, and technical assistance to help recover from major failures of critical computer systems. The Act also authorizes the Undersecretary for IA/IP to establish a "NET Guard" comprised of local teams of experts to help communities respond to and recover from attacks on information and telecommunication systems. The National Strategy to Secure Cyberspace , mentioned earlier, also recommends that the Department of Homeland Security be responsible for a number of tasks associated with interacting with the state, local, and private sector. Some of these have been captured in HSPD-7. Among the recommended tasks are: establish a 24x7 synoptic view of the health of the information infrastructure; share threat and warning information; explore the use of exercises as a way to test coordination of public and private incident management, response and recovery capabilities; coordinate development of a national threat assessment; encourage a national voluntary patch clearinghouse; encourage the advanced training of cybersecurity professionals; and, encourage the development of broadly accepted certification program for those professionals. As part of its authority to develop standards for federal computer systems, NIST is also authorized by FISMA to assist the private sector, upon request, in using and applying security standards that NIST develops. Investigating and Prosecuting Computer Crimes The Counterfeit Access Device and Computer Fraud and Abuse Act of 1984 ( P.L. 98-473 , Title II, §2102(a), 18 USC 1030, as amended) makes certain acts associated with the unauthorized access to computers a federal crime. For example, it is a crime to knowingly gain unauthorized access to a nonpublic federal computer or a computer used by or for the federal government. It is also a crime to knowingly gain unauthorized access to a computer and obtain national security information, financial or credit information, or any information from a protected computer. A protected computer is one used by or for a financial institution, the federal government, or one used in interstate or foreign commerce and communication. It is also a federal crime to knowingly transmit a program, information, code, or command that causes damage to a protected computer. While the Attorney General has the primary authority to enforce federal laws, the Act also specifically states that the United States Secret Service has the authority, as does any other agency with such authority, to investigate the computer-related offenses covered by this section of the Act. The USA PATRIOT Act ( P.L. 107-56 , §506(a)) amended the above statute by adding that the Federal Bureau of Investigation (FBI) has primary authority to investigate offenses where espionage or national security is involved, except for offenses affecting the duties of the United States Secret Service. Such authorities are to be exercised in accordance with an agreement signed by the Secretary of the Treasury and the Attorney General. Section 105 of the PATRIOT Act authorizes the Director of the United States Secret Service to develop a national network of electronic crime task forces, modeled on the New York Electronic Crimes Task Force, for the purpose of electronic crimes, including potential attacks against critical infrastructure and financial payment systems. Section 816 of the PATRIOT Act also authorizes the Attorney General to establish regional computer forensic laboratories to provide forensic examinations with respect to seized or intercepted computer evidence related to criminal activity, to provide training and education to other federal, state, and local law officials, and to assist other federal, state, and local law officials. Some of the ground-rules for investigating computer crimes are found in the Electronic Communications Privacy Act . ( P.L. 99-508 , USC Chapters 119,121, 206). A number of these were modified in Title II of the USA Patriot Act. For example, prior to the amendments, tracking computer hackers via computer logs across jurisdictional areas required separate court orders from each jurisdiction. The USA Patriot Act allows investigators to get a single court order from any court of competent jurisdiction. Further discussion of these provisions is beyond the scope of this report. Research and Development and Developing Information Security Expertise The federal government has a number of programs aimed at developing computer security expertise. FISMA requires an agency's Chief Information Officer to provide training to personnel with significant security responsibilities. FISMA also requires the agency head to ensure the agency has sufficient personnel trained in information security. The Computer Security Act, which was superceded by FISMA, had authorized NIST to develop, in consultation with the Office of Personnel Management, guidelines for training agency employees in information security practices. The guidelines developed cover a range of needs from making users aware of security issues and practices to guidelines for agencies to use when developing training courses for people charged with securing computer systems. NSA has similar guidelines for training personnel in securing national security systems. The National Security Agency, citing its authorities under NSD-42 to develop standards for securing national security system and in response to PDD-63, also has established a National Information Assurance Education and Training Program, part of which includes the National Centers of Excellence in Information Assurance Education. The Centers' program selects certain universities who have developed programs in information assurance that meet criteria established by the Committee on National Security Systems. Following the release of PDD-63, the Clinton Administration began a program called Scholarship-for-Service (SFS) which, leveraging NSA's Center of Excellence program, seeks to help schools develop information security programs that could qualify for NSA's Centers program and to support students with 2-year scholarships. Upon graduation, students receiving SFS support would be required to work 2 years in the federal sector. The National Science Foundation was tasked with running this program. The Floyd D. Spence National Defense Authorization Act of FY2001 ( P.L. 106-398 , §922) authorized the Secretary of Defense to establish a similar program for the Department of Defense. In part to help develop a cadre of experts in information security, Congress also passed the Cyber Security Research and Development Act ( P.L. 107-305 ). The Act authorizes the National Science Foundation to: award basic research grants in areas that enhance computer security; to support the establishment of multi-disciplinary Centers for Computer and Network Security Research; to award grants to institutions of higher learning to establish or improve their programs and enrollments in computer and network security; to provide graduate assistance programs in computer and network security; to establish a graduate research fellowship program; and to establish a grant program to establish university programs to train students to pursue an academic career in computer and network security. The Act also authorized NIST to support the establishment of multi-disciplinary research partnerships in computer security between universities, government, profit, and non-profit entities; and, to establish a post-doctoral research fellowship program and a senior research fellowship program. In addition to supporting the development of national expertise in computer systems security, the federal government also conducts and supports research and development in computer systems security. As mentioned earlier in this report, NIST, DOD, and NSA are specifically authorized in FISMA and NSD-42, respectively, to conduct and support research in computer systems security. In addition, the Homeland Security Act of 2002 (Title II, Subtitle D) establishes within the Department of Justice the Office of Science and Technology. The Act authorizes this Office to conduct research, including research in tools and techniques that facilitate investigative and forensic work related to computer crimes. The Homeland Security Act of 2002 (§308) also authorizes the Undersecretary of Science and Technology of the Department of Homeland Security, when establishing university research centers, to consider universities with nationally recognized programs in information security. Although the Homeland Security Act of 2002 does not specifically call for research in this area, computer security makes up one of the portfolios of the Science and Technology Directorate. Conclusion Current Status The roles and responsibilities of various federal departments and agencies in the area of computer security are relatively well defined. OMB and NIST are responsible for developing policy and standards, and for overseeing the implementation of those policies and standards, covering most of the federal government's computer systems. DOD, NSA, and the Director of Central Intelligence, working through the Committee on National Security Systems, are responsible for federal computer systems designated as national security systems. While inheriting the NCS and its responsibilities in the area of the NCS and telecommunications, the primary role of the Department of Homeland Security is to work with the private sector, state and local governments, and the public to protect the nation's information infrastructure (i.e. the Internet). The Secretary of Health and Human Services enforces regulations related to the privacy of individual health information held on private computer systems maintained by health care organizations. The SEC and other agencies with jurisdiction over financial institutions enforce regulations related to the privacy of individual financial information held on computer systems maintained by financial institutions. The SEC also enforces regulations related to the certification of internal financial controls (including those associated with a company's computer systems) for a large number of private sector firms. A number of agencies have the authority to investigate and prosecute federal computer crimes, in particular the Department of Justice and the Secret Service (now part of DHS). NSA, NSF, NIST and DHS are specifically authorized to support research and development in computer security and to develop the nation's expertise in this area. Issues However, at least three issues have arisen concerning these roles and responsibilities: 1) the role the federal government in regulating the nation's privately owned and operated critical information infrastructure; 2) the relative roles of the Department of Homeland Security and the National Security Agency in setting policy and standards for computer and telecommunication systems handling critical infrastructure information; and, 3) the relative roles of the National Cyber Security Division and the National Communication System in setting policy and standards for dealing with the private sector. Federal Regulation of the Private Sector The current role of the federal government in regulating private sector computer systems is primarily derived from its interest to protect the privacy of individually identifiable information held on private computer systems or to improve the oversight of financial reporting by the private sector. Security of a company's or an individual's computer system or the Internet as a whole are not the policy objective. There is a long running debate about whether the federal government should take a more active regulatory role in improving private sector computer security. Two options that have been discussed include requiring the development of more secure computer software and/or requiring users to improve and maintain the security of their systems over time. A number of critics of the National Strategy to Secure Cyberspace have asserted that the Strategy did not go far enough in either of these directions in its recommendations. These critics tend to come from the developers of security products and services. Both software developers and software users take the position that it is in a company's interest to sell and maintain secure products and systems and that market forces are the best way to ensure cost-effective security. Current policy is to engage the private sector and collaborate in efforts to raise awareness of security issues and to disseminate best practices. Critical Infrastructure Information The Homeland Security Act of 2002 defined a class of information called critical infrastructure information. Critical infrastructure information is information coming from the private sector, and state and local governments to the Department of Homeland Security concerning the identification of critical assets, their vulnerabilities, measures taken to protect them, and suspicious incidents. The Act gives the Secretary of Homeland Security authority to develop the information systems (as well as the protocols, etc.) needed to facilitate the sharing, storage, and analysis of this information. While not necessarily considered classified information, critical infrastructure information is considered sensitive and exempt from public disclosure. It might also be held and transmitted over systems that also handle classified or other types of sensitive information that would make the information systems handling it a national security system which falls within the jurisdiction of the Committee on National Security Systems and NSA. Who takes the lead in developing the policies and standards governing the systems being designed to handle this information? Computer and Communication Security Lastly, the Information Protection side of the Information Analysis and Infrastructure Protection Directorate at DHS has both a National Cyber Security Division and the National Communication System. As the technologies of telecommunications and computer become even more inextricable, there may appear to be some redundancies in the roles and responsibilities of these two entities. The role of the NCS is well established from over 40 years of experience. Its jurisdiction, while wide, still deals primarily with those assets considered necessary for national security related communications or during times of national emergencies. The NCSD has a much wider mandate; to work with all owners, operators, and users of the nation's information infrastructure. There is some debate about whether these two functions should merge or remain separate.

This report provides a short summary of selected federal laws, executive orders, and presidential directives, currently in force, that govern computer security. The report focuses on the major roles and responsibilities assigned various federal agencies in the area of computer security. This report will not be updated. One major area of federal activity in computer security deals with securing federal computer systems. The roles and responsibilities for securing federal computer systems are split between national security systems and all other federal systems. The Federal Information Security Management Act of 2002 authorizes the Director of the Office and Management and Budget to oversee the development of, and compliance with, security standards and guidelines, developed by the National Institute of Standards and Technology and promulgated by the Secretary of Commerce. These authorities, however, do not apply to computer systems considered to be national security systems. The roles and responsibilities for securing national security systems are established by National Security Directive 42 (NSD-42). NSD-42 establishes what is now called the Committee on National Security Systems, which it authorizes to develop, and require compliance with, standards and guidelines for national security systems. In general, the federal government does not regulate the security of non-government computer systems. However, the federal government does require certain information held on non-government systems to be protected against unauthorized access and disclosure, primarily out of privacy considerations. To date, this has been limited to financial information (Gramm-Leach-Bliley Act) and medical information (Health Insurance Portability and Accountability Act of 1996). A number of regulatory agencies have authority for developing and enforcing standards for financial information. The Secretary of Health and Human Services has authority to develop and enforce standards for medical information. The Sarbanes-Oxley Act of 2002 requires certain companies to certify the accuracy of their internal financial controls. The Security Exchange Commission has authority to develop standards and enforce these regulations. Although it currently has a limited role in securing the nation's overall information infrastructure, the federal government does, through the Department of Homeland Security, work with and encourage the private sector, state and local government, academia, and the general public to protect the nation's information infrastructure. This role is authorized in a generic sense for all critical infrastructure by the Homeland Security Act of 2002. It is also reinforced more specifically in Homeland Security Presidential Directive No. 7 and the National Strategy for Securing Cyberspace. To date, these activities are voluntary for non-federal entities. Other roles established for the federal government include: investigation and prosecution of federal computer crimes; assisting state and local law enforcement entities in their investigation and prosecutions; and, developing the nation's expertise in information security.

Introduction The United States has a long history of providing benefits to those who have served in the defense of the nation. What began as a disability compensation and pension program for veterans during the early years of the republic has grown into a comprehensive veteran benefits and services system. The federal responsibility of managing this system has been entrusted by Congress primarily to the Department of Veterans Affairs (VA). The VA carries out its veterans programs nationwide through the following three administrations and an appeals board: The Veterans Health Administration (VHA) is responsible for veteran health care programs. The Veterans Benefits Administration (VBA) is responsible for disability compensation, pension, vocational rehabilitation, education assistance, home loan guaranty, and insurance, among other benefits. The National Cemetery Administration (NCA) is responsible for providing burial space and maintaining national cemeteries, among other responsibilities. The Board of Veterans Appeals (BVA) renders final decisions on appeals regarding veteran benefits claims. The VHA, the largest and most visible operating unit, is predominantly a direct service provider of primary and specialty care, similar in many ways to a large private sector health care system. However, some aspects of the VHA are very different from a private health care system. Not only does the VHA employ health professionals to provide health care services directly, but the VHA also purchases care for certain veterans from community health providers. Further, the VHA provides social services and other supportive services—such as housing assistance, home health aide services, and adult day health care—that are rarely tied to private sector health care providers or financed by private health insurance or Medicare. Beyond the provision of health care and other support services to veterans and eligible family members, the VHA is statutorily required to conduct medical research into the special health care needs of veterans, to train health care professionals, to serve as a contingency back up to the Department of Defense (DOD) medical system during a national security emergency, and to provide support to the National Disaster Medical System and the Department of Health and Human Services (HHS) as necessary. In addition to providing inpatient, outpatient, and a range of other medical care services, the VHA has been authorized by Congress since the 1960s to provide nursing home care to eligible veterans in VA facilities, private nursing facilities contracted by the VA, and state veterans homes. Although the VHA initially provided only institutional-based long-term care, VA long-term care services have expanded to include a full range of long-term services and supports (LTSS)—both institutional and non-institutional. These services include programs of care directly provided by the VA, such as home-based primary care and geriatric evaluation, as well as services purchased by the VA, such as home health aide and home respite care. The VA typically refers to programs under this broad umbrella as Geriatrics and Extended Care (GEC) Programs (see Figure 1 and text box for terminology used in this report). These programs share a primary goal: to support veterans to remain safe in the least restrictive environment. This report provides an overview of the long-term care services offered by the VA, whether directly provided or purchased from the community. It first provides a brief history of legislation relevant to VA long-term care services. Next, it provides information on veteran eligibility for care and enrollment, to give a picture of who these programs serve. It then provides an overview of the structure of the VHA to explain how care is administered, followed by a description of the various long-term care programs that the VA offers. Finally, the report discusses potential issues of interest for Congress. Brief Legislative History 1960s-1970s Prior to the enactment of P.L. 88-450 in 1964, the VA did not have explicit statutory authority to provide nursing home care to veterans in VA facilities; however, the VA did provide a limited form of institutional care in its domiciliaries for those who no longer needed hospitalization. Toward the end of FY1964, within the scope of existing statutory authority, the VA began making plans to implement a nursing home care program with 2,000 beds in VA hospitals "for those veterans who have obtained maximum hospital benefits, [but] are too physically disabled for domiciliary care, and still have a need for nursing care which for various reasons cannot be provided in the community." In August 1964, P.L. 88-450 authorized, among other things, 4,000 beds for nursing home care. It further authorized care in private or public nursing homes for no more than six months at VA expense for VA patients who had received maximum hospital benefits but who still needed long-term nursing home care. If the veteran needed permanent nursing home care for more than six months, the veteran would be placed in a VA nursing home rather than a private nursing home. P.L. 88-450 also authorized the VA to make per diem payments to state veterans' nursing homes for the care of eligible veterans. In enacting P.L.88-450, Congress recognized the growing need for nursing home care for World War II veterans in future years, and at the same time recognized the need for VA to move patients from expensive hospitals settings (when they no longer needed hospitalization) to less expensive nursing home settings for longer-term convalescence. P.L. 91-101, enacted in 1969, amended P.L. 88-450 and eliminated the six-month limitation on care at a contracted community nursing home for veterans who were previously hospitalized in a VA hospital for a service-connected disability. For all other veterans, the six-month limitation applied, but the VA was authorized to extend the time period at its discretion. The Veterans Health Care Expansion Act of 1973 ( P.L. 93-82 ) further liberalized eligibility for contracted community nursing home care for veterans with service-connected conditions and authorized the VA to provide nursing home care to veterans in contracted community nursing homes without having to be admitted to a VA hospital first. 1980s-1990s In 1998, a Federal Advisory Committee on the Future of VA Long-Term Care found that VA's long-term care system developed incrementally in the 1970s and early 1980s. Nursing home care remains its primary emphasis, while home and community based care is underdeveloped. In addition, long-term care programs are not fully integrated into the healthcare system at many VA facilities. Despite a continuum of offerings, services are not available universally and access often is restricted. Many facilities do not have mechanisms for coordinating long-term care services, relying on episodic admissions to individual programs. Long-term care is largely viewed as an adjunct rather than an integral part of the healthcare system, VA long-term care services must be remodeled to effectively deliver needed services. Based on recommendations of the Federal Advisory Committee on the Future of VA Long-Term Care, Congress began to examine the VA's long-term care programs, which led to the enactment of the Veterans Millennium Health Care and Benefits Act ( P.L. 106-117 ) in November 1999. This act, among other things, mandated nursing home care for veterans with a service-connected condition in need of such care and for veterans with nonservice-connected conditions who are 70% or more service-connected disabled. Among other things, it also required the VA to provide non-institutional care, such as home-based care and adult day health care, to all enrolled veterans. In his signing statement, President Clinton stated: This bill is especially significant for its approach in the provision of enhanced extended care services to veterans. It firmly establishes that the Department of Veterans Affairs (VA) should accord the highest priority for nursing home care to the most severely disabled veterans and those needing care for service-connected disabilities. It will also ensure that veterans enrolled in the VA health care system receive noninstitutional, extended-care services, including geriatric evaluations and adult day health care. VHA Eligibility, Enrollment, and Long-Term Care In general, eligibility for VA long-term care services depends on several factors, including veterans' need for the service, as determined by the VA; whether the service is institutional or non-institutional; and, for certain programs, veterans' service-connected status. However, to understand eligibility for VA long-term care services, it is important to understand eligibility for VA health care in general, the VA's enrollment process, and its enrollment priority groups. Unlike Medicare or Medicaid, VA medical care is not an entitlement program. Contrary to numerous claims made concerning promises of "free health care for life," not every veteran is automatically entitled to health care from the VA. Overview of VHA Eligibility Eligibility for VA health care is based primarily on "veteran status" resulting from military service. In general, veteran status is established by active-duty status in the military, naval, or air service and a discharge or release from active military service under "other than dishonorable" conditions (e.g., general, honorable, under honorable conditions). After veteran status has been established, the VA next places an applicant into one of two categories. The first category comprises veterans with service-connected disabilities or with incomes below an established threshold. Service-connected disability means that such disability was incurred or aggravated in the line of duty in active service. Veterans with service-connected disability or income below the threshold are regarded by the VA as "high priority" veterans and are enrolled in Priority Groups 1-6 (see Figure B-1 ). The second category of veterans comprises those who do not fall into one of the first six priority groups—primarily veterans with nonservice-connected medical conditions and with incomes above the VA-established threshold. These veterans are enrolled in Priority Group 7 or 8. As shown in Table 1 , the majority of VA-enrolled veterans (77%) fall into Priority Groups 1-6, with 23% of veterans in Priority Group 1 (those with 50% or more service-connected disability or determined by VA to be unemployable due to service-connected conditions) and 22% of veterans in Priority Group 5 (those with incomes below the threshold, receiving VA pensions, or receiving Medicaid). Once veterans are enrolled in the VA health care system, they remain in the system and do not have to reapply for enrollment annually, unless they wish to disenroll formally. VHA Enrollment The size and scope of the VA health care system are influenced by several factors, including the size of the veteran population, the number of veterans eligible for VA health care, veterans' decisions about whether to enroll, and once enrolled, whether to utilize VA health care services, including long-term care services. An estimated 9.1 million veterans (43% of all veterans) were enrolled in the VA health care system in FY2016. Those not enrolled are either ineligible to enroll or eligible but choose not to enroll. In addition, some veterans may be eligible but unaware of their eligibility status. While overall the number of veterans in the United States has declined since FY2000, the number of veterans enrolled in the VA health care system has increased significantly. The Veterans' Health Care Eligibility Reform Act of 1996 ( P.L. 104-262 ) required the establishment of a national enrollment system to manage the delivery of inpatient and outpatient medical care. The VHA began formally enrolling veterans for the first time in FY1999. As shown in Figure 2 , just over 4.9 million veterans (19% of all veterans) were enrolled in the VHA in FY2000; by FY2016, that number was estimated to have increased 86%, to 9.1 million enrollees. This increase is due, in part, to factors such as enrollment in newer veterans from Operation Enduring Freedom/Operation Iraqi Freedom/Operation New Dawn (OEF/OIF/OND), a larger number of female veterans, and economic conditions, among other factors. The number of veterans receiving VA health care services is projected to level off over the next 10 years. Veterans and Long-Term Care VHA enrollees are a clinically complex population with significant health care needs. VHA enrollees are more likely than nonveterans to be diagnosed with chronic health conditions, including those linked to their military service. For example, conditions such as PTSD are more prevalent in veterans compared with nonveterans, as are conditions such as cancer and diabetes. This likelihood is due, in part, to VHA eligibility policies based on service-connected conditions. Moreover, VHA policies regarding mental health screening, for example, lead to higher rates of diagnosis. In addition, veterans who access the VHA also tend to be older, less socioeconomically well off, and less healthy than veterans who do not rely on the VA for care. The VA health care system faces the challenge of providing care to those aging with disability as well as those aging into disability. Veterans of all ages may need long-term care, both younger veterans with disabilities and aging veterans. Moreover, the number of veterans with a service-connected disability, defined as a disability caused by injury or disease incurred or aggravated during active military service, is increasing. The VA determines whether veterans have service-connected disabilities, and for those with such disabilities, assigns ratings from 0% to 100% (in increments of 10%) based on the severity of the disability. As shown in Figure 3 , nearly 2.5 million veterans had a service-connected disability in FY2003; by FY2013, that number had increased to over 3.7 million. Moreover, the number of veterans who are rated in the highest disability rating group (i.e., veterans with 70% to 100% service-connected disabilities) has increased. Among those veterans with service-connected conditions, about 2 in 10 veterans (18%) were rated as having 70% to 100% service-connected disabilities in FY2003, compared with 3 in 10 veterans (30%) in FY2013. As the number of veterans with a service-connected disability increases, the demand for VA long-term care services over a veteran's lifespan will likely increase. The need for long-term care typically increases with age. In the general population, it is estimated that about half (52%) of individuals turning age 65 will develop a disability serious enough to need long-term care. Most will need care for two years, on average. However, one in seven is expected to have care needs for five years or more. Because the veteran population is older than the general population, long-term care services are an important part of VA's health benefits package. In 2016, 48% of all veterans enrolled in the VHA were aged 65 and over, compared with 15% of the general population (as of 2015). The majority of older veterans (85%) are aged 65 to 84. Vietnam-era veterans are the largest cohort of veterans and the cohort now reaching advanced age. VHA Organization and Long-Term Care Overview of VHA Organization The VHA is the largest integrated health care system in the United States, with over 1,700 sites of care, including medical centers, nursing facilities, clinics, and vet centers. To administer this large system, the VHA has divided the country into Veterans Integrated Service Networks (VISN), based on geography (see Figure 5 ). There are currently 18 VISNs, which vary regarding the number of sites of care, the types and number of facilities, and the geographic size of the network's region. Each VISN has a VISN Director, who has oversight of the VA facilities within that VISN and directly supervises the facility director at each facility. For example, VISN 10 has oversight of VA facilities in Indiana, the lower peninsula of Michigan, and Ohio, including 10 medical centers (VAMCs) and one outpatient health care center (HCC). Each of these main facilities has associated community based outpatient clinics (CBOCs) under its purview; for example, Cleveland, OH VAMC has 12 CBOCs in outlying areas, such as Akron and Canton. The Columbus, OH, HCC has four CBOCs, including Zanesville and Marion. Many facilities also have a Community Living Center (CLC), which is a nursing facility owned and operated by the VA. The CLC may be located within the same physical structure as the VA hospital, or it may be a separate structure at a nearby location; regardless, the CLC is considered a part of the parent VAMC and is under the direction of that facility's director. Alternatively, VISN 1 covers more states (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont) and has 11 VAMCs. In contrast, VISN 21 covers a large geographical area and has nine VAMCs in three states (Northern California, Hawaii, and Nevada) and covers U.S. territories such as Guam, which has one CBOC and one Vet Center under the purview of the VAMC in Honolulu, HI. Table 2 shows national numbers of different types of facilities as of December 2015. VA Long-Term Care Organization VA LTC programs are administrated at the VAMC/HCC level. Each VAMC/HCC offers certain mandatory programs and may offer several optional programs as well. The VISN Director offers some oversight into programming, but each facility has latitude to administer the various programs, within the parameters of national handbooks and directives, resulting in variability from facility to facility even within the same VISN. For example, in VISN 17, which primarily encompasses the state of Texas, all but two of the VAMCs offer the Medical Foster Home Program (MFH). MFH is a VA-approved adult foster care setting and is not currently mandated nationally. The Waco and Harlington, TX, VAMCs do not offer MFH—a local facility decision that may be based on factors such as lack of patient demand, staffing, budget, and availability of interested caregivers. Another example of program variability is Veteran Directed Home and Community Based Services (VD-HCBS), a collaborative program of the VA and the Administration for Community Living (ACL) that provides veterans with a budget to direct their own home care services. Sixty-eight VAMCs (out of 168) offered this program, as of October 2016; veterans served by other VA facilities do not have access to VD-HCBS. Nationally, the VHA Office of Geriatrics and Extended Care (GEC) provides guidance and oversight for these programs, including performance metrics, policy, auditing, and staff training. At the facility level, LTC programs may be organized in one Geriatrics Department (often called a "Service" or "Care Line") or housed in one of several different departments (such as Social Work Service, Nursing Service, or Primary Care). Geriatrics Departments may be led by an Associate Chief of Staff for Geriatrics, or equivalent position, who is responsible at the facility level for the administration of LTC programs and reports to the facility chief of staff. From facility to facility, there is variability in program organization and management. VHA Long-Term Care Services The VA offers long-term care in both institutional and non-institutional settings. Institutional settings may include both inpatient acute care and nursing home care, although the majority of long-term care the VA provides in institutional settings occurs in a nursing home setting, which is the primary focus in this report. Non-institutional care includes outpatient or ambulatory care settings, as well as care that occurs in the home or another community-based setting. These services cover a full spectrum of care needs, spanning veterans who are largely independent, to those who require significant assistance with basic daily activities, to those who are near the end of life. Some long-term care services are provided directly by VA staff, while other services are purchased from providers outside the VA. The subsection below describes non-institutional services provided and purchased by the VA. The next subsection provides information about long-term care provided in institutional settings. Non-Institutional Care The VA provides home and community-based care to eligible veterans enrolled in the VHA who meet certain clinical criteria (see Table 3 ). A primary goal of these programs is to support veterans in remaining safely in their home settings, with optimum health and wellness as they age. The VA is statutorily required to provide two non-institutional long-term care services: adult health care and respite care. VA's other non-institutional long-term care services are provided as part of the health care benefits package. Although the VA provides many of these services directly, it also purchases certain services from community providers and then pays those providers, similar to other federal payers such as Medicare. These programs are described below. VA Provided Care The Home Based Primary Care (HBPC) program provides long-term, comprehensive primary care services to eligible veterans. Such services are coordinated by an interdisciplinary team that makes home visits. Generally, veterans who have difficulty getting around outside the home due to a chronic health condition or other long-term care need are eligible for HBPC. The HBPC team comprises VA staff, including physicians, nurse practitioners or physician's assistants, nurses, social workers, dietitians, physical or occupational therapists, psychologists, and pharmacists. Team members make separate home visits, form a medical care plan, and provide comprehensive case management for veterans. Primary goals of the program include maintaining veterans safely in their home, reducing hospitalizations and emergency department visits, and managing complex chronic illnesses to help increase veterans' quality of life. HBPC programs are accredited by the Joint Commission on the Accreditation of Health Care Organizations (Joint Commission) under home care standards and are surveyed every three years by the Joint Commission. The Community Residential Care (CRC) program is a supported housing program where veterans reside in a VA-approved group home. VA staff provide case management services to the veteran and monitor the care provided by the group home staff. The CRC program is designed for veterans who do not need a nursing home level of care, but do need support with their daily living skills, such as household tasks, meal preparation, and transportation. The veteran pays the CRC home out-of-pocket for room and board, which varies depending on geographic cost of living and amount of care provided. The VA staff make regular visits to see the veteran and inspect the home initially and annually. In addition, VA staff offer ongoing education and training to the CRC caregivers on topics such as infection control, working with challenging behaviors, and falls prevention. For veterans who need more assistance than a CRC home can provide, the Medical Foster Home (MFH) program may be an option available at some VAs. MFH is a subset of the CRC program providing a higher level of care to eligible veterans. The veteran resides in a VA-approved adult foster care setting, with caregivers providing supervision 24 hour per day. Caregivers are private individuals, many of whom have nursing or nursing aide backgrounds, who choose to open up their home to veterans. The caregiver must also live in the home and may accept no more than three veterans as residents at a time. The MFH program is designed for veterans who would need nursing home level of care if not for significant in-home supports. The MFH caregiver provides assistance with personal care, supervision, and management of household tasks for the veteran. The veteran pays the MFH caregiver out-of-pocket for room and board, with these costs varying by the amount of care needed and geographic cost of living. All MFH veterans are also enrolled in a home visiting VA program, such as HBPC, which provides case management and oversight of the veteran's care. In addition, the VA MFH Coordinator arranges the placement of the veteran, monitors the care, organizes education and training for the caregivers similar to the CRC trainings, and arranges for initial and annual inspections of the homes that are conducted by VA staff, which typically includes the coordinator, a life safety expert, dietitian, and nurse. In addition to programs offered in the home setting, the VA offers several outpatient clinic-based services. For example, as required under current law, VA offers geriatric evaluation in many settings, including outpatient, inpatient, and long-term care settings. Although VA is required to provide geriatric evaluation to eligible veterans it may not be provided at all VA facilities. In part, this is due to facilities not having a geriatrician, another provider with geriatric expertise, or the necessary interdisciplinary expertise. The key component of geriatric evaluation is a comprehensive, interdisciplinary assessment, with team members including, but not limited to, a physician and at least two of the following disciplines: nurse, social worker, occupational or physical therapist, dietitian, or pharmacist. Veterans are referred from primary care or other specialties seeking input related to issues, such as increasing functional deficits; behavioral issues related to dementia; complicated psychosocial situations related to aging; polypharmacy (i.e., aging veterans who are taking medications that may cause side effects, and who could benefit from a simplified medication regimen); and frequent hospitalizations. The team forms a recommended treatment plan and then either manages the implementation of that plan or makes recommendations back to the primary care team for how to best manage the veteran's care. Another clinic-based option available to veterans is outpatient palliative care. The outpatient Palliative Care Clinic focuses on comfort care and symptom management for veterans with chronic illnesses helping to increase veterans' quality of life. Veterans may be seen in a Palliative Care Clinic even while continuing to receive curative treatment. Generally, veterans may have a prognosis of two years or less to live. Palliative care may also be appropriate earlier, when a veteran's goals are primarily related to symptom management and quality of life. The Palliative Care Team includes a medical provider, social worker, nurse, chaplain, and may include a psychologist and dietitian. Hospice, a specific form of palliative care for veterans with six months or less to live, is provided in home or inpatient settings. A limited number of VA facilities offer onsite Adult Day Health Care (ADHC) . ADHC is an outpatient day program that provides activities, socialization, supervision, and meals in a congregant setting. This program is targeted toward veterans who would need nursing home care if not for such assistance, including veterans who need assistance with personal care and daily living skills, as well as veterans with cognitive impairments that need supervision. ADHC programs generally offer structured activities such as restorative exercises and social activities (e.g., music, crafts, and outings), personal care, me dication management, and meals. VA-Purchased Care Adult Day Health Care , as described above, is also purchased by the VA from community agencies. In this situation, the VA has agreements with local community agencies that provide ADHC services. The VA refers veterans to those ADHC sites, authorizes how many days per week the veteran may attend based on clinical need, and monitors the care provided via onsite visits made by VA clinical staff at least quarterly. In addition, the VA staff conducts an annual inspection of the ADHC site. The VA pays an agreed-upon daily or hourly rate to the ADHC sites, similar to state Medicaid programs. Homemaker/Home Health Aide (H/HHA) services are another service that the VA purchases from community agencies. Clinical eligibility for H/HHA services is the same as for the ADHC program; veterans who are clinically eligible for nursing home level of care may receive home health aide services in their home, with the goal of keeping the veterans in their home rather than in a nursing facility. A VA provider assesses the need for care and places an order. Next, a VA coordinator contacts the veteran to discuss his or her needs, determines amount of care to be provided based on clinical need, and makes a referral to a community home health agency. The VA reassesses the veteran's need for care at least annually and assesses the agency's quality annually. Respite services are also purchased by the VA and provided either in the home by a home health agency or in an ADHC setting. Respite services are intended to be short term and are generally limited to thirty days per calendar year per veteran; respite is meant to give the family caregiver a break from caring for the veteran. Clinical eligibility is the same as for ADHC or home health aide services. The VA also purchases skilled home care , which is provided by qualified personnel for a limited time with the goal of rehabilitation or restoring health status. Skilled home care includes but is not limited to home physical, occupational, or speech therapy; wound care; and intravenous (IV) care. A VA physician determines that a veteran needs the skilled care and then orders the skilled care and VA coordinators contact the veteran and arrange the care. In general, the VA purchases skilled home care from Medicare-certified home care agencies. The VA monitors the agencies' quality measures at least annually. Another service that the VA purchases from community agencies is home hospice . As mentioned previously, hospice is a type of palliative care or comfort care. To be eligible for hospice, a veteran must have a life-limiting diagnosis and a physician must determine that a veteran has a life expectancy of six months or less. The VA hospice coordinator then contacts the veteran and family to provide further education regarding hospice and makes a referral to a community hospice agency. The hospice agency provides an interdisciplinary care team, which manages the symptoms of the life-limiting diagnosis, works with the veteran on goals for care, and seeks to improve quality of life. The team generally consists of a physician, nurses, a social worker, aides, and a chaplain. If the veteran's needs cannot be met in the home, the VA may pay for a general inpatient hospice stay or an inpatient respite stay in a community facility. Or the VA may transfer the veteran to a VA Community Living Center (CLC) to receive inpatient hospice services in a VA facility. Finally, a limited number of VA facilities offer Veteran-Directed Home and Community- Based Services (VD-HCBS) . Clinical eligibility is the same as for ADHC or H/HHA services (see Table 3 ). VD-HCBS provides veterans with a budget for services, and the veteran determines how to use that budget to hire home health aides or arrange other supportive services to help the veteran live independently. The goals of the program are to provide the veteran more control and choices related to his or her care and to keep the veteran safely in his or her home. The veteran may use the funds to pay a family member or private citizen to provide aide services. The VA has agreements with local Area Agencies on Aging (AAA) to administer the program, including providing case management services and oversight of budget. Institutional Care As the VA works to support veterans in their home environment, some veterans may have long-term care needs that can be served in institutional settings (see Table 4 ). The VA is mandated to provide nursing home care to certain service - connected veterans . As previously mentioned, the Veterans Millennium Health Care and Benefits Act ( P.L. 106-117 ) requires the VA to provide nursing home care to the following veterans: any veteran in need of such care for a service-connected disability; or to any veteran who is in need of such care and who has a service-connected disability rating of 70% or more; or any veteran who has a service-connected disability rated 60% or more and unemployable; or any veteran who has a service-connected disability rated 60% or more and who has been rated permanently and totally disabled. Depending on available resources, the VA may also provide nursing home care to nonservice-connected veterans who are clinically in need of institutional care. This care may be provided in a VA Community Living Center (CLC), a Community Nursing Home (CNH), or a State Veteran's Home. The VA has 135 Community Living Centers (CLC) associated with VAMCs across the country that provide nursing home level of care. CLCs are staffed by VA employees and may provide rehabilitation, custodial, and hospice care to veterans. Some CLCs may offer specialty services, such as a specialized dementia unit. In the mid-2000s, this program underwent a change in the model of care, renaming the facilities from Nursing Home Care Units to Community Living Centers to evoke a more homelike atmosphere and acknowledge that CLCs are the veterans' home. In addition to the name change, the VA launched a system-wide program to promote cultural transformation, including a more person-centered approach, more homelike interior design, and more resident choice related to daily schedule of meals, sleep and wake times, and bathing. CLCs are inspected by the VA's Office of the Inspector General and the Long-Term Care Institute. While not all VAMCs have CLCs, all are required to operate a Community Nursing Home (CNH) program. Under this model, the VA has contracts with community nursing facilities to provide care to veterans. The VA inspects the nursing facility initially and then reviews quality annually, and VA clinical staff make monthly visits to each nursing facility where veterans have been placed to monitor the care being provided. The VA Community Nursing Home Coordinator makes arrangements for placement of eligible veterans and acts as a liaison for the nursing facility. The third setting for VA nursing home care is in a State Veterans Home (SVH) . SVHs are owned and operated by the state in which they reside, and eligibility requirements are determined by the state of jurisdiction. The state may apply for grants from the VA to cover some of the cost of infrastructure, and the SVH may receive a per diem that covers approximately one-third of the cost of the veteran's care. The VA also surveys the SVH annually. Each state operates SVHs differently, but may offer various levels of care in addition to nursing home, such as domiciliary (independent living), assisted living, and adult day health care. In addition to providing long-term care in these settings, VA facilities may choose to provide respite, hospice, and palliative care, as well as geriatric evaluation programs, to eligible veterans in an institutional setting. As previously mentioned, veterans are eligible for 30 days of respite care per calendar year, in general; if needed, this care may be provided in an institutional setting (such as CLC or CNH), depending on resource availability, to give the family caregiver a break from caregiving. The clinical criteria for veterans receiving institutional respite care is the same as for home respite; however, this program may be limited in certain VA facilities   depending on resource or bed availability. In addition, hospice care may be provided to veterans in an institutional setting. For example, veterans receiving home hospice whose care needs can no longer be managed at home may move into a VA CLC to receive hospice care for a short time, while their symptoms are managed, or while they are actively dying. In some cases, the VA may also pay for inpatient hospice care in other institutional settings, such as community inpatient hospice facilities. Also, palliative care may be offered in institutional settings; some CLCs may have palliative care units, or a VA may have a palliative care team that consults at the bedside of veterans in a hospital intensive care unit. Similarly, geriatric evaluation teams may consult with veterans residing in acute inpatient settings. Although the provision of these programs varies across VA facilities, the programs should be available to eligible veterans residing in institutional settings. VHA Long-Term Care Expenditures Long-term care expenditures are a small but not insignificant part of the VHA medical care budget, at just over one-tenth of the VHA's total medical care budget. In FY2015, the VHA spent $7.4 billion, just over 13% of its total medical care spending ($55.8 billion), for veteran's long-term care (see Table 5 ). Institutional care accounted for almost $5.3 billion, or 71% of VA's total long-term care spending, while non-institutional care accounted for $2.1 billion, or 29%. While total appropriated funding for VHA medical care has increased 25% (in nominal dollars) since FY2010, the proportion of total appropriations spent on long-term care has remained relatively unchanged. However, non-institutional long-term care expenditures doubled from FY2010 to FY2015 (non-inflation adjusted dollars). As a proportion of total VA long-term care spending, non-institutional care increased from 19% to 29% from FY2010 to FY2015. As Table 5 shows, the percentage of total VHA medical care spent on long-term care ranged from approximately 12% to 13% from FY2010 to FY2015. Institutional Care The majority of VHA institutional care spending (64%) is for VA Community Living Centers (CLCs), which are nursing facilities owned and operated by the VHA (see Table 6 ). For FY2015, just over 9,000 veterans received care in CLCs. However, the majority of the "workload"—defined as the average number of veterans receiving nursing home care per day (or the average daily census)—was provided by state veterans' nursing homes, which are owned and operated by states. Over half (53%) of the workload for FY2015 was accounted for by state veterans nursing homes. It is important to note that total medical care obligations for state nursing homes identified in Table 6 , as well as per diem costs, account only for VA's portion of the total cost of care in state homes. States and veterans are also responsible for a share of the total costs of care in these settings. Moreover, most VHA institutional spending pays for long-stay care. Across all institutional settings, 88% of residents were long-stay residents (defined as veterans residing in a setting for 91 days or more). Compared with other VA institutional settings, CLCs have higher per diem costs, on average, but also have a greater proportion of short-stay residents. Short-stay residents are more likely to need post-acute or rehabilitative care, which is often more resource-intensive than custodial nursing care provided to long-stay residents. Table 6 compares FY2015 short-stay versus long-stay per diem costs by institutional setting. As shown in the table, average per diem rates for CLC short-stay in 2015 were greater than their average long-stay rates. According to the VA, CLCs may provide specialized care for veterans with mental or behavioral health conditions, as well as certain programs for those with dementia or spinal cord injuries. In addition, CLC per diem costs account for other direct and indirect VA expenditures such as physician and other skilled medical staff, medical education and research, and overhead expenditures related to VA national programs. These types of costs are not included in per diem costs for CNHs and state nursing homes. Non-Institutional Care In FY2015, almost 70% of expenditures for long-term care provided in non-institutional settings were for either home-based primary care or homemaker/home health aide programs (see Table 7 ). The program that received the most visits or encounters (referred to as clinic stops/procedures in the table) was homemaker/home health aide programs. Services through homemaker/home health aide programs are provided more frequently, often several times a week, if not daily, to veterans who need ongoing assistance with personal care needs. Issues for Congress Three broad issues emerge for Congress when considering VA long-term care eligibility, financing, and delivery. The first issue is veterans' access to care, specifically access to long-term care services. The second issue is the setting where long-term care services are provided and the appropriate balance between home and community-based versus institutional services. The third issue involves veteran's health coverage options and federal coordination of financing and health care delivery within the VA health care system and across federal programs. Access to Care The veteran population, on average, is older than the general population. Further, the number of veterans who have disabilities that are rated as 70% or more service-connected, and therefore are eligible for VA-paid nursing home care, has increased. This growth may lead to more veterans needing access to long-term care services in order to remain in the community, as well as a greater number of veterans eligible for nursing home care at VA's expense. However, the current policy discussion has primarily focused on reforming access to care within the VA health care system, particularly in relation to primary and specialty care. The Veterans Access, Choice, and Accountability Act of 2014 ( P.L. 113-146 ), as amended, required two different external assessments of the VA. The first was an independent assessment of the VA offering multiple broad recommendations for next steps for the VA. The second assessment, conducted by the Commission on Care, made various recommendations regarding the future of the VA in a report published in July 2016. Both sets of recommendations acknowledge the challenges associated with an increasing number of aging and disabled veterans, but they were largely silent on how such demographic implications will affect the demand for VA long-term care services. The VA's capacity to meet the needs of aged and disabled veterans over time depends on its ability to provide that care directly, but also to purchase care from the community. This challenge raises several questions for policymakers: In the context of VA health system reform, are there access issues to be considered for long-term care as well as for specialty and primary care areas? How can the VA maximize quality and efficiency, recognizing that access to long-term care services and care coordination across acute and long-term care may prevent the frequency or need for more expensive care, such as acute inpatient stays or emergency department visits? Does the VA have the right size and mix of geriatric and extended care health professionals to meet the demands of the disabled and aging veteran population both now and in the future? Does the VA have the flexibility it needs to negotiate with community partners who provide much of VA's home and community-based care? Institutional vs. Home and Community-Based Services Over the past two decades, federal financing and delivery of long-term care, particularly for the largest federal payer of LTSS (Medicaid) has shifted toward the provision of care in home and community-based settings rather than institutional care. In FY1995, the proportion of Medicaid LTSS spending on institutional care was 82%, with 18% spent on home and community-based services (HCBS). Almost 20 years later, the proportion of Medicaid LTSS spending on institutional care has decreased to 47%, with more than half of spending (53%) on HCBS (data for FY2014). Medicaid's shift toward more HCBS occurred with various administrative efforts and activities, as well as financial incentives and broader statutory authority from Congress for states to provide such services. In part, Medicaid HCBS expansion was prompted by the U.S. Supreme Court decision in Olmstead v. L.C. , which held that the institutionalization of people who could be cared for in community settings was a violation of Title II of the Americans with Disabilities Act (ADA). The movement to expand HCBS has occurred alongside the shift to more patient-centered and consumer-driven models of care, which seek to honor the preferences of the individual. Most individuals express a strong preference for remaining in their homes and communities rather than in institutions. Similarly, the VA has expressed a desire to move toward "a more balanced offering of home and community-based services." However, in FY2015, 29% of VA long-term care spending was on non-institutional care versus 71% of spending on institutional care. One issue that may affect the balance of long-term care services offered is VA's statutory requirement to provide nursing home care to veterans with 70% or more service-connected disability, as well as the requirement to provide nursing home care to veterans who are service-connected and need care for their service-connected disability. Thus, similar to federal Medicaid statute, which requires states to provide nursing home care to certain eligible beneficiaries, the VA operates under a mandate to provide such care to certain veterans. Moreover, the current design of the State Veterans Home (SVH) program generally favors institutional care over HCBS. As stated previously, under this federal-state partnership, the VA provides grants to states to build, modify, or acquire nursing home, domiciliary, and adult day health care facilities—a federal grant to the state may not exceed 65% of the total project cost. In addition to providing grants to states for facility construction, the VA provides a fixed per diem to states for each veteran who receives care in a state veteran's home. Thus, under the current program design, states generally have an incentive to continue to maintain long-term and extended care facilities rather than explore non-institutional alternatives. According to the VA, HCBS is less costly than facility-based options and growth in LTSS expenditures can be moderated by moving toward the provision of more HCBS. However, in the aggregate LTSS spending can be moderated only if HCBS spending increases as institutional spending decreases. VA's requirement to maintain a specific level of long-term care beds and staffing, as well as the mandate to provide institutional care to certain veterans, may create barriers to shifting care to HCBS. To efficiently use the institutional resources it has, the VA must keep the institutional beds occupied. Further, whether beds are occupied or not, the cost to maintain the physical infrastructure of facilities owned and operated by the VA is a consideration. Current contracting requirements may limit the VA's ability to purchase institutional care in the community, thereby offsetting the need for institutional settings owned and operated by the VA. Such requirements may also limit the VA's capacity to provide care to veterans in their communities. Unless VA institutional spending can be reduced, spending on more HCBS may be an additional cost to the VA rather than a shift in cost. This issue raises several questions for policymakers: What is the right proportion of VA LTSS spending on institutional versus non-institutional care? Does the VA have the appropriate number of CLC beds offering the right types of care? Does the VA have the ability and flexibility needed to partner with community long-term care facilities to provide care to veterans in their communities and potentially reduce demand for VA-owned and operated CLCs? Should Congress review the VA's long-term care infrastructure, comparing projected demand against capacity? And, finally, how might Congress compel the VA to shift care from institutions to home and community-based settings? Coverage Options and Federal Coordination Not all veterans rely on the VA exclusively for their health care. Many veterans access care through other sources of health coverage, and most enrolled veterans have more than one source of coverage. According to the 2015 VHA Survey of Enrollees, approximately 78% of veterans enrolled in the VHA have some type of public or private health care coverage in addition to VA health care. For example, 51% of veterans reported they were enrolled in Medicare, 7% had Medicaid, 19% had TRICARE, and 28% had private insurance (note that individuals may have reported more than one source of coverage). Only 20% of veterans surveyed reported having no other health coverage. Veterans with more than one coverage option may choose to access the VA instead of care covered under another health care program or insurer for a variety of reasons: personal preference, lower or no out-of-pocket costs (copayments) for certain services, or access to services that may not be available through traditional health insurance or Medicare. Veterans who have Medicare or private health insurance may seek services not covered by those plans from the VA, such as adult day health care or respite care. Although the VA offers some long-term care services similar to Medicaid (e.g., home health aides to assist with personal care), unlike Medicaid, the VA does not require veterans to spend down assets or meet strict income guidelines to receive long-term care. Conversely, some eligible veterans may elect other coverage options and choose to receive their health care in the community due to personal preference, proximity, or more timely access to a provider. Veterans' reliance on VA health care varies; some veterans rely solely on the VA, whereas others use the VA intermittently for certain health care services. This discrepancy presents a challenge for the VA in understanding current demand, and predicting future demand, for health care services. As veterans age, they may come to rely more on VA's long-term care services, which are not covered by Medicare or private health insurance. Veterans enrolled in the VHA are likely to receive health care in other settings and through other forms of coverage. Coordination across federally financed health care programs is important to ensure efficient, appropriate, and high-quality health care. It is also critical to avoiding service duplication and overutilization—aspects that may further constrain VA's health care system resources and capacity. This raises several questions for policymakers: Where are there inefficiencies or duplication that could be limited or coordination that could be enhanced? When, or for what services, should veterans access Medicaid, Medicare, and the VA? What do the VA and CMS know about veterans dually enrolled in Medicare or Medicaid and the VHA, or enrolled in all three programs, that could inform care coordination? How can the VA best plan for future demand when veterans have multiple care options and may ultimately seek none, some, or all of their care from the VA? Appendix A. VHA Copayments for Long-Term Care Services Veterans who are enrolled in the VA health care system do not pay any premiums; however, some veterans are required to pay copayments for certain services and outpatient medications related to the treatment of a nonservice-connected condition. Table A-1 summarizes which Priority Groups are charged copayments for long-term care services. Only veterans in Priority Group 1 (those who have been rated 50% or more service-connected) and veterans who are deemed catastrophically disabled by a VA provider are never charged a copayment, even for treatment of a nonservice-connected condition. For veterans required to pay long-term care copayments, these charges are based on three levels of nonservice-connected care, including copayments for inpatient, non-institutional, and adult day health care. However, actual copayments may vary depending on a veteran's financial situation. For example, P.L.114-315, the Jeff Miller and Richard Blumenthal Veterans Health Care and Benefits Improvement Act of 2016 exempted Medal of Honor recipients from paying LTC copayments for both service and nonservice connected LTC. Certain VA long-term care programs have associated costs other than a VA copayment. For example, regardless of service-connected status, veterans residing in Medical Foster Home or Community Residential Care homes pay out of pocket for room and board. The out-of-pocket cost varies by geographical area and amount of care needed. There is no additional VA copayment. Similarly, veterans who reside in State Veterans Homes may have out-of-pocket costs; this varies from state to state and is often on a sliding fee scale. The payment is made to the State Veterans Home, and there is no additional VA copayment. Conversely, there is no copayment or cost to the veteran of any kind for VA hospice services, regardless of veterans' income or service-connected status. Appendix B. Veterans Priority Groups Figure B-1 lists the Veterans Priority Groups 1 through 8 and their eligibility criteria.

The Veterans Health Administration (VHA), an operating unit of the Department of Veterans Affairs (VA), is a direct service provider of health care, similar in many ways to a large private sector health care system. In addition to providing inpatient, outpatient, and a range of other medical care services, the VHA provides and purchases long-term care services. The VA is one of two federal payers of long-term care services (the other being Medicaid). Since the 1960s, the VA has been authorized to provide nursing home care to eligible veterans in various settings, including VA facilities, private nursing facilities contracted by the VA, and state veterans homes (P.L. 88-450). These nursing home benefits were further expanded in subsequent legislation (P.L. 91-101 and P.L. 93-82). In 1999, the Veterans Millennium Health Care and Benefits Act (P.L. 106-117) required the VA to provide such benefits to veterans needing nursing home care due to one of their service-connected conditions, as well as veterans who overall have a service-connected disability rating of 70% or more, who need the care for any condition, service-connected or not. In addition, the law required the VA to maintain staffing and level of services for institutional care not less than the FY1998 level; the law also required non-institutional long-term care services as part of the VA medical benefits package. About 9.1 million veterans (43% of all veterans) were estimated to be enrolled in the VHA in FY2016. Although the overall number of veterans in the United States has declined since FY2000, the number of veterans enrolled in the VHA has increased significantly in that same time period. In FY2000, just over 4.9 million veterans were enrolled in the VHA; by FY2016 that number was estimated to have increased 86%, to 9.1 million enrollees. This increase is due, in part, to the growing number of veterans with service-connected disabilities, as well as more liberal enrollment policies. Among veterans with a service-connected disability, the proportion who have a disability rated as 70% or more service-connected (and therefore eligible for VA paid nursing home care) has also increased. VA long-term care programs are administered at the VA facility level, with some variability in how programs are administered. Each VA facility offers certain mandatory programs and may offer several optional programs as well. Eligibility for VA long-term care programs depends on eligibility for VA health care, which is based primarily on "veteran status" resulting from military service. Once enrolled, veterans' eligibility for long-term care services depends on several factors, including veterans' need for the service (as determined by the VA), whether the service is institutional or non-institutional, and (for certain programs), veterans' service-connected status. Institutional settings may include both inpatient acute care and nursing home care. However, the majority of VA long-term care provided in institutional settings occurs in nursing home facilities, such as VA Community Living Centers (CLCs), community nursing homes, and state veterans homes. Non-institutional care includes outpatient and ambulatory care settings, as well as care that occurs in the home or another community-based setting. Non-institutional services include home-based primary care, community residential care, geriatric evaluation, palliative care, adult day health care, homemaker/home health aide care, respite care, home skilled care, home hospice, and veteran-directed home and community-based services and medical foster homes (at some facilities). Some long-term care services are provided directly by VA staff, whereas others are purchased from providers outside of the VA. Long-term care expenditures are a small but not insignificant part of the VHA total medical care budget, at just over one-tenth of the VHA's budget. In FY2015, the VHA spent $7.4 billion (13% of its total appropriated funding for medical care, which was $55.8 billion) for veterans' long-term care. Institutional care accounted for almost $5.3 billion, or 71% of VA's total long-term care spending, while non-institutional care accounted for $2.1 billion, or 29%. The majority of VHA institutional care spending (64%) was for VA Community Living Centers (CLCs), nursing facilities owned and operated by the VA. This report provides an overview of VA long-term care services, including legislative highlights, eligibility, organizational structure, descriptions of services (both institutional and non-institutional care), and expenditures. The report also describes three key issues for Congress when considering the VA and its long-term care financing and delivery system: 1. Veterans' access to long-term care services. 2. Settings where services are provided and the appropriate balance between institutional and non-institutional care. 3. Veteran's health coverage options and federal coordination.

African History: An Overview Human history is believed to have begun in Africa, probably in the eastern and southern part of the continent,as human ancestors evolved into the species homosapiens , perhaps 200,000 years ago, and began peopling the sub-Saharan region. (1) About 50,000 to 100,000 years ago, according to most current scientificthinking, small bands of these fully modern humans crossed out of Africa into the Middle East, and became theancestors of all human populations elsewhere. (2) An internal African migration of great significance was launched perhaps 2,500-5,000 years ago, as the Bantu people of West Africa began to expand their area ofsettlement from a base that was probably in the northeast of present-day Nigeria or possibly Cameroon. The Bantueventually became the predominant peopleover most of sub-Saharan Africa, although people speaking so-called Nilo-Saharan languages are widely found inthe Sahel grasslands on the southern border ofthe Sahara and parts of eastern Africa. The Nilo-Saharan languages may have had their origins in the Nile valley,but the term "Nilotic" to describe peoplesexisting today has fallen out of favor with scholars because of the extensive intermingling of Bantu andNilo-Saharan speakers over the centuries. Bantu tropicalagriculture was not suited to the Mediterranean climate of extreme southern Africa, and this region continued to beinhabited by people known as "Khoisan" or"San." Experts are uncertain about the origins of iron use in Africa, (3) but by about 500 BC, it appears that the Bantu had become skilled in smelting iron and making theiron tools that created a highly successful agriculture and accelerated their expansion. When Europeans began toexplore the African coast after 1450 AD, theyfound that farmers were growing a wide variety of crops, including grains as well foods unfamiliar to Europeans,such as bananas. Some of these had come intoAfrica through contacts with the Indian Ocean region and southeast Asia. (4) Many African farmers also had cattle, although the tsetse fly kept cattle outof thewetter, central part of the continent. After the discovery of America, farmers quickly adopted New World crops,such as maize and peanuts. By 1500, an estimated 47 million Africans were living in thousands of farming communities spread across the continent, (5) although in particularly dry regions,such as Kenya's Rift Valley, some lived a purely pastoral life, herding cattle, sheep, and goats. These wereexchanged with farmers for grains and otheressentials. (6) Large towns and cities had notdeveloped, probably because large settlements were likely to be struck down by the parasites and otherdisease-causing organisms that had evolved with homo sapiens in Africa. (7) Human populations outside Africa, by contrast, had largely escaped thesediseasesand hence could more easily build cities. Pre-colonial Society There is wide agreement among Africanists that loyalties to large ethnic groups, such as "the Yoruba" in present-day Nigeria or "the Tutsi" of east Africa, werelargely absent in pre-colonial Africa, even though they are a dominant feature of African politics today. (8) Broadly similar languages were spoken over wideareas,and these language areas may have correlated with similar cultural practices and religious beliefs as well. Buthistorians believe that Africans did not perceive thatthey had common interests with other members of these large, amorphous groups. Instead, African loyalties wereembedded in extended families, clans, andpatron-client relationships which offered protection and economic support. Some areas saw the emergence ofpowerful individuals or chiefs, sometimes termed"big men" by scholars, who exercised influence over wide areas through marriage ties and other means, such ascontrol over a critical trade route. (9) A number of African kingdoms developed as the more successful chiefs consolidated their authority through conquest and alliance. To the south of the CongoRiver estuary, for example, European explorers encountered the Kongo kingdom, where a powerful king ruledseveral provinces through royal relatives. (10) Greatartistic achievements also characterized many of these pre-colonial kingdoms, as evidenced by the naturalisticbronze castings of heads in the kingdom of Benin,in today's Nigeria, and the stylized Congolese masks and carvings that inspired Picasso and other modern artists. The Slave Trade The Atlantic slave trade is said to have begun in 1441, when a man and a woman were captured on the coast of Western Sahara and taken to Portugal. (11) Duringthe 400 years that the trade lasted, between 10 million and 13 million people were taken from Africa, according toauthoritative estimates, (12) with most going toBrazil and the Caribbean, and smaller numbers sent to the United States or the British North American colonies thatpreceded its formation in 1776. The peak ofthe trade occurred in the eighteenth century, as plantation agriculture expanded in the Americas. Annual totalsreached 100,000 in some years late in thecentury, (13) at a time when 3,000-4,000 were alsobeing taken from East Africa in the lesser-known Indian Ocean slave trade. (14) In 1807, the British parliament voted to end the slave trade, and over the next 60 years, the Royal Navy intercepted more than 1,600 ships off Africa's coasts andfreed over 160,000 captives, sending most to Sierra Leone. (15) But many ships evaded the British patrols, and large numbers of slaves continued to be exporteduntil slavery was abolished throughout the Americas in the 1850s and 1860s. U.S. participation in the slave tradewas banned by legislation passed in 1807 andstrengthened in 1819. For a number of years, U.S. Navy ships were stationed off the African coast to participatein efforts to halt the trade, but with limitedsuccess. (16) The Atlantic slave trade was conducted by European traders based on the West African coast. They purchased slaves from African owners by trading guns,alcohol, cloth, or other European-manufactured goods; as well as cowrie shells, which had monetary value inpre-colonial Africa. Slavery had long been practicedin Africa, where it was customary to enslave people captured during wars, together with condemned criminals, and,in some societies, convicted adulterers andenemies of the king. (17) In addition, some of thosesold into the Atlantic slave trade were kidnap victims. (18) According to historians, slaves in traditional Africansocieties were typically absorbed into families or local armies, and their treatment was generally less harsh than inthe plantations of the New World. Moreover,the children of slaves in Africa often could not be sold. (19) Effects. Scholars debate the effects of the slave trade on the politics and economies of African societies, (20) butthe era was clearly associated with turmoil and outbreaks of war affecting much of West Africa. The guns thatflooded Africa in exchange for slaves helped fuelthis instability, and the quest for European arms gave warring parties a powerful incentive to constantly seek newcaptives. (21) It seems certain that warfare relatedto the slave trade, the loss of millions of people in their most productive years, and the psychological damage toindividuals resulting from political instability andfear of capture, weakened Africa and left it ill-prepared to cope with the onset of direct European colonization. The Colonial Era As late as 1870, there was little indication that the European powers were about to leave their isolated positions on the coast and partition Africa amongthemselves. Instead, it seemed more likely that indigenous political entities would consolidate their authority andeventually develop into nation-states. In WestAfrica, for example, the kingdom of Ashanti (Asante) had profited from its wealth in gold and the slave trade, andhad acquired a strong central government, anadvanced system of roads, well defined boundaries, and a national language. (22) It seemed destined to grow stronger. Buganda in East Africa, to takeanotherexample, had become the chief naval power on Lake Victoria and was known for its powerful king, the Kabaka;its strong army; and its growing trade. (23) Meanwhile, a number of "secondary empires" -- secondary in the sense that they relied on imported European military technology -- were emerging. (24) Manyofthese were based in Muslim societies, and their gains did much to promote the spread of Islam in sub-SaharanAfrica. In earlier centuries, Islam had beenspreading slowly in West Africa as a result of trans-Sahara trade contacts, and had made larger gains in northeasternAfrica through trade and Arab immigration. Africans who wanted to associate themselves with the wider Islamic world often converted willingly, and Koranicschools had begun to introduce literacy inArabic across the Sahel. But in the nineteenth century, a series of holy wars or jihads created a vastWest African Islamic empire centered on Sokoto, in modernNigeria. In East Africa, the sultans of the island of Zanzibar were extending their power on the mainland, and Egyptwas expanding its control in northeasternAfrica. With troops on Lake Victoria by 1876, (25) it seemed headed for an empire reaching into central Africa. In southern Africa, it was the "Boers" or Afrikaners, practicing a very conservative form of Christianity, who established a nineteenth century secondary empire. Descended from Dutch, Huguenot, and German settlers who had arrived at the Cape of Good Hope in theseventeenth and eighteenth centuries, thousands ofBoers trekked deep into the African interior to escape the cultural influences of the British. (Britain had takencontrol of the Cape during the Napoleonic wars.) With modern rifles and cavalry tactics, the Boers defeated the powerful Zulu in key battles, and established farmsin grasslands areas recently depopulated by aseries of African wars sparked by Zulu expansionism. The Zulu were acquiring modern arms themselves andremained a major force in the region under a kingruling through an aristocracy. The Scramble. The development of Africa's indigenous political entities was halted by the European scramblefor Africa, which began in competition over the Niger and Congo River basins in the 1870s. The scrambleconcluded in 1920, when British forces, making use ofcombat airplanes developed during World War I, ended the last resistance in Somalia. By this time, all ofsub-Saharan Africa, except for Ethiopia and Liberia,was under European control. Ethiopia had thwarted Italian ambitions to make it a colony by inflicting a humiliatingdefeat on Italian troops at Adowa in 1896. However, Menelik II, the Ethiopian emperor, was unable to oust the Italians from the colony of Eritrea, which theyhad established along the Red Sea coast. (Italy invaded Ethiopia again in 1935, in what some historians regard as an opening phase of World War II. TheItalians were driven from the region by Britishtroops in 1941-1942.) (26) The scramble was made possible in part by advances in medicine, which for the first time gave Europeans a measure of protection against tropical diseases. Gains in military technology, particularly the development of machine guns and modern artillery, gave Europeanstremendous advantages over even very largeAfrican forces. In 1898, for example, an army of British and Egyptian troops killed 10,800 Sudanese in one dayof fighting, while losing 48 officers and menthemselves. (27) As a result of Europe's militaryadvantages, many Africans chose not to resist the colonial invasion, although the Ashanti, the Zulu, the Boers, theHerero of German Southwest Africa (Namibia), and peoples in French West Africa did launch armed strugglesagainst the colonizers. Many European leaders were initially reluctant to seize territory in Africa because they doubted that potential financial gains would balance the likely cost. However, in Britain, France, and Germany there were imperialists and nationalists both in and out of governmentwho brought popular and political pressure tobear in support of expansion. Anti-slavery activists felt that direct rule would end the slavery that continued to existin Africa itself, and missionaries saw thattheir efforts could benefit as well. Business interests seeking to develop and exploit Africa's resources were also influential, particularly with respect to southern Africa. Diamonds were discoveredat Kimberley, in present-day South Africa, in 1871, and gold was found on the Witwatersrand (in and aroundmodern Johannesburg) in 1885. (It was not until1902, however, that British troops finally subdued the Afrikaners, in the second of the "Boer Wars.") The newcolonial powers also valued Africa's agriculturalpotential. Germany, for example, sought to create a reliable source of raw cotton in its East African colony ofTanganyika. (28) The profit motive was perhaps strongest with King Leopold II of Belgium, but he successfully hid his real interests for many years amid a show of humanitarianconcerns. Working closely with Henry M. Stanley, the British-American explorer and journalist, Leopold built avast empire under his personal control byfunding the exploration of the Congo River basin and persuading local chiefs to sign treaties, which they littleunderstood, recognizing his authority. At the BerlinWest Africa Conference in 1884-1885, Leopold won recognition of the sovereignty of his International Associationof the Congo (IAC), which controlled Congoand has been described as Leopold's "one-man enterprise." (29) Britain and Germany had come to favor recognition of Leopold's IAC as a means of thwarting thegrowth of French influence in west and central Africa. (30) Leopold had also succeeded in winning the endorsement of U.S. President Chester Arthur for hisplans,which were supported by a Senate resolution as well. (31) The Berlin conference set rules for the future acquisition of colonies in Africa, requiring that countries exercise effective control of an area before claiming it. This had the effect of limiting most further colonization to the strongest powers -- Britain, France, and Germany,although Portugal secured territories in Angolaand Mozambique, where Portuguese settlers had long been present. Germany lost its colonies in the First WorldWar, and by that time it was clear that Britainwas the dominant power in Africa, with colonies stretching from southern Africa through eastern Africa and Sudanto Egypt, and holding the Gold Coast,including the former Ashanti, as well as Nigeria in West Africa. France, however, also held large territories in Westand in Central Africa. The United States did not have colonies in Africa, but the U.S. Navy assisted the American Colonization Society as it began to settle former slaves on the WestAfrican coast in 1820. The first permanent settlement was achieved in 1822, after arduous struggles and near-defeatby disease and unfriendly local warriors. The settlers issued the Declaration of Independence of the Republic of Liberia in 1847, and in subsequent decades, theAmerico-Liberians used firearms to conquerindigenous peoples and extend their control into the hinterland. Some scholars argue that this expansion did notdiffer significantly from the actions of the European colonizers, (32) and that it set the stagefor the violent disintegration of Liberian society in the late twentieth century. In April 1980, indigenous soldiersfrom the hinterland killed the Americo-Liberian president, William Tolbert, setting off a decade of political violenceand human rights violations, followed by a6-year civil war. (33) Effects. The effects of the colonial era on Africa and its peoples, like the effects of the slave trade, are a subjectof scholarly debate. The consequences of Leopold's rule in his vast Congo colony, however, were quite clearlynegative. Human rights activists and missionaries,including American missionaries, gradually made known the vast scale of the abuses that were taking place inCongo as Leopold tried to extract the maximumprofit from his enterprises. Forced labor, beatings, mutilations, summary executions, and the use of starvation asan instrument of policy (34) were commonplace inCongo and the subject of Joseph Conrad's novel, The Heart of Darkness , published in 1902. Thesituation in Congo became an international scandal, forcing theBelgian government to remove the colony from Leopold's personal control in 1908, and to institute reforms. In the British and French-controlled territories, the colonial era did provide a backbone of infrastructure, including roads and telephone systems, although ruralareas generally benefitted far less than towns and cities. Standards of public health improved, and some elementaryeducation began to be provided. Christianmissions protected by the colonial authorities played a major role in promoting education and literacy -- winningmillions of converts as a result. (35) Opportunitiesfor higher education, travel, and employment in the modern sector, though limited, empowered a number of Africanswho later became leaders in independentAfrica. Kenya's Jomo Kenyatta and Ghana's Kwame Nkrumah, for example, studied at the London School ofEconomics, and Nkrumah also attended LincolnUniversity in the United States, as did Nigeria's Nnamdi Azikiwe. All were later presidents of their respectivecountries. At the same time, European investment in Africa was limited, and colonial governments generally expected African colonies to pay their own way in terms ofdevelopment. In order to generate the necessary revenue, the colonial state was heavily involved in the economy,influencing decisions on what crops should beplanted and regulating prices as well as investment. Many statist systems based on the colonial model persisted afterindependence, retarding the evolution ofmarket economies. Colonial economic policies also made Africa dependent on the export of primary products --minerals, agricultural products, and timber -- tothe developed world in exchange for manufactured goods. The prices of primary products have fared poorly relativeto manufactured goods in the post-colonialworld, contributing to Africa's problems. Colonial governments had no interest in promoting democracy or developing democratic traditions, which would have complicated their efforts to rule Africa witha minimum of expenditure. In the words of one expert, "the colonial state in Africa was an authoritarian bureaucraticapparatus of control and not intended to be aschool of democracy." (36) As pressure for politicalrights and independence mounted after World War II, colonial regimes often imprisoned their critics and tookother authoritarian measures that set unfortunate precedents for post-colonial rulers. Most Africans had noopportunity for political participation until the very endof the colonial period, when elections began to be held. While Britain and France discouraged popular participation for most of the colonial era, they did work closely with local chiefs and other big men, because thecooperation of these traditional authorities was essential in obtaining the labor and tax revenues the colonial regimesrequired. Some contend that in strengtheningbig men, whose influence rested on kinship ties, the granting of favors, and the suppression of dissent, the colonialauthorities contributed significantly to the problems independent Africa has suffered with respect to corruption, nepotism, and authoritarianism. Colonial practice, many scholars believe, shaped Africa's present-day ethnic divisions by intensifying language and cultural differences among African peoples. Intheir view, this came about in part because Europeans of the colonial era tended to view the world in terms of"tribes" and "nations," and encouraged Africans todo likewise. Moreover, the colonial authorities, particularly the British, found it administratively convenient togroup peoples together as "tribes" and ruleindirectly through "tribal chiefs," whom they strengthened and in some instances created. (37) Africans found that they could most effectivelyadvance their interestsin the colonial era if they worked through tribal organizations and sought the patronage of tribal leaders, and thistended to strengthen tribal loyalties. Today, theseethnic divisions are the source of much of Africa's violent politics. Even where civil war does not occur, ethnicdivisions typically weaken political institutionsand undermine economies. (38) The colonial partition of Africa often had the effect of imposing artificial boundary divisions on Africa, separating peoples that had been linked by culture andtrade. After the partition, roads and railroads were built to link the capitals of the new colonial states to theirhinterlands, rather than to one another; creatingdifficulties in transport between African countries that remain to this day. Moreover, by imposing the bureaucraticcolonial state on African societies, theEuropeans suppressed the diverse indigenous political arrangements that had governed Africa before the partition. Whether some of Africa's pre-colonial politicalentities could have continued to develop in ways that avoided or minimized the problems that confront the Africanstate today is one of the unknowns of history. The fact that they were denied the opportunity to develop further is regarded by historian Basil Davidson as the"black man's burden." (39) End of Colonialism. World War II (1939-1945) severely weakened Britain and France, and hastened the endof the colonial era in Africa. The war aims of the western powers tended to undermine the ideological basis ofcolonialism by stressing the importance ofdemocracy and resistance to aggression -- ideas that resonated with Africa's emerging nationalists. At PresidentRoosevelt's insistence, the United States andBritain had agreed on a set of war aims in the 1941 Atlantic Charter that affirmed "the right of all peoples to choosethe form of government under which they willlive." (40) The United Nations Charter signed at theend of the war committed the colonial powers to developing self government and free political institutions inthe territories under their control (Article 73). With the coming of peace, Africans who had been educated abroad during the 1930s, returned to Africa and began to organize opposition to the colonial regimes. Their thinking had been influenced by European intellectual currents of the day, and many had become socialists. They had also studied the revolutionarymovements sweeping Asia and the struggle of black Americans to achieve social justice. Nkrumah and otherAfrican nationalists were greatly inspired by thework of W.E.B. DuBois, the black American sociologist and civil rights leader. (41) By the end of the 1940s, British policymakers, who had granted independence to India in 1947, generally recognized that the African colonies would one day beindependent -- but they tended to see that day as many decades in the future. France, by contrast, was following apolicy of "assimilation" that in theory was tolead to the integration of its colonies into a greater France. Individual Africans could be assimilated as Frenchcitizens once they had achieved a certain standardof French education, and some, such as Leopold Senghor, poet, philosopher, and future President of Senegal,represented French Africa in the National Assembly. All around Africa, however, nationalist sentiments were mounting, and by the early 1950s, the British faced a guerrilla uprising known as Mau Mau among theKikuyu of Kenya. New political parties were organizing and staging anti-colonial protests in Gold Coast (Ghana)and Nigeria. British decision-makers soonconcluded that their weakened country could ill-afford the cost of suppressing rising African nationalism, and theindependence timetable was moved forward. Ghana became independent in 1957, followed by Nigeria in 1960, Tanzania in 1961, and Kenya in 1963. Political parties were organizing in the French colonies as well, but President Charles de Gaulle was shocked when, in 1958, the little territory of Guinea voted ina referendum for independence rather than close association with France in a proposed new French Community. In the face of agitation for independenceelsewhere, de Gaulle decided that France would cut its losses, and 14 independent countries emerged fromFrench-held Africa in 1960. Demands forindependence sprang up unexpectedly in the Belgian Congo in 1958, and with little power to resist, Belgium grantedCongolese independence in 1960 as well. Southern Africa. In most of southern Africa, independence was long delayed because of the presence ofsubstantial white populations which generally opposed majority rule. In several countries in the region, Africanshad to resort to armed struggle to win theirfreedom. In 1965, the tiny white minority of British-descended settlers in Rhodesia issued a Unilateral Declarationof Independence from Britain, which waspushing for democratic reforms. This led to United Nations sanctions against the Rhodesian regime, and Africanslaunched a civil war. Rhodesia finally becamethe independent country of Zimbabwe under a majority-elected government in 1980. Guerrilla wars broke out inAngola and Mozambique in the 1960s, andindependence came only in 1975, after Portuguese military dictator Antonio Salazar was ousted in a 1974 coup inLisbon. Armed struggle also took place inNamibia (South West Africa), which South Africa had taken from Germany in 1914, but independence did notcome until 1990, following a U.N.-supervisedelection. In South Africa itself, whites of both English and Afrikaner descent had enjoyed self-government since 1910, when Britain had granted what would later beknown as Commonwealth status. (42) Oppositionto white minority rule had existed for decades, but in 1948, the National Party (NP), representing conservative,nationalistic Afrikaners, came to power and imposed an institutionalized system of racial segregation known asapartheid (apart-ness). Protests against apartheid mounted in the late 1960s, and in the 1970s, an increasingly violent resistance campaign was met by ever harsher governmentrepression. In the 1980s, as resistance continued to grow, South Africa launched a number of military strikes andcovert operations beyond South Africa's bordersagainst bases and personnel of the opposition African National Congress (ANC). Late in the decade, however,South Africa's white-controlled government wasfacing international isolation, and many Afrikaner leaders came to realize that the costs of defending apartheidwould be unsustainable in the long run. Consequently, the regime undertook secret discussions with the ANC on the outlines of a majority-based systemthat would include protections for minorityinterests. ANC leader Nelson Mandela was freed from prison in February 1990, and difficult constitutionalnegotiations concluded in November 1993. Universal-suffrage elections were held in April 1994, and Mandela became President in May of that year. Independent Africa In the first years of the 1960s, the future for western and eastern Africa seemed quite bright. Heavy-handedcolonial governments had departed, and a new Africanelite including many individuals with excellent educations and global experience had come to power. GNP percapita was rising at about 1% per year, onaverage, (43) and Africans as well as foreigndevelopment experts expected that the construction of roads, universities, hospitals, hydro-electric dams, and otherprojects would soon result in faster growth. In May 1963, the heads of 30 African states signed the Charter of theOrganization of African Unity (OAU) topromote African solidarity and intensify efforts to improve living standards. Member states pledged to respect theprinciples of non-interference and respect forterritorial integrity in their relations with one another. Even in these early years, however, serious problems were beginning to emerge. The former Belgian Congo fell into civil war from 1960-1964, and itsmineral-rich Katanga province attempted to secede. In January 1963, the president of Togo, Sylvanus Olympio, wasassassinated in the first of dozens of militarycoups and attempted coups that would plague the region. Nkrumah, who had made Ghana a socialist, one-party statewas overthrown in 1966, and the first ofNigeria's many coups occurred that same year. Ethnic tensions mounted in Nigeria as a result of the coup, and whenthe Ibo people of eastern Nigeria attempted tosecede, a civil war broke out that lasted until 1970. Sub-Saharan Africa's annual rate of per capita economic growth fell to .8% in the 1970s, and plunged to a negative 2.2% per year in the 1980s, more than wiping out all previous gains. (44) In these decades, mostAfrican countries were governed by authoritarian regimes, and a few, such as Idi Amin's government in Uganda(1971-1979), were quite violent. Civil wars broke out not only Uganda, but also in Ethiopia, Sudan, Somalia, andChad, as well as in Angola and Mozambique,where long civil wars followed the wars for independence. When drought struck wide areas of the continent in1982-1984, the highest death tolls occurred in thewar-torn countries, particularly Ethiopia and Sudan, where international relief agencies could not reach the hungry. The underlying causes of Africa's problems in the post-independence era have been the subject of much discussion and analysis. The impact of the colonial era,which is blamed for inciting ethnic divisions and creating traditions of authoritarian rule as well as bureaucraticinterference in the economy, has already beenmentioned. Colleges and universities began to appear in African colonies only at the end of the colonial period,leaving very small indigenous elites to deal withthe challenges of independence. Independent Africa confronted a major population challenge as well. In 1950, therewere an estimated 200 million people in thesub-Saharan region, but by 1990, the number had grown to 600 million. (45) The Cold War The Cold War has also been blamed for many of Africa's problems. Vast quantities of arms came into Africa during the Cold War, fueling African conflicts. Most of these arms came from the Soviet Union and its allies, and went to self-proclaimed Marxist regimes inEthiopia, Angola, and Mozambique. In reaction,the United States provided far lesser quantities of weapons, but focused much of its economic assistance onauthoritarian regimes in Zaire, Sudan, Liberia andelsewhere that were perceived as anti-Soviet. This competitive Cold War involvement, critics maintain, tended tostrengthen governments on both sides that wereanti-democratic and following inefficient, state-oriented economic policies, often marked by considerablecorruption. (46) Effects of French Policy The degree to which French policy may have contributed to Africa's problems is a matter of debate. France had remained actively engaged in Africa becauseFrench policy makers believed that a major African role would help give France great power status at a time whenthe two superpowers were dominant elsewhere. By overt and covert means, they cultivated a "special relationship" with the elites of their former colonies, whichthey regarded as France's " chasse gardée," or"exclusive hunting ground." (47) In addition, Francecapitalized on the tie of language to forge close relations with the "francophone" regimes in Zaire and Rwanda,former Belgian colonies. These special relationships with France usually brought both military and economic assistance, as well as a promise of French intervention to protect friendlyregimes from violent unrest. Several thousand French troops were stationed at African bases. French businesses,meanwhile, gained privileged access to tradeand investment opportunities. Critics maintained that French policy was perpetuating corrupt and authoritarianregimes in many countries, but defenders arguedthat France was contributing to stability and, as a result, facilitating development. France began to reduce itsmilitary and financial commitments in Africa afterthe Socialist Party won legislative elections in May 1997, but the future direction of French policy is not yet clear. (48) The 1990s In the later 1980s and early 1990s, as the colonial era fell farther into the past and the Cold War waned, scholars began to focus on characteristics of the Africanstate and African societies to explain the continent's difficulties. This line of analysis led to a number ofdiscouraging conclusions about the continent. Somescholars concluded that African states were too weak to promote societal change and economic development, largelybecause the institutions of the state had beencorrupted. The personal ambitions of leaders, ethnic favoritism, and "pathological patrimonialism," (49) were blamed by some for diverting state resourcesto thepersonal fortunes of ruling cliques, and to the police and military officials who kept them in power. There was muchacademic discussion of the "failed state" inAfrica, amid extensive media coverage of famine and conflict in Somalia, Sudan, and other countries. (50) Economic difficulties continued as well. Despiteagrowth spurt in mid-decade, overall GDP growth for the years 1990 through 1998 was 2.0% per year, less than thepopulation growth rate of 2.6%. (51) At the same time, there were several positive developments affecting Africa in the early 1990s that gave rise to hopes for a better future. With the end of the ColdWar, some noted, Africa's authoritarian rulers would no longer be able to play the superpowers against one anotherto perpetuate their hold on power. Themomentous changes in South Africa were also highly encouraging because they averted a widely expected and potentially very violent revolution. Manyanticipated that a stable South Africa would soon become an "engine of growth" for the economies of much of thesub-Saharan region. Several African countrieswere already well-advanced in free market economic reforms that they had undertaken at the behest of western aiddonors. Consequently, by the mid-1990s --despite slow growth in the region as a whole -- GDP growth rates in several countries were exceeding populationgrowth rates, and some were achieving annualGDP increases of 5% or better. Political reforms were also beginning in many of Africa's authoritarian states because of mounting demands for democratization from opposition movements and donors. In some countries, national political conferences convened, and diverse interests in Africa's growing "civilsociety" were represented, including humanrights organizations, nascent political parties, and churches. Multiple political parties were permitted in countriesthat had been one-party states for years, andelections that seemed generally free and fair began to be held. These developments brought favorable reactions froma number of analysts. In 1991, for example,U.S. scholar Richard Joseph, who had been a critic of Africa's patrimonial politics, published an article entitled"Africa: The Rebirth of Political Freedom," whichnoted that a "virtual miracle" seemed to be underway. (52) Afro-Pessimism v. Afro-Optimism For many observers, the hopes of the first half of the 1990s have faded, in part as a result of disappointment over the course of African democratization. Some ofAfrica's authoritarian leaders learned to manipulate the electoral process and divide the opposition, creating whatone authority, Larry Diamond, calls"pseudo-democracies." Diamond argues that the governments of Kenya, Gabon, and Cameroon have played a"cat-and-mouse game with international donors,liberalizing politically in response to pressure while repressing as much as they can get away with in order to hangon to power." (53) A disappointed RichardJoseph wrote in 1998 that Africa's democratic opening at the beginning of the decade had resulted, with fewexceptions, in "virtual democracies." These mayhave the surface characteristics of liberal democracy, such as regularly scheduled elections, but "their governmentssystematically stifle opposition behind a maskof legitimacy." (54) More recently, events in Zimbabwe and Côte d'Ivoire, two countries with significant economic potential if political stability could be achieved, provedparticularly discouraging to advocates of democratization. In Côte d'Ivoire, a Christmas 1999 military coup,followed by the exclusion of a highly qualifiedcandidate from the Muslim north from presidential and parliamentary elections held in late 2000, left the countrysharply divided along ethnic and religious lines. In Zimbabwe, the opposition made gains in June 2000 parliamentary elections, but the campaign period was marredby political violence, and several members ofthe opposition were killed. Government tactics in its campaign to take over farms owned by whites also led criticsto charge that the rule of law was beingdestroyed in Zimbabwe. (55) Sub-Saharan Africa's AIDS epidemic continues to intensify. (56) According to a December 2000 United Nations update, some 25.3 million adults and children areinfected with the HIV virus in the region, (57) whichhas about 10% of the world's population but more than 70% of the worldwide total of infected people. Thedisease, much like the slave trade in earlier times, takes away young adults in their most productive years. Ugandaand Senegal have managed to slow the diseasewith effective prevention campaigns, and there are indications that such campaigns are beginning to show resultselsewhere. But the overall infection rate inAfrica is about 8.8% as compared with 1.1% worldwide, and in some countries in southern Africa, 20% or moreof the adult population is HIV-positive. Anestimated 17 million people have already died in the African epidemic, and mortality is rising. The armed conflicts that continue to afflict Africa, particularly the vast Democratic Republic of the Congo (DRC) and several of its neighbors at the heart of thecontinent, are another concern. The Rwanda genocide of 1994, which saw perhaps 500,000 to one million peoplekilled, followed by the first DRC upheaval in1996-1997 and a new DRC civil war starting in 1998, have set back development prospects and created seriousrefugee problems for several countries. (58) Anumber of countries have troops in Congo pursuing a variety of causes and interests, and creating fears of a widerwar. Armed conflicts are also taking place inAngola, Sierra Leone, Sudan (59) and other countries Meanwhile, Africa's economic performance continues to disappoint many observers. According to World Bankdata, the region's GDP grew by 2.1% and 2.3% in1998 and 1999 respectively, while population grew by 2.6% and 2.4% (60) - leaving the region economically stagnant. South Africa's economy grewby just .6% in1998 and 1.2% in 1999, postponing the day when it might be able to spark an economic expansion in southernAfrica. Academic authors, looking at sub-SaharanAfrica's small share of global trade and investment, describe the region as "marginalized" in the global economy. (61) "Afro-pessimists" consider the totality of these trends and conclude that for at least the next several years the continent's political and economic prospects are notvery bright. A study of global trends in the year 2015, published by the U.S. National Intelligence Council inDecember 2000, (62) concluded that: The interplay of demographics and disease--as well as poor governance--will be the major determinants of Africa's increasing international marginalization in2015. Most African states will miss out on the economic growth engendered elsewhere by globalization and byscientific and technological advances. Only a fewcountries will do better, while a handful of states will have hardly any relevance to the lives of their citizens. Assub-Saharan Africa's multiple and interconnectedproblems are compounded, ethnic and communal tensions will intensify, periodically escalating into open conflict,often spreading across borders and sometimesspawning secessionist states. This way of thinking about Africa, however, is rejected by many other observers, including some with long experience in African affairs, who argue thatAfro-pessimism results from stereotyped views of Africa and a media tendency to focus on violent, dramatic events.In a 1998 article, two experts with CapitolHill backgrounds argued that there is a "new reality" in Africa "in which governments are becoming accountableto citizens; in which economic policies areempowering a growing private sector; in which real progress is being made in addressing difficult but tractableproblems." (63) An International Monetary FundIssues Brief, released in December 2000, acknowledged "two decades of economic stagnation and little progressin poverty reduction" in Africa. But the brieftook an upbeat approach overall, affirming that as a result of economic policy reforms, "the seeds of an economicrenaissance in sub-Saharan Africa, with fastergrowth and less poverty, have been sown...." (64) President Thabo Mbeki of South Africa has himself repeatedly advanced the idea that an African Renaissance isbeginning, (65) and in a December 1997 speech, thenU.S. Ambassador to South Africa, James Joseph, endorsed the African Renaissance concept, saying that"nothing can stop Africa now." (66) The optimists, while accepting that there have been setbacks, maintain that the dominant political themes of the 1990s were reconciliation in several formerlyconflict-torn countries, most notably South Africa, and widespread gains in democratization through the electoralprocess. Particularly significant, they argue,were the democratic transitions that took place in South Africa, which held successful universal suffrage electionsin 1994 and 1999, and in Nigeria, where anelected civilian regime took office in May 1999, ending years of military rule. Nigeria is home to more than 120million people, or nearly one-fifth of sub-SaharanAfrica's population. A recent book in the optimistic school, sponsored by the American Assembly, pointed out that in 1996 and 1997 alone, national electionswere held or scheduled in 28 African countries. (67) The optimists argue that the wave of elections in Africa in recent years has established precedents that will bedifficult to erase, thus making further democratization possible in years to come. Optimists also accept that there have been disappointments in the economic sphere, but note that several African countries, such as Botswana, Mozambique,Rwanda, and Uganda had projected annual GDP growth rates of above or near 5% in 2000, following comparableperformances in 1999. With continuingeconomic policy reforms, improved governance, and support from the international community, optimists argue,many other countries could begin to lift per capitaincomes, enhancing opportunities and the quality of life for their people. Debt relief in support for poverty reductionprograms has a particularly important role toplay, many argue. (68) Africa's natural resources,including vast, newly-discovered oil deposits off the West African coast, as well as the continent's minerals,tourism potential, and environmental resources, also encourage the optimists to anticipate a brighter future. U.S. Policy The Clinton Administration's policy toward Africa had a decidedly Afro-optimist tone. President Clinton madean extensive trip to Africa in March-April 1998,visiting six countries in 11 days. (69) He told theSouth African parliament that he was seeing "what Deputy President Mbeki has called an African Renaissance," (70) and in a speech in Ghana, the President said that "democracy and peace and prosperity are not slogans, but theessence of a new Africa." (71) The Presidentacknowledged during his visit that Africa faced continuing economic problems and disruptive conflicts in a numberof countries, but insisted that "from Ghana toMozambique, from Cote d'Ivoire to Uganda, growing economies are fueling a transformation in Africa." (72) In August 2000, President Clinton again traveled to Africa, visiting Nigeria to underscore U.S. support for what National Security Advisor Sandy Berger called"the most important democratic transition in Africa since the collapse of apartheid." (73) President Clinton warmly praised Nigeria not only for its progress indemocratization, but also for its cooperation with the United States in combating international crime and itsleadership in regional peacekeeping. In addition, heemphasized the importance of combating the African HIV/AIDS epidemic, which had not been a subject during his1998 trip. The Clinton Administration stressed Africa's potential as a U.S. trading partner, citing possibilities for increased trade and investment and emphasizing thegrowing importance of oil imports from the region. Officials repeatedly argued that Africa was already supplying16% of U.S. oil imports and that it wasprojected to surpass the Persian Gulf as a U.S. supplier within the decade. (74) The Administration gave strong endorsement to a congressional trade andinvestmentinitiative, the African Growth and Opportunity Act, noted above, which first passed the House in 1998 and becamelaw ( P.L. 106-200 ) in May 2000. Administration spokesmen argued that the United States has a number of other interests in Africa as well, such aspreventing weapons proliferation, preservingenvironmental resources of global importance, and combating the drug trade and international terrorism. To further its objectives in Africa, the Administration launched a number of Africa assistance initiatives, such as the Leland Initiative, aimed at enhancing Africa'saccess to the Internet, and the Greater Horn of Africa Initiative (GHAI) intended to reduce perennial food insecurityover much of eastern Africa. In July 1999, theAdministration launched a major new effort against the HIV/AIDS epidemic in Africa and worldwide, known asthe LIFE (Leadership and Investment in Fightingan Epidemic) Initiative. These and other Administration initiatives involved a range of U.S. agencies apart fromthe Department of State and the U.S. Agency forInternational Development, including the Departments of Transportation, Labor, and Commerce, as well as theCenters for Disease Control of the NationalInstitutes of Health - all of which, as a result, boosted their Africa-related capabilities. Administration policy encountered some difficulties, however, and a defining moment came early, when in October 1993, 18 U.S. soldiers were killed whileparticipating in a United Nations humanitarian relief operation in Somalia. (75) In reaction to this incident, the United States and the United Nationshesitated insending peacekeepers when the Rwanda genocide broke out in 1994, and President Clinton later acknowledged toRwandans that "we did not act quickly enoughafter the killing began." (76) In the wake of the Somalia and Rwanda experiences, the Administration sought to strengthen Africa's own peacekeeping capabilities through the Africa CrisisResponse Initiative (ACRI), which trains units of African armed forces for peacekeeping duties. Moreover, theAdministration launched a "train and equip"program to help at least five Nigerian battalions prepare for peacekeeping duties in Sierra Leone. (77) U.S. officials often assumed roles as mediatorsin Africanconflicts and claimed the peace agreement between Ethiopia and Eritrea, signed in Algiers on December 12, 2000,as a particular success. Secretary of StateAlbright attended the signing ceremony. Nonetheless, Africa's many other conflicts were a source of frustrationto Administration policymakers, since theyundermined efforts to promote economic growth and political reform. Trade results during the Clinton years were mixed. U.S. imports from Africa grew by an annual rate of 2.7% from 1995 to 1999, but this pace was considerablyslower than the overall 8.4% annual increase in U.S. imports over the same period. (78) Similarly, exports to Africa grew at an average annual rate of .9%, ascompared to a 4.4% annual growth rate for all U.S. exports. (79) Most trade took place with only a few countries, notably oil producers and South Africa, and morethan half of imports were accounted for by petroleum. African imports and exports accounted for about 1% of theU.S. totals in 1999, while according to 1998data, U.S. investment in the sub-Saharan region, also heavily focused on the petroleum sector, was about 1.2% oftotal U.S. foreign direct investment. (80) Nonetheless, Administration officials pointed out that U.S. firms had made major investments in Africa, includingSouthwestern Bell's acquisition of a share inthe South African telecommunications industry and the establishment of Caterpillar Inc. dealerships in 15countries. (81) Policy in Previous Administrations Sub-Saharan Africa became a distinct item on the foreign policy agenda in 1958, when President Eisenhower authorized the creation of a Bureau of AfricanAffairs in the Department of State. (82) Over theyears, Africa policy has often been the subject of controversy, with debate typically centering on whether aparticular Administration was doing too much or too little with respect to an issue, such as apartheid in South Africa,African development, or the Soviet/Cubanrole. These controversies cannot be reviewed in any detail here, but the principal issues faced by successiveAdministrations can be briefly noted. The Eisenhower Administration confronted its first African crisis in 1960, with the Congo rebellion, which it feared would be exploited by the Soviet Union. TheAdministration supported the deployment of a U.N. peacekeeping force, which the Soviets initially agreed to, butthen turned against. The KennedyAdministration (1961-1963) was more favorably disposed toward African nationalists than the EisenhowerAdministration, although Cold War pressures limitedKennedy's policy options. President Kennedy did approve funding for a large and controversial dam Nkrumahsought for Ghana, and toward the end of hisAdministration Kennedy began to press the white regimes of southern Africa for reforms. (83) In 1963, The United States backed aU.N.-sponsored voluntary armsembargo against South Africa, over the objections of Britain and France. Africa policy during the Johnson Administration (1963-1969) focused on Congo (Zaire), where the United States gave extensive covert aid to suppress rebellionsthought to be communist-inspired or of potential benefit to the Soviet Union. (84) It was during this period that Mobutu Sese-Seko, with U.S. backing,solidified hisposition as Zaire's president -- a position he would hold until 1997. While Washington gave limited militaryassistance to Congo (Zaire), in addition to covertaid, congressional concerns over the emergence of "another Vietnam" prevented deeper involvement. In the Nixon and Ford Administrations (1969-1977), the Africa policy focus shifted to southern Africa and the violent upheavals affecting Angola, Mozambique,and Rhodesia. Political controversy over Africa policy sharpened considerably in these years, as critics came tobelieve that policymakers were too sympathetic tothe white minority regimes. However, Henry Kissinger, the most influential policymaker of the period, believedthat the Soviet Union was following a policy of"ruthless opportunism" and "adventurism" in Africa and elsewhere, and this view goes far toward explaining Africapolicy during the period. (85) When Congressbanned further involvement in Angola in 1975, Kissinger claimed that it was unwilling to confront Sovietexpansionism. (86) President Jimmy Carter's Administration (1977-1981) brought a new emphasis on human rights to U.S. foreign policy, resulting in a strong push for majority rulein Zimbabwe, advocacy of independence for Namibia, and heavy criticism of apartheid in South Africa. Mobutuwas also pressed for economic and politicalreforms, but Zaire policy, like Africa policy generally, continued to be constrained by Cold War considerations. The Administration did not react to the Liberiacoup in 1980, perhaps because reports of human rights violations and corruption had discredited theAmerico-Liberian regime. The Carter Administration was faced with apparent Soviet and Cuban gains in the sub-Saharan Africa, and came under domestic political pressure to respond. Anoppressive, pro-Soviet regime had emerged in Ethiopia, and in response, the Carter Administration forged ties withSomalia, Ethiopia's neighbor. Somalia thencomplicated the situation by invading a province it claimed in Ethiopia, precipitating the 1977-1978 "OgadenWar." Cuba sent troops to assist Ethiopia, andmany feared that the United States might become militarily involved if Cuban and Ethiopian troops crossed intoSomalia. Cuba and Ethiopia did launch asuccessful counteroffensive against the Somalis, but their advance halted at the Somalia border, averting a crisis. Cold War concerns also played a role in theCarter Administration's opposition to mandatory sanctions against South Africa. (87) Cuban troops were also in Angola, where they were assisting the Marxist regime in fighting the UNITA resistance movement. This Cuban deployment became amajor concern for Africa policymakers in the Reagan Administration (1981-1989). There was strong support in theReagan Administration for resuming covertaid to UNITA, and a publicly-acknowledged covert aid program was launched in 1986 after Congress had repealedprohibiting legislation in 1985. ChesterCrocker, the Assistant Secretary of State for Africa in those years, favored a policy of "linkage," intended to secureCuban withdrawal from Angola in exchangefor independence for South African-held Namibia. Crocker has written that he faced heavy political opposition fromall sides on this issue, but a 1988 regionalpeace agreement, negotiated under U.S. leadership, finally achieved the goals he sought. (88) With respect to South Africa, Administration critics believed that theUnited States was not pushing hard enough for political change, and in 1986, Congress enacted sweeping sanctionslegislation, over President Reagan's veto. Africa policymakers in the George H.W. Bush Administration (1989-1993) directed much of their attention to the Horn of Africa. Rebel forces in Ethiopia werepoised to overthrow the regime in 1991, and Bush Administration diplomats, working with both the governmentand the rebels, managed to arrange a peacefultransition, avoiding an ethnic and political upheaval of the sort that devastated Liberia after the 1980 coup. (89) Somalia, however, had fallen into an era of clanviolence, which, combined with drought and famine, had created a humanitarian disaster by 1992. Consequently,just before leaving office, Bush sent U.S. troopsto launch a massive, multi-national humanitarian intervention. The move was credited with saving thousands fromstarvation, (90) despite the loss of American lifethat occurred in 1993. With Cold War tensions easing, the Bush Administration also pushed Mobutu for reforms. This was part of a broader policy of promotingdemocracy and economic liberalization in Africa generally. Principal Congressional Actions As noted at the beginning of this report, Congress has dealt with a wide range of issues related to Africa. Thissection lists principal actions in recent decades. 2000 . The African Growth and Opportunity Act (AGOA, P.L. 106-200 ), aimed at boosting U.S. trade with Africa as well as U.S.investment, became law. --- Under the Global AIDS and Tuberculosis Relief Act of 2000 ( P.L. 106-264 ) Congress authorized $300 million in FY2001 and also inFY2002 for a comprehensive HIV/AIDS effort worldwide. The FY2001 Foreign Operations Appropriations ( P.L.106-429 ) provided $300 million inDevelopment Assistance for HIV/AIDS and slightly more than half of the amount was expected to go towardAfrican programs. 1998 . Congress enacted the Africa: Seeds of Hope Act ( P.L. 105-385 ) to promoteAfrican food security through U.S. assistance programsand other measures. 1994 . The African Conflict Resolution Act ( P.L. 103-381 ), authorizing U.S. assistance to promote the peaceful resolution of Africanconflicts, was enacted. 1993 . The South African Democratic Transition Support Act of 1993 ( P.L. 103-149 ) committed the United States to supporting theconsolidation of democracy in South Africa. 1990 . Congress created the Development Fund for Africa (DFA), which became Chapter 10 of Part I of the Foreign Assistance Act of 1961. The DFA, which was first mentioned in FY1988 report language, was intended to protect Africa aid levels in thewake of the Cold War. 1992 . The Horn of Africa Recovery and Food Security Act ( P.L. 103-274 ) was passed. The Act set policy objectives for U.S. assistance inthe Horn and included provisions to promote democracy. 1986 . Congress enacted the Comprehensive Anti-Apartheid Act ( P.L. 99-440 ) over President Reagan's veto. The Act set policy objectivesfor the United States in South Africa, imposed a number of sanctions, and provided for "positive measures" toimprove the lives of black SouthAfricans. 1985 . Congress passed a large emergency supplemental appropriation for African famine relief ( P.L. 99-10 ). The move followed extensivemedia coverage of famine in Ethiopia and Sudan, and some criticism of the adequacy of the executive branchresponse. --- The International Security and Development Cooperation Act of 1985 repealed the Clark Amendment (see below,1976). 1980 . Congress created the African Development Foundation to promote grassroots development through small grants to African self-helporganizations ( P.L. 96-533 ). 1977 . Congress, in effect, repealed the Byrd Amendment (see below, 1971) by ending its application to Rhodesia. 1976 . The "Clark Amendment," Sec. 404 of the International Security Assistance Act of 1976 ( P.L. 94-239 , later Sec. 118 of P.L. 96-533 ),prohibited aid that would help any group in Angola conduct military or paramilitary operations. The prohibitioncould be waived by a joint resolution. Theamendment was sponsored by Senator Dick Clark of Iowa. (The Clark Amendment followed an earlier, temporaryban known as the "TunneyAmendment.") 1971 . The "Byrd Amendment," named for its sponsor, Senator Harry F. Byrd, Jr. of Virginia, was passed. This amendment to the ArmedForces Appropriation (P.L. 92-156) partially exempted the United States from participating in U.N. sanctionsagainst white-ruled Rhodesia by prohibiting thePresident from enforcing the U.N. trade embargo with respect to imports of critical and strategic materials, such aschromium and nickel. Suggested Additional Readings Bohannan, Paul and Philip Curtin. Africa and Africans , 4th ed. Prospect Heights,Illinois: Waveland Press, 1995. Davidson, Basil. The Black Man's Burden: Africa and the Curse of the Nation State. New York, Times Books, 1992. Gordon, David F., David C. Miller, Jr., and Howard Wolpe. The United States and Africa: A Post-Cold War Perspective . New York: W.W. Norton, 1998 Hochschild, Adam. King Leopold's Ghost . Boston: Houghton Mifflin, 1998. Herbst, Jeffrey. States and Power in Africa: Comparative Lessons in Authority and Control. Princeton, Princeton University Press, 2000. Joseph, Richard, ed. State, Conflict, and Democracy in Africa . Boulder, Colorado: Lynne Reinner Publishers, 1999. Pakenham, Thomas. The Scramble for Africa, 1876-1912 . New York: Random House, 1991. Reader, John. Africa: A Biography of the Continent . New York: Alfred A. Knopf, 1998. Schraeder, Peter J. United States Foreign Policy Toward Africa: Incrementalism, Crisis, and Change. Cambridge: Cambridge University Press, 1994. Selected CRS Products CRS Issue Brief IB95052. Africa: U.S. Foreign Assistance Issues , by [author name scrubbed]. Continuously updated. CRS Issue Brief IB10050. AIDS in Africa , by [author name scrubbed]. CRS Issue Brief IB96037. Congo (Formerly Zaire) , by [author name scrubbed]. Continuously updated. CRS Issue Brief IB98046. Nigeria in Political Transition , by Theodros Dagne with the assistance of Amanda Smith. Continuously updated. CRS Issue Brief IB98043. Sudan: Humanitarian Crisis, Peace Talks, Terrorism, and U.S. Policy , by Theodros Dagne. Continuously updated.

Congress has dealt repeatedly with issues related to sub-Saharan Africa since the late 1950s. This report provides basic background on Africa and its history, U.S.policy, and congressional involvement, for the general congressional reader. The modern human species is believed to have emerged in Africa approximately 200,000 years ago. Perhaps 2,500 years ago, the Bantu people began to expandfrom a West African base, gradually spreading a complex agricultural system over much of the continent. Africanists generally agree that loyalties to large ethnicgroups, a key factor in African politics today, were largely absent in pre-colonial Africa. The Atlantic slave trade, which began about 1450 and lasted 400 years, removed millions of people in their most productive years from Africa and left thecontinent ill-prepared to cope with the European "scramble for Africa." From the 1870s through the early twentiethcentury, nearly the entire sub-Saharan regionwas divided among the European powers. The Europeans built a basic economic infrastructure; but imposed abureaucratic system of government andstrengthened traditional chiefs and other "big men" to help them rule. These patterns deepened divisions in Africansocieties and strengthened anti-democraticpatterns of government. After World War II, African nationalists organized political parties and began to demand independence. By the early 1960s, independence had come to most ofeastern and western Africa, but white minority rule persisted in southern Africa, ending only in 1994, whenuniversal-suffrage elections were held in South Africa. In the first years of the 1960s, there were high hopes that the end of colonialism would bring rapid economic growth. Instead, Africa confronted a number ofproblems, including inefficient, state-centered economic systems; frequent military coups; ethnic strife; andcorruption. The Cold War contributed to Africa'sdifficulties, flooding the continent with arms and strengthening a number of repressive regimes that had superpowerbacking. French policy also tended to bolster authoritarian governments in former French colonies. In the early 1990s, hopes for Africa's future revived following widespread political and economic reforms and the end of the Cold War. Later in the decade,however, the pace of reforms slowed and central Africa fell into an era of violent conflict. "Afro-pessimists" believethat these developments have gravelydamaged Africa's prospects, but others argue that they are temporary problems masking an underlying "AfricanRenaissance." The Clinton Administration sidedwith the "Afro-optimists," despite frustrations over the war in Congo (formerly Zaire) and other problems. The 106th Congress passed legislation to strengthen U.S.-African economic ties and to boost spending to fight the HIV/AIDS epidemic in Africa and worldwide. Previous Congresses acted on a number of African issues, including African food security, apartheid in SouthAfrica, and covert U.S. involvement in Angola.

Recent Developments The downward pressure on international oil prices associated with the global economic downturn has highlighted vulnerabilities in Iran's economy. Due to Iran's isolation from the international financial system, the country has been relatively insulated from negative spillovers from the international financial crisis. However, Iran's ability to access financing for trade and investment, already complicated by foreign and domestic businesses' concerns about Iran's relationship with the international community, have been constrained further by the decline in international credit markets. Economic discontent was a major factor in voting decisions in the presidential elections in June 2009. Protests and continued political unrest stemming from the presidential elections have raised questions about the future of President Ahmadinejad's economic policies. Some analysts speculate that Ahmadinejad may try to enact more populist policies in an effort to cement his political base. In January 2010, the Iranian parliament approved a subsidy reform plan that would cut government subsidies on fuel and other goods and services. Implementation of the plan may enhance Iran's long-term financial sustainability, but there are concerns that a reduction in subsidies will lead to high rates of inflation and political unrest in the short-term. A number of international oil companies have recently announced that they would curb gasoline sales to Iran. They include the Swiss-based Vitol, Glencore, and Trafigura; Royal Dutch Shell; India's Reliance; Malaysia's Petronas; and Russia's LUKOIL. The House-passed and Senate-passed versions of H.R. 2194 would impose more punitive sanctions on Iran. The bills would impose penalties on companies that supply Iran with gasoline or support its domestic petroleum-related industries. Introduction The Islamic Republic of Iran is a central focus of U.S. national security policy. The United States has designated the Iranian government as a state sponsor of terrorism. The United States contends that Iran is a destabilizing force in the Middle East and expresses concern about its growing influence in the region and internationally. The United States has decried Iran's uranium enrichment activities, which allegedly are being used to develop nuclear weapons. Iran also has been accused of arming Shiite militias in Iraq, providing support to Hezbollah and Hamas, and inflaming sectarian strife in the Middle East. This report provides a general overview of Iran's economy, addresses related U.S. policy concerns, and discusses policy options for Congress. The purpose of this report is two-fold. First, it provides insight into important macroeconomic trends, policy reforms and objectives, key economic sectors, international trade patterns, and sources of foreign exchange. Second, in the context of U.S. economic sanctions imposed for national security and foreign policy reasons, the report evaluates Iran's economic structure, strengths, and vulnerabilities and discusses issues and options for Congress. Iran boasts the word's third largest petroleum reserves, following Saudi Arabia and Canada, and the second largest gas reserves, after Russia. Iran also has the Middle East and North Africa region's second largest economy, after Saudi Arabia, and the second largest population, after Egypt (see Table 1 ). Nevertheless, Iran faces a number of significant economic challenges. Internal challenges include the large role of oil export revenues in financing government spending and vulnerability to oil price fluctuations; dependence on gasoline imports to meet domestic energy needs; high inflation, unemployment levels, and poverty levels; reported domestic economic mismanagement; and widespread economic inefficiency. External challenges include U.S. and United Nations (U.N.) sanctions, other forms of U.S.-led financial pressure, and the fallout from the recent global economic turndown. Historical Context The 1979 Islamic revolution changed Iran's modern political and economic history. Ayatollah Ruhollah Khomeini and his supporters transformed Iran into an Islamic state with a public sector-dominated economy that was increasingly internationally isolated. With the Iran-Iraq war (1980-1988), Iran faced negative rates of real economic growth, declines in oil production and revenue, and high levels of inflation. This represented a reversal of economic prosperity in 1960s and 1970s, during which Iran's economy experienced real economic growth rates nearing 10%, one of the world's highest, along with growth in per capita income and low inflation levels. During the 1990s, Iran strived to rebuild war-torn local production, attract international investment, enhance foreign relations, liberalize trade, and, more recently, redistribute wealth under a series of a five-year economic plans. Post-war economic growth included recovery in oil output, but the country faced a severe economic downturn in the latter part of the decade due to a drop in international oil prices. Since the 1979 U.S. embassy hostage crisis in Tehran, Iran has been subject to various U.S. economic sanctions. Such actions have been motivated over time by concerns regarding Iran's nuclear program and support for terrorist organizations. More recently, the United States has focused on targeted financial measures to isolate Iran from the U.S. financial and commercial system. Sanctions have been imposed in order to change the Iranian government's policies with respect to its nuclear program and support to terrorist organizations. To that end, the United States has imposed sanctions to curtail the development of Iran's petroleum sector and constrain Iran's financial resources in a way that motivates policy change in Iran. The United States also has applied diplomatic pressure on foreign countries and companies to limit business with Iran. Some European Union states and other countries also have imposed sanctions on Iran in line with moves by the United Nations (U.N.). The United States has pushed for stronger international sanctions against Iran in the United Nations. Most recently, in March 2008, the United Nations Security Council (UNSC) passed a third round of sanctions against Iran through Resolution 1803, calling for the inspection of suspicious international shipping to and from Iran that are suspected of carrying prohibited goods. It encourages greater monitoring of named Iranian financial institutions, travel bans for named Iranians, and freezes of additional assets related to Iran's nuclear program. In June 2008, the five permanent members of the UNSC (Britain, China, France, Russia, and the United States) and Germany offered to suspend further sanctions against Iran if Iran agreed to halt its uranium enrichment program and to begin negotiations on constraints of its nuclear activity. The six countries considered Iran's response unclear, and in August 2008, they agreed to pursue a fourth round of U.N. sanctions against Iran. Iran has opposed U.S. and U.N. sanctions vehemently. The country has long maintained that the purpose of its uranium enrichment program is to produce fuel for nuclear power reactors, rather than fissile material for nuclear weapons. The Iranian government asserts its right to develop nuclear energy for peaceful purposes. Iran increasingly has questioned the justification of the sanctions in light of some recent positive reports on its nuclear activities. A November 2007 U.S. National Intelligence Estimate (NIE) assessed that Iran stopped its nuclear activities for weapons proliferation in 2003. Iran and the International Atomic Energy Agency (IAEA) agreed in August 2007 on a work program that would clarify the outstanding questions regarding Tehran's nuclear program. Iran has clarified some questions, but a May 2008 report by the IAEA raised major new questions about Iran's nuclear intentions. Overview of Iran's Economy Iran's economic growth was expected to slow in 2009, owing to the decline in international oil prices in late 2008, domestic economic mismanagement, and limited oil revenue savings to weather the recent global economic turndown. Economic growth is expected to pick up modestly in 2010. During the earlier part of the decade, Iran's economy experienced broad-based growth, with the annual change in real GDP peaking in FY2007 (see Table 2 ). During this period, economic growth was driven by government spending on priority sectors, expansionary monetary and fiscal economic policies, increased growth in credit, and private consumption. Despite high international oil prices in recent years, the contribution of the oil and gas sector to economic growth has been more modest. Iran's oil economy has been faced with low levels of production and inadequate investment. U.S. and U.N. sanctions levied against Iran, along with the poor domestic business environment, may contribute to low levels of investment. In recent years, Iran's economic growth has been hampered by double-digit rates of inflation. Although high inflation is widespread among the oil-exporting countries in the Middle East and Central Asia, Iran has one of the highest. Iran's average Consumer Price Index (CPI) inflation level was above 25% at year-end 2008. Through 2009, the CPI inflation level dropped, but remained above 13%. For 2010, budgetary constraints are expected to reduce inflation further. By some estimates, if Iran implements the recently passed subsidy reform bill, then inflation will rise again as the price of food, utilities, education, and other goods and services increases. Domestic factors contributing to the uptick in inflation include expansionary government economic policies and growing consumption demands. External factors include international sanctions against Iran and rising international food and energy import prices. Inflation levels have been associated with Ahmadinejad's efforts to curb banking interest rates for loans to sub-inflation levels. The Central Bank, the Bank Markazi, has opposed these hikes. The unemployment rate remains high, reaching an estimated 11.8% in 2008. Some observers contend that the unemployment rate is higher than figures reported by the Iranian government. At least one-fifth of Iranians lived below the poverty line in 2002. Iran has a young population and each year, about 750,000 Iranians enter the labor market for the first time, placing pressure on the government to generate new jobs. The emigration of young skilled and educated people continues to pose a problem for Iran. The IMF reported that Iran has the highest "brain drain" rate in the world. Economic Policy and Reform Efforts Over the past few decades, Iran has engaged in a series of five-year economic plans in order to shift its state-dominated economy into an economy that is market-oriented, private sector-led, and economically diversified. Reform efforts have experienced resistance from various elements of Iran's political establishment. Significant strides toward trade liberalization, economic diversification, and privatization took place under the Khatemi administration (1997-2005). The government introduced some structural reforms such as tax policy changes and adoption of new foreign investment laws to promote Iran's global market integration and attract investment. Iran shifted to a unified managed float exchange rate system in March 2002. At various times previously, Iran has had different combinations of exchange rates, including official, export, parallel market, and Tehran stock market versions. The exchange rate reform is considered to have improved Iran's trading environment and to have enhanced public sector transparency modestly. President Ahmadinejad has taken a more populist approach with his economic policies, with promises of "bringing the oil money to people's tables" when he took office in 2005. Some critics maintain that policies under President Ahmadinejad have been a major contributor to budget deficits and are ineffective tools for combating inflation, unemployment, and poverty. In line with Ahmadinejad's populist agenda, fiscal policy has been expansionary. The government provides extensive public subsidies on gasoline, food, and housing. Energy subsidies alone represent about 12% of Iran's GDP. Some observers estimate total subsidies to reach over 25% of GDP. When including implicit subsidies, the government's spending on subsidies may be even higher. In addition to subsidies, President Ahmadinejad has provided cash handouts to the poor. Subsidies and cash handouts are considered by many to be un-targeted and ineffective at helping the poor. In January 2010, the Parliament passed a massive overhaul of Iran's system of state subsidies. The legislation reduces state subsidies by $20 billion. A goal of the reforms is to reduce overconsumption. Many analysts contend that high subsidies do not give Iranians an incentive to conserve. While many economists assert that a reduction of Iran's subsidies are necessary for Iran's long-term economic sustainability, there are concerns that subsidy cuts may lead to a sharp increase in inflation of basic goods and gasoline and, based on past experience, lead to political unrest. In June 2007, the government implemented a gasoline rationing system to reduce gasoline consumption. Although this policy was extremely unpopular and even led to public riots, it resulted in a drop in gasoline consumption. Iran's supreme leader has offered support to President Ahmadinejad in his efforts to implement the subsidy reform. However, some analysts speculate that the political unrest following the June 2009 presidential elections may compel Ahmadinejad to return to more populist policies in an effort to maintain his political base. Monetary policy also has been expansionary under Ahmadinejad. The government has provided low-interest loans for agriculture, tourism, and industry and has instituted loan forgiveness policies. Other activities include the creation of a number of social programs to assist farmer and rural residents. Ahmadinejad's cabinet established the $1.3 billion Imam Reza Mehr Fund (Imam Reza Compassion Fund) to assist youth with marriage, housing, and education in 2006. As in other Middle Eastern countries, the rising cost of marriage is financially prohibitive to many young Iranians. Interest-free loans are available to youth for marriage through the fund. Some economists contend that Ahmadinejad's efforts to lower the interest rate have led to excessive liquidity and inflation. The government has used oil export revenues from the Oil Stabilization Fund (OSF) to support expansionary fiscal and monetary policies. The OSF was created by the Bank Markazi, in 2001 to store surplus oil revenue and to smooth economic vulnerabilities associated with oil price fluctuations. Iran has been drawing down on its OSF to finance discretionary spending, such as for public subsidies, cash handouts to the poor, and low-interest loans. Of primary concern to the United States and the international community is the purported use of oil export revenues to finance Iran's nuclear program and alleged support for terrorist groups. While estimates vary about the size of the OSF, many observers express concern it no longer contains sufficient funds to cushion against the global economic turndown. Economic Stakeholders Iran's economy is heavily dominated by the state, which is the recipient of revenues from crude oil exports, and quasi-state actors, such as the bonyads and the commercial entities of the Islamic Revolutionary Guard Corp (IRGC). Private sector activity is limited, although the government is engaged in some privatization efforts. Bonyads Sometimes referred to as "Islamic conglomerates," bonyads (Persian for "foundation") are semi-private charitable Islamic foundations or trusts that are believed to wield enormous political and economic power in Iran. They were among the institutions used by the regime to help nationalize Iran's economy after the 1979 revolution. Bonyads report directly to the Supreme Leader and are not subject to parliamentary supervision. They do not fall under Iran's General Accounting Law and, consequently, are not subject to financial audits. Because bonyads are not required to disclose their financial activities, it is not known exactly the magnitude of their wealth. The largest Iranian charitable trust is the Foundation of the Oppressed and War Veterans ( Bonyad e-Mostazafan va Janbazan , MJF). With more than 200,000 employees and 350 subsidiaries, the MJF has an estimated value of more than $10 billion in assets. It is the second largest commercial enterprise in Iran, following the National Iranian Oil Company. The MJF provides financial assistance, medical care, and recreational opportunities to Iran's poor and individuals wounded or disabled from the Iran-Iraq war. Through its company affiliates, the MJF is involved in both Iran's domestic economy and foreign economies. The MJF's domestic economic scope is expansive, with affiliates involved in economic areas such as agriculture, construction, industries, mining, transportation, commerce, and tourism. Since 1991, the MJF has invested in energy, business, engineering, and agricultural activities in Europe, Russia, Asia, the Middle East, and Africa. Some allege that the MJF is used for Iranian intelligence activities for buying dual-use products for proliferation of weapons of mass destruction (WMDs). Many believe that bonyads enjoy a significant advantage over private companies. Prior to the unification of Iran's exchange rate system, the bonyads were able to access foreign exchange at deep discounts compared to private enterprises. Presently, bonyad officials have longstanding connections with politicians, and frequently get special access to credit at state-owned banks. In addition, bonyads get privileges on taxation and import duties. Some critics contend that economic and political reform in Iran will not be significant unless bonyads are reformed. Some also contend that these entities contribute to political corruption and limit the funneling of oil wealth to the poor. Shares for many of Iran's national companies undergoing privatization are given to bonyads , rather than wholly private enterprises. Islamic Revolutionary Guard Corps The Islamic Revolutionary Guard Corps (IRGC) was founded in 1979 by the Ayatollah Khomeini and is a branch of the Iranian government's military. The IRGC is comprised of five branches: the Grounds Force, Air Force, Navy, Basij militia, and Qods Force special operations. The Revolutionary Guard increasingly has become an important player in the Iranian economy. The IRGC's initial economic involvement consisted of postwar reconstruction activities, largely infrastructure projects. More recently, the IRGC has become involved in commercial activity in the construction, oil and gas, and telecommunications sector. In September 2009, a financial group affiliated with the IRGC bought a 51% stake at nearly $8 billion in Iran's largest telecommunications operator, which had been recently privatized. The IRGC has significant control over Iran's borders and airports. Through its powerful connections, the IRGC frequently acquires business contracts for new projects at the expense of private sector businesses. The IRGC also serves as a leading investment tool for many of Iran's leaders. Elements of the Iranian private sector have expressed displeasure with the IRGC. Some Iranians allege that the IRGC is involved in Iran's underground economy. The IRGC is allegedly involved in smuggling alcohol and other low-level contraband into Iran. Some report that the IRGC smuggles gasoline, which is heavily subsidized in Iran, to other countries for profit. Some analysts believe that the Revolutionary Guard benefits from Iran's economic isolation. With foreign businesses unwilling or unable to enter into deals, the Revolutionary Guard faces less competition for acquiring new contracts. However, because the IRGC frequently does not have the technical expertise that many international companies do, the IRGC sometimes subcontracts to international companies, making a profit as an intermediary in the transaction. U.S. Action The United States contends that the IRGC is involved in proliferation of weapons of mass destruction (WMDs). It argues that profits generated by the Revolutionary Guard's activities in Iran's financial and commercial sectors and engineering activities fund IRGC's illicit activities. Under Executive Order (E.O.) 13382, the United States can sanction entities for proliferation concerns. The sanctions prohibit all transactions between U.S. persons and the sanctioned entity and freeze any assets that the sanctioned entity has in the United States. On October 25, 2007, under E.O. 13382, the U.S. Department of State designated the IRGC for proliferation concerns. The U.S. embargo on the IRGC represented the first time that the United States has sanctioned a foreign country's military. Also on the same day and under the same executive order, the U.S. Treasury identified nine companies either owned or controlled by the IRGC and five individuals associated with the IRGC for proliferation concerns. These companies all are reportedly tied to Iran's energy sector. They are listed below : Companies: Khatam al-Anbya Construction Headquarters: Main engineering headquarters of the IRGC; secured deals of at least $7 billion in oil, gas, transportation, and other sectors ; owned or controlled by the IRGC Oriental Oil Kish: Drilling company; owned or controlled by the IRGC Ghorb Nooh: Owned or controlled by the IRGC Sahel Consultant Engineering: Owned or controlled by the IRGC Sepasad Engineering Company: Owned or controlled by the IRGC Omran Sahel: Owned or controlled by the IRGC Hara Company: Engineering firm associated with Khatam al-Anbya; owned or controlled by the IRGC Gharagahe Sazandegi Ghaem: Business services company owned or controlled by the IRGC Individuals: General Hosein Salimi: Commander of the Air Force, IRGC Brigadier General Morteza Rezaie: Deputy Commander, IRGC Vice Admiral Ali Akhbar Ahmadian: Former Chief of the IRGC Joint Staff Brigadier General Mohammad Hejazi: Former Commander of Bassij resistance force Brigadier General Qasem Soleimani: Commander of the Qods Force Treasury took further action against the IRGC under E.O. 13382 on February 10, 2010. It designated IRGC General Rostam Qasemi, who also is the commander of Khatam al-Anbiya Construction Headquarters, the engineering wing of the IRGC. Treasury also designated four subsidiaries companies that are owned or controlled by Khatam al-Anbiya (designated under E.O. 13382 on October 25, 2007), or that operate on its behalf. These four companies support mining and engineering projects. They are: Fater Engineering Institute Imensazen Consultant Engineers (ICEI) Makin Institute Rahab Institute In addition to WMD proliferation concerns, the United States asserts that the Revolutionary Guard is involved in terrorist activities. E.O. 13224 permits the President to freeze the assets of terrorists and their supporters. On October 25, 2007, the United States sanctioned the IRGC-Qods Force under E.O. 133224. The United States asserts that the Qods Force provides to Hezbollah's military and terrorist activities, with assistance ranging between $100 to $200 million a year. Private Sector Prior to the 1979 revolution, Iran boasted a vibrant, significant private sector. However, under the leadership of the Ayatollah Khomeini, the bulk of private sector companies, including commercial banks, were taken over by state and quasi-state institutions. Foreign participation in Iran's economy was prohibited. Currently, wholly private enterprises are present in agriculture, trade, small-scale manufacturing, and mining, but play a minimal role in large-scale economic activity. In an effort toward more private sector development, Iran began a major privatization initiative in July 2006. It allowed issuances of up to 80% of shares in strategic industries through the stock market, including downstream oil sector businesses, banks, insurance, utilities, and transportation. Iran is also working to privatize state-run oil and gas companies. However, some members of the private sector are skeptical of the government's privatization efforts. They perceive the privatization efforts as a mechanism for redistributing assets to other parts of the state, namely the IRGC, or for the expansion of quasi-governmental actors, such as the bonyads . Iran's private sector competes with the businesses operated by the bonyads and the IRGC, which enjoy significant advantages over private companies. Some observers are critical of the Iranian government's continued strong involvement in the country's economy. Some Iranians believe that the government needs to invest oil export revenues in Iran's private sector rather than spending revenues on imports and socially minded programs. In addition, the private sector is critical of the government's use of assets in the OSF to fund state-run companies at the expense of loans to private businesses. Historically, Iran has been a society of trade merchants, the bazaari class. As manufacturing in Iran is limited, merchants import goods, mark up the goods for profit, and then sell. In order to be economically viable, the bazaaris need low employment costs, low rents, free trade, and low regulation. The bazaaris tend to be skeptical of a large government role in the economy. They are supportive of Iranian trade with foreign countries. However, they tend to be critical of foreign investment because it would open up their companies to foreign competition. The merchant class has particularly been hurt by the international sanctions. Iranian businessmen reportedly have increased difficulty opening bank accounts abroad and getting foreign banks to honor letters of credit. According to Iranian officials, over half of the banks in Dubai no longer provide credit to businesses based in Iran. As Iranian businesses experience setbacks in obtaining trade financing from international banking partners, they may turn to lesser known banks or to other banking partners not susceptible to international pressure, but potentially raising the cost of business. In particular, the Islamic Republic has turned toward banks in Gulf Cooperation Council (GCC) countries. Economic Sectors Iran's economy has a number of key sectors. In 2008, industry – which includes oil and gas, petrochemicals, steel, textile, and automotive manufacturing – accounted for an estimated 45% of the Iran's GDP. The services sector, including financial services, represented about 44% of Iran's economy. Agriculture constituted about 11% of Iran's economy. Agriculture continues to be one of the economy's largest employers, representing one-fifth of all jobs based on a 1991 census. Some analysts have expressed concern that excessive focus on the oil and gas sector is crowding out investment and expansion opportunities in other sectors and opportunities for economic diversification. Iran's economic sectors remain heavily dominated by the state, but there are some privatization efforts under way. Oil and Natural Gas Holding an estimated 10% of global proven oil reserves, Iran boasts the world's third largest proven petroleum reserves following Saudi Arabia and Canada. Most of Iran's crude oil reserves are in the southwestern region near the Iraqi border. Among the Organization of the Petroleum Exporting Countries (OPEC) members, Iran is the second largest oil producer following Saudi Arabia. In 2008, Iran produced about 3.8 million barrels of crude oil per day. While oil export revenues have grown in past years due to surges in oil prices, Iran's crude oil output has remained essentially flat. Iran' oil production levels are limited by a number of factors. The oil industry faces a high rate of natural decline of mature oil fields and low oil recovery rates. It is believed that millions of barrels of oil are lost annually because of damage to reservoirs and these natural declines. Iran also has been plagued by aging infrastructure and old technology. Structural upgrades and access to new technologies, such as natural gas injections and other enhanced oil recovery efforts, have been limited by a lack of investment partly due to U.S. sanctions. U.S. companies are restricted by U.S. law from investing in Iran's oil development, but firms from other countries, until recently, have actively invested in Iran's oil sector development. Under Iran's fifth five-year development plan (2010-2015), if approved by the Majl i s , Iran would invest $200 billion to increase oil and gas production. According to the plan, more than 40 oil fields would be developed to boost oil production capacity to five million barrels of oil per day by 2014. Gas production capacity would be boosted from 552 million cubic meters in 2008 to 996 million cubic meters in 2013. According to estimates, about $125 billion in foreign investment would be needed for the plan. Another $45 billion to $50 billion in investment would be derived from domestic sources. Iran has the second largest natural gas reserves globally, following Russia. Despite its vast gas resources, Iran was a net importer of natural gas as late as 2005. Natural gas production could be used for domestic consumption, exports to European and Asian markets, and development of Iran's petrochemicals industry. Iran has sought international investment to help build its natural gas sector. However, U.S. sanctions have limited Iran's access to technologies from abroad that are necessary for developing liquefied natural gas plants. The oil and gas sector is heavily state-dominated. Iran is engaging in efforts to privatize nearly 50 state-run oil and gas companies, estimated to be worth $90 billion, by 2014 through the Tehran Stock Exchange. Both domestic and foreign investors would be able to buy shares. Privatization of these energy companies may make it easier for investors to circumvent U.S. sanctions, which complicate investors' ability to engage in business transactions with Iran directly. The Iranian Oil Minister has announced that a privately-owned bank with a minimum capital of $200 million is expected to open soon to fund oil industry projects. Agriculture Iran is a major world provider source of caviar and pistachio nuts, a significant non-oil export for Iran. The country's climate and terrain also support tobacco, tea, wheat and barley, among other food commodities. Iran's agriculture production is vulnerable to periodic droughts, including a severe drought in 2008. In addition to climate change, the agricultural sector faced setbacks in production during the 1979 revolution and the war with Iraq. Overfishing and environmental degradation also threaten the agriculture sector. Iran typically has used oil export revenues to pay for agricultural imports. However, rising international food commodity prices combined with a large population increase have placed pressure on Iran's economy, despite high international oil prices. Other Middle Eastern countries are experiencing similar economic strains. Manufacturing Iran is working to build up various industries within its manufacturing sector, including steel, automotives, food products, and petrochemicals. There is some concern that Iran's manufacturing sector has declined because oil export revenues have increased Iran's exchange rate, making the manufacturing sector less competitive. Manufacturing activity reportedly has been impeded by international sanctions. Iranian manufacturing units rely on imported parts and services from Europe. Access to imported intermediate goods has been complicated because a number of European banks have scaled down financial transactions with Iranian businesses. Steel Iran is the largest producer of steel in the Middle East and a significant producer of steel globally. Despite Iran's high production levels, the country is a net importer of steel. There has been a ramp-up of growth in demand for steel in the Middle East, fueled by the need for investments in energy project infrastructure and expansion of construction activity. The Iranian Privatization Organization has announced plans to privatize a number of steel companies in FY2010. Automotives In 2008, Iran was the 14 th largest motor vehicle producer in the world, with production increasing by 5.4% from the previous year. Iran produces both light and heavy vehicles. Its two biggest automakers are Iran Khodro and Sapia. Auto plants frequently have outdated technology and parts must be imported through third countries. Cars frequently are not fuel-efficient, contributing to pollution. Despite Iran's high level of automotive production, domestic demand for motor vehicles exceeds supply. Iran imports a variety of vehicles, including basic models, luxury vehicles, and vehicles for construction and mining. Iran reduced the tariff rate on auto imports in 2006. The Iranian Privatization Organization has announced plans to offer shares of both Iran Khodro and Saipa to the public by June 20, 2010. Iran has begun joint ventures with foreign companies for auto production, including Peugeot and Citroen (France), Volkswagen (Germany), Nissan and Toyota (Japan), Kia Motors (South Korea), Proton (Malaysia), and Chery (China). Foreign companies have entered the Iranian auto market with some caution in light of concerns about U.S. reaction and reputational risks. Based on perceived reputational risks, the German automaker Daimler has restricted its business activity in Iran. Daimler has sold its 30% stake in a subsidiary of Iran Khodro and has withdrawn an application to export commercial vehicles to Iran, but will fulfill existing contracts. Food Products There has been a rise in agriculture-related manufacturing, such as rice milling and manufacturing of canned food and concentrates, fruit juices, and confectionary. Foreign companies, such as Nestle, Coca Cola, and Pepsi have signed deals for production with local Iranian businesses. Under U.S. sanctions regulations, foreign subsidiaries of American companies are able to trade or engage in business in Iran. Petrochemicals Iran is the second largest manufacturer of petrochemicals in the Middle East, following Saudi Arabia. About half of Iran's petrochemical product sales are for its domestic market. In an attempt to diversify its exports, Iran is building up its petrochemicals industry. The industry reportedly faces some challenges from state intervention and price-fixing. Additionally, international sanctions have reduced commercial banks' willingness to finance international deals to build the petrochemical sector. Financial Sector Iran's financial sector has been heavily dominated by large, public banks since the nationalization of the banking system after the 1979 revolution. Over the past couple of decades, Iran has engaged in some privatization and liberalization of its financial sector. In 2001, Iran's Central Bank approved licenses for three full functioning private banks. Efforts toward privatization have been thwarted frequently by the Guardian Council. Iran's Central Bank technically is an independent institution. However, the Iranian government has direct control over lending and investment activities of commercial banks. Bank Markazi is not able to conduct a "proactive" monetary policy and has no control over the government's fiscal policy. It is limited in its ability to issue direct instruments to combat inflationary pressures. The Central Bank must obtain approval from the Majlis in order to issue participation papers. State-owned banks are considered by many to be poorly functioning as financial intermediaries. Private banks are hampered by extensive regulations and the government's populist policies, including administrative controls on rates of return and subsidized credit for specific regions of the country. Setting interest rates below the rate of inflation reportedly has placed many commercial banks under financial duress. In addition, most of the financial intermediaries' loan portfolios are comprised of low-return loans to state-owned enterprises and quasi-government agencies, such as the bonyads . By IMF estimates, non-performing loans have amounted to more than one-fifth of Iranian banks' loan portfolios, which is close to five times the average of emerging markets as a whole. The bulk of the non-performing loans are in economic sectors in which the Iranian government is involved in directed lending. These sectors include manufacturing, mining, agriculture, and trade. Some believe that the financial system has stifled domestic business and has lowered Iran's attractiveness to foreign businesses. Tehran Stock Exchange In 1967, Iran began operating the Tehran Stock Exchange (TSE). With initially six companies, the TSE now lists over 300 companies. Capitalization through the TSE is permitted for the automotive, mining, petrochemical, and financial sectors. Since 2005, foreign investors have been able to participate in the TSE. Foreign investors are permitted to hold a maximum of 25% of shares of each company listed, up from 10% previously. However, foreign activity in the TSE is low, estimated to account for less than 2% of investment in the TSE. Aside from concerns about the international tensions associated with Iran's nuclear standoff, low foreign activity may also reflect concerns about liquidity, transparency, and the poor legal environment protecting foreign holdings. Between July 2008 and April 2009, the TSE fell by 38%, with investor confidence shaken by the global economic turndown and the impact of declining oil prices on Iran's economy. However, by the end of 2009, the TSE had risen by 58%. The fluctuations in the TSE are consistent with trends in the Gulf countries and global markets. Financial Sanctions The U.S. Department of the Treasury has employed targeted financial measures against Iran. The United States is attempting to isolate Iran from the international financial and commercial system in an effort to promote policy change in Iran regarding its nuclear program and purported terror financing. The United States also hopes that financial isolation will limit Iran's resources for its nuclear program and its alleged support for terrorist organizations. In congressional testimony, the Treasury Deputy Assistant Secretary for Terrorist Financing and Financial Crimes in 2008 stated, "Iran utilizes the international financial system as a vehicle to fund these terrorist organizations... the Iranian regime operates as the central banker of terrorism, spending hundreds of millions of dollars each year to fund terrorism." Several major Iranian banks are under U.S. and U.N. sanctions. Under E.O. 13224, the Treasury has designated several Iranian entities for supporting terrorism. On October 25, 2007, the Treasury designated Bank Saderat, a major Iranian state-owned financial institution, for terrorism support. Iranian authorities contend that two external audits of Bank Saderat conducted in Lebanon and London found no evidence of such allegations. Treasury also has designated a number of financial institutions under E.O. 13382 for assisting with Iran's missile program. The following lists some of the institutions sanctioned under E.O. 13382: On January 9, 2007, the Treasury sanctioned Bank Sepah, a major Iranian financial enterprise. U.N. Security Council Resolution 1747 named Bank Sepah and Bank Sepah International as financial institutions involved in financing nuclear or ballistic missile activities. On October 25, 2007, the Treasury Department sanctioned Bank Melli and Bank Mellat, other major Iranian financial institutions, as WMD proliferators or supporters. In June 2008, the European Union also decided to sanction Bank Melli. On March 12, 2008, Treasury sanctioned the Bahraini Future Bank B.S.C. in March 2008 for reportedly assisting in Iran's nuclear and missile programs. The United States contends that Future Bank B.S.C. is controlled by the embargoed Bank Melli. On October 22, 2008, Treasury designated the Export Development Bank of Iran (EDBI) for providing or attempting to provide financial services to Iran's Ministry of Defense and Armed Forces Logistics (MODAFL). The EDBI is a state-owned financial institution that supports Iran's trade community. Treasury also sanctioned three financial institutions associated with EDBI, two of which are located in Iran and one located in Venezuela. On November 5, 2009, Treasury sanctioned First East Export Bank (FEEB), a subsidiary of Bank Mellat located in Malaysia. The United States asserts that FEEB is owned or controlled by Bank Mellat. In a move to further restrict Iran's access to the U.S. financial system, the Treasury revoked the "U-turn" license for U.S. financial institutions on November 6, 2008. With respect to Iran, "U-turn" fund transfers are financial transactions that pass through the U.S. financial system only en route from one offshore non-Iranian financial institution for another, conducted for the direct or indirect benefit of the Iranian government, banks, or individuals. Previously, U.S. financial institutions were allowed to process such financial transactions. The United States and some European countries assert that certain Iranian banks and their branches are attempting to circumvent international financial sanctions in order to engage in proliferation-related activity and terrorist financing. Iranian government officials have denied these claims. Financial sanctions reportedly have affected the profitability of Iranian banks and damaged Iran's credit ratings. Financial intermediaries have faced challenges financing development projects, such as building oil infrastructure. Iran is taking steps to protect its foreign assets from future international sanctions. For instance, Iran reportedly has started shifting billions of dollars from European banks to Iranian and Asian banks and purchasing gold and equities. However, some economists express concern that Asian banks may not be reliable because of their close relationship to Europe's economy. Money Laundering Iran's financial system may be vulnerable to money laundering. Since 2002, the Central Bank of Iran has engaged in efforts to combat money laundering. In January 2008, Iran passed its first anti-money laundering law, which criminalized money laundering. Critics contend that Iran's money laundering framework may contain vulnerabilities that pose a threat to the international financial system. On December 5, 2009, Iran adopted implementing regulations for the Anti-Money Laundering (AML) law. Iran continues to work to bring its AML framework in line with international standards. On March 3, 2008, the U.S. Treasury's Financial Crime Enforcement Network (FinCEN) issued a statement emphasizing concern about ongoing deficiencies in Iran's efforts to combat money laundering and the financing of terrorism through its financial system. The U.S. Treasury advisory stated that, using state-owned banks, Iran "disguises its involvement in proliferation and terrorism activities through an array of deceptive practices specifically designed to evade detection." Of particular concern to the U.S. Treasury is that Iran's central bank and commercial banks have requested their names to be removed from international transactions in order to make it more difficult to track their involvement. The Treasury advisory noted 59 major Iranian banks or their branches in international financial cities that pose threats, including Iran's central bank. None of the banks listed currently face U.N. or U.S. sanctions. The advisory encouraged all financial institutions to consider the risks associated with doing with the specified Iranian financial institutions. Additionally, the Financial Action Task Force (FATF), a Paris-based "international financial watchdog," called on its 34 member states to encourage banks to monitor their financial interactions with Iran. The FATF alleges that Iran has not taken adequate actions to combat money laundering and terror financing. Iranian officials assert that the Bank Markazi complies with international best practices and that it vigilantly regulates domestic financial institutions. Informal Financial Sector Many Iranian businesses and individuals rely on hawala , an informal trust-based money transfer system that exists in the Middle East and other Muslim countries. Hawala transactions are based on an honor system, with no promissory instruments exchanged between the parties and no records of the transactions. Some analysts consider the hawala system as particularly susceptible to terrorist financial transactions. Since the imposition of recent U.S. and U.N. financial sanctions on Iran, the use of hawala by Iranians reportedly has increased. It is considered by many Iranians to be a more cost-effective way to transfer money in light of the added expenses incurred through working through the formal financial system in light of the sanctions. According to a Iranian merchant, "If we wanted to send money through the banking system it would cost a small fortune, so we move money to dealers and they send the money through Dubai to China." While some assert that the use of hawala shows that Iran is able to circumvent international sanctions successfully, others suggest that the increased use of hawala is a sign of the sanctions' effectiveness in making it more difficult for Iran to finance transactions. International Trade International trade contributes significantly to the Iranian economy. Between 2004 to 2007, Iran's total trade in goods (exports plus imports) nearly doubled, reaching about $147 billion in 2007. Due to the decline in international oil prices, Iran's trade surplus dropped from $32 billion 2008 to $17 billion in 2009 (see Table 3 ). Some analysts point out that Iran's trade with the world may actually be higher due to transshipment or black market trade. Iran maintained a current account surplus in 2008. The current account surplus declined from 12% of GDP in 2007 to 7% of GDP in 2008. A rebound in oil prices in 2010 would boost Iran's export growth, contributing to an improvement in Iran's trade balance and current account balance. However, such improvement may be constrained somewhat by higher import prices due to sanctions. According to the Iran's Trade Commission, international financial sanctions have raised trade costs for Iran between 5% and 10% annually and have increased the time it takes to conduct transactions. Major Goods Traded Oil and gas exports are Iran's most important export. Other major export commodities are petrochemicals, carpets, and fresh and dried fruits. Top destinations for Iran's non-oil exports are the United Arab Emirates (UAE), Iraq, China, Japan, and India. Major imports for Iran include gasoline and other refined petroleum products, industrial raw materials and intermediate goods used as manufacturing inputs, capital goods, food products, and other consumer goods. Oil Exports Iran remains the fourth largest exporter of crude oil worldwide, after Saudi Arabia, Russia, and the UAE. In 2008, Iran exported 2.5 million barrels of oil per day. Iran's net revenues from oil exports totaled $73 billion in that year. Iran exports primarily to Asian countries and European countries that are a part of the OECD. Top export markets for Iran are Japan, China, India, South Korea, and Italy. More than 40% of the world's oil traded goes through the Strait of Hormuz, a channel along Iran's border. The Strait of Hormuz is considered a global "chokepoint" because of its importance to global energy security. It is a narrow channel with a width of only 21 miles at its widest point through which large volumes of oil are shipped. Oil revenue accounts for the majority of export earnings (about 80%) and represents the bulk of government revenue (about 40%). They are the most important source of foreign exchange earnings for the country. Iran's dependence on oil export revenues makes the country highly susceptible to the volatility of international oil prices. The quadrupling of global oil prices since 2002 cushioned the extent to which Iran's economy may have been affected by international sanctions and its alleged domestic policy mismanagement. However, the recent decline in oil prices may highlight weaknesses in Iran's economy. There is debate about the extent to declines in oil prices may affect Iran's economy. Oil price declines would reduce government revenue and spending and potentially increase Iran's vulnerability to sanctions. Oil price drops also would affect the private sector, as Iran imports a significant portion of its capital and machinery goods from abroad. A fall in oil prices and subsequent economic downturn may increase political dissent among Iranians, already facing high unemployment and inflation levels. Refined Petroleum Imports Despite Iran's vast oil reserves, the country must import close to half of all the refined petroleum products it needs to meet domestic consumption requirements. In 2009, Iran gasoline imports totaled about 130,000 barrels of oil per day, close to 80% of all of or Iran's total imports of products. In 2009, Iran's gasoline suppliers included Vitol (Switzerland), Glencore (Switzerland), Trafigura (Switzerland), China National Petroleum Corporation (CNPC), Independent Petroleum Group (IPG, Kuwait), Litasco (Russia), Petronas (Malaysia), Reliance Industries Limited (RIL, India), Royal Dutch Shell, Total (France), and Zhenua Oil (China). In addition, Venezuela supplies small quantities of gasoline from time to time in a show of political solidarity with Iran. Iran and Venezuela have sought to counter U.S. global influence and strengthen their own international standing and reputation through strategic alliances. In recent years, many of the world's biggest oil traders have terminated gasoline supplies to Iran. What follows are some recent developments: The Swiss-based wholesalers Vitol, Glencore, and Trafigura have been long-standing suppliers of gasoline to Iran. While they reportedly sold gasoline to Iran in 2009, these companies have since stopped shipments due to the mounting political and commercial risks of doing business with Iran. The termination of shipments follows a trend in recent years of scaling back business with Iran. For instance, in December 2007, Vitol reportedly declined to renew long-term contracts with Iran, but still provides gasoline to Iran on the spot market. India's Reliance has been a major supplier of gasoline to Iran. However, in January 2009, Reliance reportedly agreed to terminate gasoline sales to Iran once its current contractual obligations expire. Previously, some Members of Congress called on the U.S. Export-Import Bank to rescind two loan guarantees worth $900 million authorized to RIL, in support of the RIL's petroleum refinery equipment and services ($500 million) and for gas development and exploration in India's Bay of Bengal region ($400 million). In the first half of 2010, Malaysia's Petronas, Russia's LUKOIL, and Royal Dutch Shell reportedly stopped selling gasoline to Iran. Iran's longtime suppliers of gasoline from Europe are being succeeded by smaller Dubai-based and Chinese companies. China's ZhenHua Oil, which began selling gasoline to Iran in 2009, reportedly now provides Iran with one-third of its gasoline imports. A number of factors contribute to Iran's high gasoline consumption rates. Many analysts contend that high energy subsidies do not give Iranians an incentive to conserve. In addition, there has been an increase in vehicle sales, particularly of fuel-inefficient older models. Import levels are also high because Iran has limited domestic refinery capacity to produce light fuels. Some analysts predict that Iran could become a net export of gasoline by 2013 if the government achieves its targets for domestic gasoline refinery projects and eliminates gasoline subsidies. Oil consumption also is declining as consumers are moving more toward natural gas use. In recent months, there have been reports that Iran has been increasing strategic reserves of gasoline. Analysts have noted a rise in Iran's gasoline imports, which likely is accounted for by Iran's attempt to build up its strategic reserves. Iranian authorities may be trying to cushion the country against a possible formal international embargo of gasoline exports to Iran. Even without the passage of formal sanctions, a number of gasoline suppliers have limited their business activities with Iran due to political and diplomatic pressure. Trading Relationships In 2009, Iran's top overall trading partner was China. Iran's next largest trading partner was Japan, followed by the United Arab Emirates, India, and Korea. Significant export markets for Iran included China, Japan, India, and Turkey. Major merchandise suppliers for Iran included China, Germany, the UAE, and South Korea (see Table 4 ). Iran's trading relations have changed over time as international concern over Iran's nuclear program has affected economic activity. Iran's trade has shifted from Western countries to the developing world. Figure 1 and Figure 2 highlight trends in Iran's trading relationships. Europe A number of European countries, most notably Germany, historically have had important trade ties with Iran. Germany remains Iran's top trading partner in Europe. However, Germany's importance as a trading partner for Iran has declined in recent years. Germany has come under pressure from the United States to curtail trade with Iran. German export credits backing trade with Iran totaled about $186 million in 2008, about one-fourth of the value of German export credits for Iran in 2007 and one-tenth that in 2005. In addition to a decline in export credits, the repayment terms for export credits reportedly have been shortened. Iranian companies seeking to import from Germany can no longer receive export credit guarantees for seven to ten years, typical for large-scale infrastructure projects. Rather, they must repay the loans within 360 days. Germany has been conducting extra scrutiny of export authorizations requests and evaluating the financial risks of doing business with Iran more closely. Despite the scaling back of German official export credits for trade with Iran, German exports to Iran increased by about 22% from 2007 to 2008, while German imports from Iran increased by about 3%. Some large European financial institutions have reduced businesses with sanctioned Iranian bodies. For instance, Germany's Commerzbank and Deutsche Bank, have reduced or stopped business with Iran. The United Kingdom's HSBC and Standard Chartered also have lowered business with Iran. Many European banks that have curtailed business with Iran are leaving offices open on a minimal basis in case there is a change in the international climate towards Iran. In February 2010, two of Germany's largest insurance companies, Allianz and Munich Re, announced that they would curb their business operations in Iran due to Iran's "political situation." Both companies have said that they would not write any new policies tied to Iran or renew existing contracts after their expire. In addition, Germany's Siemens recently announced it was reducing business in Iran. Asia Facing challenges in trading with Western countries, Iran has sought to strengthen ties with Asian countries. Between 2002 and 2008, total trade between Iran and China grew nearly eight-fold. China has surpassed Germany as Iran's biggest trading partner. It is the largest destination for Iran's exports and the biggest source of Iran's imports. Iran benefits from low-cost imports from China. Major Chinese exports to Iran include mechanical and electrical equipment and arms. Iran's growing trade relationship with China also may be rooted in strategic reasons, such as China's position as one of five permanent UNSC members. Middle East Iran also has pursued increased integration with its neighbors in the Middle East. Iran's trade with Middle Eastern partners accounted for 6% of its total trade with the world in 2002. By 2008, this figure had increased to nearly 13%. The Iran Customs Administration cites Iraq, the UAE, and Afghanistan as destinations for Iranian exports of natural gas condensates, industrial and agricultural products, minerals, carpets, handicrafts, and petrochemicals. Arab nations may be weary of Iran's nuclear ambitions, but they appear to value trade and investment relations with Iran. Many are hoping that positive economic engagement with Iran will mitigate international tensions over Iran's nuclear ambitions. The UAE, in particular, is a major trading partner for Iran, with trade largely dominated by UAE exports to Iran. The bulk of merchandise supplied to Iran by the UAE is believed to be products imported into the UAE from foreign markets and subsequently repackaged for shipment to Iran. The UAE thrives as a central re-exporting and distribution center in the Persian Gulf because of its low tax rates, free trade zones, lower delivery times, enhanced handling and service capacity, and a perception of lax export controls. Dubai, in particular, is Iran's economic lifeline to the rest of the world. Through Dubai, Iran is able to import goods that the country cannot import directly due to international and U.S. sanctions. Although U.S. businesses are outlawed from operating in Iran, many reportedly can circumvent U.S. sanctions by sending their investments through Dubai. The United States has called on the UAE to make its export controls more stringent. In recent months, the UAE appears to be taking actions to regulate trade and investment relations with Iran in a more stringent manner. In September 2007, the UAE passed a law permitting it to place restrictions on dual-use technologies, chemical and biological weaponry, and military equipment. The UAE used the new law for the first time to impound a vessel at Jebel Ali that was delivering merchandise to be transshipped to Iran. About 40 Iranian companies were closed in 2007 based on UAE efforts to reduce trade in goods with potential "dual use." Financial institutions in the UAE reportedly are restricting Iran's access to credit, making it harder for Iranian businesses to trade goods with the UAE. Some UAE banks reportedly have frozen the assets of Iranian firms and have reduced opening letters of credits to Iranian businesses. UAE-based banks may be wary of reputational and financial risks associated with such transactions. Consequently, some Iranian businesses have had to shift to other regional banks or have had to engage in cash-based transactions, raising the costs of goods on the end-user. Dubai continues to be an important transshipment hub for Iran, but some parts of the Iranian business community are concerned about the potential implications of a more stringent UAE approach to commercial ties with Iran. There is a possibility that trade diversion to Iran may take place through other countries if the UAE is perceived as a hostile business environment. United States U.S. trade with Iran is limited, receding drastically with the 1987 U.S. ban on imports from Iran and the 1995 ban on U.S. exports to and investments in Iran. Before 1995, major U.S. exports to Iran included machinery and industrial equipment. U.S. exports virtually came to a standstill with the 1995 embargo on U.S. trade and new investment in Iran. Sanctions were relaxed to a certain extent in 2000, with the election of President Khatami in Iran. While U.S. trade with Iran is low compared to U.S. trade with other countries, there has been notable growth in U.S.-Iranian trade in recent years (see Table 5 ). Top U.S. exports to Iran include soybeans, pharmaceutical preparations, wheat, wood pulp, and medical equipment. Major U.S. imports from Iran include textile and floor coverings; artwork, stamps, and collectibles; fruits and related products; nuts and related products; and vegetables and related products. There is evidence that Iran is able to obtain embargoed U.S. goods through the re-export trade, mainly through Dubai. U.S. sanctions against Iran may curtail U.S. economic activity, imposing costs on American workers and businesses and reducing U.S. exports. U.S. businesses have expressed concerns about U.S. measures against companies that are unable to control re-exports of high-technology goods to Iran and other targeted countries. Others have noted that U.S. policies in Iran may deprive the United States of significant business opportunities in Iran. Europe, China, India, and Russia are stepping in and taking advantage of Iran's sizeable market and untapped potential. Proponents of sanctions contend that the security, reputational, and financial risks associated with doing business with Iran outweigh the economic benefits. In general, entities targeted by U.S. sanctions do little business with the United States. Consequently, the United States depends on other countries to reduce trade and investment with Iran in an effort to change Iran's policies. Such sanctions would have little effect on U.S.-Iran trade since such trade is already limited. However, the action would send a strong signal to foreign countries and may hurt Iran's trade with major trading partners. Trade Liberalization In 1995, Iran became a WTO observer state and, since then, has repeatedly put forth applications to become a permanent WTO member. Accession to the WTO is a stated priority of the Iranian government. Iran cites the more favorable treatment that WTO members give to one another and competition from Asian countries in textiles and manufactures as important challenges to Iranian exports. The United States repeatedly blocked Iran's bids to join the WTO over concerns about Iran's nuclear program and support for terrorist activities. On the other hand, many European Union countries and developing countries have supported Iran's accession. Iran and many other countries maintain that WTO membership should not be based on political reasons, but rather, on economic and business grounds. In a significant policy shift toward Iran in May 2005, the United States agreed to stop blocking Iran's attempts to join the WTO as part of economic incentives to Iran to resolve the nuclear program issue. However, the most recent negotiations for accession have ceased because of political reasons and Iran continues to not be a member of the WTO. The WTO accession process is lengthy and some Iranians have expressed concern that domestic momentum for the reforms necessary for accession has waned. Iran, along with Russia, now remain the two largest economies outside of the WTO. International Financial Flows Foreign Exchange Reserves Iran's foreign exchange reserves, which include the Oil Stabilization Fund, tend to follow international oil prices. Based on IMF estimates, Iran's international reserves grew from $60.5 billion in FY2006 to $82.9 billion in FY2007. For FY2008, Iran's international reserves was estimated to total $79.6 billion. Owing to the recent drop in oil prices, Iran's international reserves may shrink. There is concern that domestic economic mismanagement has reduced funds available through the OSF to smooth economic vulnerabilities facing Iran in the present global economic environment. The composition of Iran's foreign reserves has changed lately. In December 2007, Iran stopped accepting payments in U.S. dollars for oil export purchases by foreign countries and is shifting to other currencies, such as the euro and the yen. Iran also called upon other OPEC members to shift away from the dollar in favor of other currencies during a November 2007 OPEC summit. Aside from Venezuela, all other member states opposed the switch. The Central Bank also is reducing the proportion of dollars in its foreign reserves and diversifying to other currencies. Foreign Investment in Iran's Economy As the most populous country in the Middle East and with vast natural resources, Iran potentially has a significant market for foreign businesses. However, foreign direct investment (FDI) in Iran historically has been low relative to other countries in the region due to a combination of political and structural factors (see Table 6 ). A stringent domestic regulatory environment and government reluctance to allow foreign investment have contributed to low levels of FDI. For instance, in the energy sector, foreign investment is believed to be limited due to Iran's buy-back system. Under this system, international oil companies that contract with an Iranian affiliate pay a fee—such as an "entitlement to oil or gas from development operation." In 2006, buybacks were projected to reach $500 million. Elements of the Iranian establishment have resisted foreign investment. Iranian officials have encouraged foreign companies to enter into the Iranian market. However, many business contracts have been won by quasi-state actors, such as the bonyads and commercial entities of the IRGC. International sanctions and political uncertainty have clouded Iran's economy and have made some foreign business and investors wary about economic involvement in Iran. U.N. and some U.S. sanctions are targeted toward obstructing Iran's development of its oil and gas sectors in order to constrain Iran's resources for uranium enrichment and alleged terrorist financing. Foreign companies have had difficulty obtaining financing due to U.S. Treasury Department pressure on international banks to cut off ties with Iran. Foreign companies also have limited investment in order to avoid U.S. opposition and to maintain good relations with the United States. International investors reportedly have withdrawn from development projects in Iran, such as in the oil and gas, shipping, and automotive industries. Iran faces a problem of significant domestic capital flight abroad. For instance, Iranian investors have found more profitable opportunities for property investment overseas, such as in the UAE. International energy companies that have decided to suspend development projects in Iran include British Petroleum, Total, Royal Dutch Shell, Repsol YPF, StatoilHydro, and Eni. Some companies have decided to continue current projects, but to not engage in any future projects with Iran for the time being. As some European companies have scaled down energy sector development projects, other European partners are stepping in (see Table 7 for selected recent deals negotiated by Iran). With Western involvement in Iran's energy sector tenuous, Iran has been turning toward Asian countries, such as China and Pakistan; Russia and Central Asian countries; and regional partners, such as Bahrain and Turkey. While new agreements have been negotiated, their successful completion has been slow. Many speculate that the deals are not finalized because of international concerns over Iran's nuclear enrichment program and the specter of sanctions. According to a GAO report, State and Treasury officials assert that U.S. sanctions have contributed to a delay in foreign investment in Iran's hydrocarbon sector. The Iranian government contends that sanctions and international pressure have not slowed down foreign investment in Iran's gas sector. International Loans and Assistance World Bank Iran receives loans from the World Bank. As of February 25, 2010, the net principle amount of World Bank loans totaled Iran $3.1 billion, of which $2.7 billion had been disbursed. Currently, the World Bank has two active portfolios in Iran, focused on the environment and poverty alleviation. The World Bank's activity in Iran restarted in 2000, following a seven year halt. World Bank loans to Iran come only from the International Bank for Reconstruction and Development (IBRD), the Bank's market-rate lending facility. Iran is unable to borrow from the Bank's International Development Agency (IDA), a concessional lending and grant-making fund, because of its per capita GDP. The United States has not made any contributions to the IBRD, which lends to Iran, since 1996. Some lawmakers call for reducing U.S. contributions to the IDA in protest of IBRD lending to Iran. However, some question the merits of penalizing other countries that receive loans from the IDA. In addition, the World Bank's International Finance Corporation (IFC) has invested in Iran, providing a $5 million joint venture among a Iranian private bank, a French bank, and the IFC. Iran also has joined the World Bank's Multilateral Investment Guarantee Agency (MIGA), which offers political risk insurance to foreign and domestic investors in Iran. Bilateral Official Development Assistance In terms of bilateral official development assistance (ODA), major donor countries to Iran are Germany, France, the Netherlands, Norway, and Japan. Total ODA given by countries of the Organization for Economic Cooperation and Development (OECD) to Iran amounted to $63 million in 2008 (see Table 8 ). On the whole, the United States does not provide foreign assistance, but does provide some humanitarian assistance, to Iran. For instance, the U.S. Agency for International Development (AID) has provided disaster relief assistance following the earthquake that struck near the Iranian city of Bam on December 26, 2003. Congressional Issues and Options Members of Congress appear to be divided about the United States' course of action with respect to Iran. Some contend that the United States should pursue harsher measures against Iran, given the gravity of the real and potential threats posed by Iran's uranium enrichment program and terrorism financing. Others suggest that perhaps the United States should consider more positive engagement with Iran through rebuilding diplomatic ties and pursuing economic engagement with Iran, such as through Iran's accession to the World Trade Organization. They suggest that Iran would be receptive to sincere positive engagement on the part of the United States. Unilateral and Multilateral Approaches to Sanctions There is debate about whether or not the United States should pursue more sanctions against Iran unilaterally or through U.N. action. Some lawmakers assert that U.S. unilateral efforts to pressure Iran may detract from building multilateral consensus to widen punitive measures against Iran through the United Nations. Some maintain that unilateral efforts also might reduce Iran's willingness to cooperate with the United Nations. Others note that pursuing multilateral action can be a lengthy process and that it is difficult to find consensus among foreign countries with various competing interests, such as security and commercial interests. The United Nations successfully passed the third round of sanctions against Iran only after watering them down to satisfy Chinese and Indian concerns. As industrializing countries with increasing energy demands and insufficient supplies, China and India view Iran as a critical energy supplier for their needs. Both countries also have growing trade relations with Iran. Such national interest priorities may override international security concerns about Iranian alleged terrorist financing or nuclear technology development. Still, some lawmakers consider the recently-passed third U.N. resolution a good first step and support pushing for more punitive action through the UNSC. Others suggest that the extent to which China and India engage in economic transactions with Iran may be muted somewhat by the two countries' ties with the United States. Impact of Sanctions on Iran's Economy and Policy Analysts debate the impact of sanctions on Iran's economy. International tensions associated with Iran's nuclear program and alleged financing for terrorist organizations undoubtedly have complicated Iran's business environment. Some analysts point to Iran's low levels of foreign investment, difficulties obtaining trade finance, and challenges in developing its oil and gas sectors as evidence of the impact of sanctions. On the other hand, according to a GAO report, "Iran's global trade ties and leading role in energy production make it difficult for the United States to isolate Iran and pressure it to reduce proliferation activities and support for terrorism." The Peterson Institute for International Economics (IIE) writes that sanctions increasingly have been unsuccessful as globalization has allowed embargoed countries to find other suppliers and export destinations for trade and investment. Sanctions may not raise the costs to the point that they are crippling to the Iranian's trade and financial interactions with the rest of the world. Iran reportedly is able to circumvent the trade ban by transshipment of U.S. exports through other countries, such as the UAE. Analysts also note that international sanctions may simply result in a diversion of Iran's trade to other countries that do not enforce sanctions against Iran. In addition to the impact of sanctions on Iran's economy, some lawmakers question the effectiveness of sanctions, noting that despite decades of sanctions, the United States has not been able to significantly shift the Iranian government's policies. Previous studies have found that sanctions have little impact on government policy and that, rather, they tend to hurt the population of a country. In congressional testimony, one observer stated, "In a broader sense, sanctions often end up hurting ordinary people while having little impact on the government leaders we are trying to influence." The recent enforcement of targeted financial measures appears to signal an effort to avoid the drawbacks of the broader trade sanctions of the past and to concentrate pressure on certain key actors. Despite the narrower focus of targeted financial sanctions, the effects of these sanctions may spill over to the Iranian populace. There is uncertainty about how sanctions affect the elite, and how elite views may spillover into government policy. Congress may choose to follow with GAO's assessment and require the U.S. Treasury and State to collect data to assess the economic impact of sanctions on Iran. According to a recent GAO report, U.S. economic sanctions on Iran have had affected Iran, but the extent of these effects on Iran's economy and the government's decisions are difficult to gauge. The GAO notes that assessment of the impact of sanctions is challenging because of a lack of data collection by the U.S. government and baseline information for comparability. Action in the 110th Congress In the 110 th Congress, several bills were passed in the House related to Iran. House-passed bills encouraged tighter sanctions against Iran, but noted that such action does not indicate congressional support for U.S. military action against Iran. The following were some of the major pieces of legislation proposed by lawmakers: H.R. 957 , "To amend the Iran Sanctions Act of 1996 to expand and clarify the entities against which sanctions would be imposed," would have stiffened existing sanctions against Iran. The bill was passed by the House on July 31, 2007 and referred to Senate committee on August 3, 2007. H.R. 2347 , "Iran Sanctions Enabling Act of 2007," and the corresponding Senate version of the bill ( S. 1430 ) would have encouraged divestment from companies that conduct business with Iran. The Bush Administration opposed H.R. 2347 on the grounds that it may interfere with U.S. foreign policy efforts. The bill would have allowed for sanctions against countries such as China, Russia, and France for conducting business with Iran. H.R. 2347 was passed by the House on July 31, 2007 and referred to Senate committee on August 3, 2007. H.R. 1400 , "The Iran Counter-Proliferation Act of 2007," and its companion bill, S. 970 , would have expanded economic sanctions against Iran and removed the presidential waiver in the Iran-Libya Sanctions Act. H.R. 1400 was passed by the House on September 25, 2007 and referred to Senate committee on September 26, 2007. H.R. 2798 was a more narrowly targeted measure against Iran. It would have prohibited any assistance by the Overseas Private Investment Corporation (OPIC) to individuals who have finance or investment ties to countries that are state sponsors of terror. The bill would have targeted Iran, North Korea, and Sudan. The bill was passed by the House on July 23, 2007 and was ordered to be reported out to the Senate committee and placed on the Senate Legislative Calendar on March 4, 2008. H.R. 1357 , "To require divestiture of current investments in Iran, to prohibit future investments in Iran, and to require disclosure to investors of information relating to such investments," was referred to House subcommittee on June 5, 2007. H.R. 7112 , "Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2008," would have widened current sanctions to U.S. firms with foreign subsidiaries doing business in Iran; would have encouraged businesses to divest from Iran; and would have imposed penalties on countries that are involved in transshipment, re-exportation, or diversion of sensitive goods to Iran. H.R. 7112 was passed by the House on September 26, 2008 and referred to House committees. The related Senate measure, S. 3445 , was introduced on September 26, 2008. Action in the 111th Congress In the 111 th Congress, several bills have been introduced to expand economic and diplomatic pressure on Iran. Some lawmakers have advocated targeting Iran's dependency on imports of refined petroleum products. H.R. 2194 , the "Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2009," was passed by the House on December 15, 2009. The bill would permit sanctions to be imposed on investments of $20 million or more that directly and significantly contribute to the enhancement of Iran's ability to develop Iranian petroleum resources. In addition, the bill would permit sanctions on the exportation of refined petroleum resources to Iran and activities that support the exportation of refined petroleum resources, including shipping, insurance, and financing activities. S. 2799 , the Senate version of H.R. 2194 , was passed by the Senate on March 11, 2010. Some Members of Congress have urged a speedy reconciliation of the two bills. Supporters of such punitive options assert that they will place pressure on the Iranian government, given Iran's lack of refining capacity and dependence on gasoline imports. Others fear that such action would adversely affect global energy supplies and ramp up prices for U.S. consumers. In addition, some American business groups express concern that such measures may affect their foreign subsidiaries or partners who conduct business with Iran, raising questions about trade-offs between security and commercial interests. Some critics also maintain that such an action would target the Iranian populace more than the regime. There is speculation about how congressional passage of such measures would affect President Obama's efforts to secure international support for another round of U.N. sanctions. H.R. 1327 , the Iran Sanctions Enabling Act of 2009, would support recent actions taken by some state and local governments and education institutions to divest their pension funds from persons and companies that invest more than $20 million in Iran's energy sector. The bill would prohibit legal action against asset managers who divest and would require states to take several measures when considering divestment, including providing the targeted entity with an opportunity to demonstrate that it does not have investment activities in Iran that meet the $20 million threshold. H.R. 1327 was introduced on March 5, 2009, and a committee hearing was held on March 12, 2009. On October 15, 2009, the bill was referred to Senate committee. Supporters of the legislation assert that a divestment policy provides the United States with significant political and financial leverage against Iran. Critics argue that a divestment strategy would hamper U.S. diplomatic negotiations with Iran. The United States also may risk trade retaliation from countries whose companies are facing divestment. Others maintain that U.S. divestment efforts may not significantly affect the financial operations of foreign companies to the extent that might prompt them to reconsider their business activities in Iran.

The Islamic Republic of Iran, a resource-rich and labor-rich country in the Middle East, is a central focus of U.S. national security policy. The United States asserts that Iran is a state sponsor of terrorism and that Iran's uranium enrichment activities are for the development of nuclear weapons. To the extent that U.S. sanctions and other efforts to change Iranian state policy target aspects of Iran's economy as a means of influence, it is important to evaluate Iran's economic structure, strengths, and vulnerabilities. Since 2000, Iran has enjoyed broad-based economic growth. However, strong economic performance has been hindered by high levels of inflation and unemployment and low levels of foreign investment. Some contend that President Mahmoud Ahmadinejad's expansionary monetary and fiscal policies have worsened unemployment, inflation, and poverty in Iran. With the onset of the global economic downturn, Iran's economic growth was expected to slow in 2009 and through 2010. Iran has long been subject to U.S. economic sanctions, and more recently, to United Nations sanctions, over its uranium enrichment program and purported support for terror activities. Such sanctions are believed by some analysts to contribute to Iran's growing international trade and financial isolation. Iran's economy is highly dependent on the production and export of crude oil to finance government spending, and consequently is vulnerable to fluctuations in international oil prices. Although Iran has vast petroleum reserves, the country lacks adequate refining capacity and imports gasoline to meet domestic energy needs. Iran is seeking foreign investment to develop its petroleum sector. While some deals have been finalized, reputational and financial risks may have limited other foreign companies' willingness to finalize deals. While Iran-U.S. economic relations are limited, the United States has a key interest in Iran's relations with other countries. As some European countries have curbed trade and investment dealings with Iran, other countries, such as China and Russia, have emerged as increasingly important economic partners. Iran also has focused more heavily on regional trade opportunities, such as with the United Arab Emirates. High oil prices have increased Iran's leverage in dealing with international issues, but the country's dependence on oil and other weak spots in the economy have to come to light by the 2008 international financial crisis, which may portend a slowing down of Iran's economy. Members of Congress are divided about the proper course of action in respect to Iran. Some advocate a hard line, while others contend that sanctions are ineffective at promoting policy change in Iran and hurt the U.S. economy. In the 110th Congress, several bills were introduced that reflect both perspectives. Policies toward Iran remain a key issue for the 111th Congress.

Introduction Early in the history of the United States, the Supreme Court began to exercise the power that it is most closely and famously associated with—its authority of judicial review. In its 1803 decision in Marbury v. Madison , the Supreme Court famously asserted and explained the foundations of its power to review the constitutionality of federal governmental action. During the two decades following its holding in Marbury , the Court decided additional cases that helped to establish its power to review the constitutionality of state governmental action. If a challenged governmental action is unconstitutional, the Court may strike it down, rendering it invalid. When performing the function of judicial review, the Court must necessarily ascertain the meaning of a given provision within the Constitution, often for the first time, before applying its interpretation of the Constitution to the particular governmental action under review. The need to determine the meaning of the Constitution through the use of methods of constitutional interpretation and, perhaps, construction, is apparent from the text of the document itself. While several parts of the Constitution do not lend themselves to much debate about their preferred interpretation, much of the Constitution is broadly worded, leaving ample room for the Court to interpret its provisions before it applies them to particular legal and factual circumstances. For example, the Second Amendment reads, "A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed." The text of the Amendment alone does not squarely resolve whether the "right of the people to keep and bear arms" extends to all citizens or merely is related to, or perhaps conditioned on, service in a militia. This ambiguity prompted a closely divided 2008 decision of the Supreme Court that ruled in favor of the former interpretation. The text of the Constitution is also silent on many fundamental questions of constitutional law, including questions that its drafters and those ratifying the document could not have foreseen or chose not to address. For example, the Fourth Amendment, ratified in 1791, does not on its face resolve whether the government may perform a search of the digital contents of a cell phone seized incident to arrest without obtaining a warrant. Thus, interpretation is necessary to determine the meaning of ambiguous provisions of the Constitution or to answer fundamental questions left unaddressed by the drafters. Some commentators have also noted the practical need for constitutional interpretation to provide principles, rules, or standards to govern future conduct of regulated parties, as well as political institutions, branches of government, and regulators. When deriving meaning from the text of the Constitution, the Supreme Court has relied on certain "methods" or "modes" of interpretation—that is, ways of figuring out a particular meaning of a provision within the Constitution. There is significant debate over which sources and methods of construction the Court should consult when interpreting the Constitution—a controversy closely related to more general disputes about whether and how the Court should exercise the power of judicial review. Judicial review at the Supreme Court, by its very nature, can involve unelected judges overturning the will of a democratically elected branch of the federal government or popularly elected state officials. Some scholars have argued that in striking down laws or actions, the Court has decided cases according to the Justices' own political preferences. In response to these concerns, constitutional scholars have constructed theories designed to ensure that the Justices following them would be able to reach principled judgments in constitutional adjudication. In 1987, Professor Richard Fallon of Harvard Law School divided "interpretivists," or those purporting to prioritize the specific text and plain language of the Constitution above all else, into two basic camps: "On one side stand 'originalists,'" whom he characterized as taking "the rigid view that only the original understanding of the language and the framers' specific intent ought to count. On the other side, 'moderate interpretivists' allow contemporary understandings and the framers' general or abstract intent to enter the constitutional calculus." Whether or not Professor Fallon's precise description at the time was accurate, those regarding themselves as originalists have clarified that the Court should rely on the fixed meaning of the Constitution as understood by at least the public at the time of the Founding. This has become known as the original public meaning of the Constitution. On the other hand, still other commentators have questioned the legitimacy of fixating on what the Framers, ratifiers, or members of their generation might have considered the core meaning of a particular provision of the Constitution, and have instead suggested interpretive methods that ensure the Court's decisions allow government to function properly, protect minority rights, and safeguard the basic structure of government from majoritarian interference. Although the debate over the proper sources of the Constitution's meaning remains unresolved, several key methods of constitutional interpretation have guided the Justices in their decisionmaking and, more broadly, have influenced constitutional dialogue. It is possible to categorize the various methods that have been employed when interpreting the Constitution. This report broadly describes the most common modes of constitutional interpretation; discusses examples of Supreme Court decisions that demonstrate the application of these methods; and provides a general overview of the various arguments in support of, and in opposition to, the use of such methods by the Court. The modes discussed in detail in this report are (1) textualism; (2) original meaning; (3) judicial precedent; (4) pragmatism; (5) moral reasoning; (6) national identity (or "ethos"); (7) structuralism; and (8) historical practices. In explaining these modes, this report is merely describing the most common methods on which the Justices (and other interpreters) have relied to argue about the meaning of the Constitution. Depending on the mode of interpretation, the Court may rely upon a variety of materials that include, among other things, the text of the Constitution; constitutional and ratification convention debates; prior Court decisions; pragmatic or moral considerations; and long-standing congressional or legislative practices. It is important to note that the Court may use more than one source in deciding a particular case, and the Justices must exercise some discretion in choosing or coordinating the sources and materials they will consult in making sense of those sources. Understanding these methods of interpretation may assist Members of Congress in observing the oath they take to uphold the Constitution when performing their legislative functions and fulfilling Congress's role as a coequal branch of government. For example, Members of Congress may interpret the Constitution when considering whether to vote for proposed legislation or when a dispute arises regarding the boundaries between Congress's own constitutional authority and that of the executive branch (e.g., a dispute over the reach of Congress's oversight power or the scope of Executive privilege). And knowledge of the most common methods for elaborating on the Constitution's meaning may aid Senators and the Senate Judiciary Committee in examining the judicial philosophy of individuals the President nominates to serve on the federal courts. It may also assist Members and congressional committees in evaluating executive branch officials' interpretations of the Constitution. Textualism Textualism is a mode of legal interpretation that focuses on the plain meaning of the text of a legal document. Textualism usually emphasizes how the terms in the Constitution would be understood by people at the time they were ratified, as well as the context in which those terms appear. Textualists usually believe there is an objective meaning of the text, and they do not typically inquire into questions regarding the intent of the drafters, adopters, or ratifiers of the Constitution and its amendments when deriving meaning from the text. They are concerned primarily with the plain, or popular, meaning of the text of the Constitution. Textualists generally are not concerned with the practical consequences of a decision; rather, they are wary of the Court acting to refine or revise constitutional texts. The Justices frequently rely on the text in conjunction with other methods of constitutional interpretation. The Court will often look to the text first before consulting other potential sources of meaning to resolve ambiguities in the text or to answer fundamental questions of constitutional law not addressed in the text. For example, in Trop v. Dulles , a plurality of the Court held that the Eighth Amendment prohibited the government from revoking the citizenship of a U.S. citizen as a punishment. When determining that a punishment that did not involve physical mistreatment violated the Constitution, the Court first looked briefly to the text of the Amendment, noting that the "exact scope" of the phrase "cruel and unusual punishment" in the Eighth Amendment had not been "detailed by [the] Court." The plurality then turned to other modes of interpretation, such as moral reasoning and historical practices, in deciding the case. The Trop plurality's use of textualism in combination with other interpretive methods is distinguishable from a stricter textualist approach espoused most famously by Justice Hugo Black. Consistent with his view that those interpreting the Constitution should look no further than the literal meaning of its words, Justice Black contended that the text of the First Amendment, which states, "Congress shall make no law . . . abridging the freedom of speech, or of the press" absolutely forbids Congress from enacting any law that would curtail these rights. An example of Justice Black's use of textualism in a First Amendment case is his dissent in Dennis v. United States . In that case, the Court held that Congress could, consistent with the First Amendment's guarantee of freedom of speech, criminalize the conspiracy to advocate the forcible overthrow of the United States government. The Court determined that the severity of potential harm to the government from the speech in question justified Congress's restrictions on First Amendment rights. In accordance with his views that the text of the Constitution should serve as the sole source of its meaning, Justice Black dissented on the grounds that the Court should not have applied a balancing test to uphold the law against First Amendment challenge. He wrote, "I cannot agree that the First Amendment permits us to sustain laws suppressing freedom of speech and press on the basis of Congress' or our own notions of mere 'reasonableness.' Such a doctrine waters down the First Amendment so that it amounts to little more than an admonition to Congress." Another classic example of a self-consciously textualist opinion is Justice Black's dissent in Griswold v. Connecticut . In Griswold , the majority struck down as unconstitutional a Connecticut law that criminalized the furnishing of birth control to married couples based on a view that the Due Process Clause of the Fourteenth Amendment provides a general right to privacy. Justice Black criticized the majority for straying too far from the text of the Bill of Rights and relying on "nebulous" natural law principles to find a "right to privacy in marital relations" in the Constitution that—at least in his view—did not exist. Adhering to his preference for interpreting the Constitution in line with its text, Justice Black wrote, "I like my privacy as well as the next one, but I am nevertheless compelled to admit that government has a right to invade it unless prohibited by some specific constitutional provision." Proponents of textualism point to the simplicity and transparency of an approach that focuses solely on the objectively understood meaning of language independent of ideology and politics. They argue that textualism prevents judges from deciding cases in accordance with their personal policy views, leading to more predictability in judgments. Proponents also argue that textualism promotes democratic values because it adheres to the words of the Constitution adopted by the "people" as opposed to what individual Justices think or believe. Opponents of a strict reliance solely on the text in interpreting the Constitution suggest that judges and other interpreters may ascribe different meanings to the Constitution's text depending on their background — a problem compounded by textual provisions that are broadly worded or fail to answer fundamental constitutional questions. In addition, opponents argue that judges should consider values not specifically set forth in the text, such as those based on moral reasoning, practical consequences, structural relationships, or other considerations. In other words, establishing textual meaning may not be straightforward, and a more flexible approach that does not bind the Court and policymakers to words written 300 years ago may, in the view of those who argue against textualism, be necessary to ensure preservation of fundamental constitutional rights or guarantees. Original Meaning Whereas textualist approaches to constitutional interpretation focus solely on the text of the document, originalist approaches consider the meaning of the Constitution as understood by at least some segment of the populace at the time of the Founding. Though this method has generally been called "originalism," constitutional scholars have not reached a consensus on what it means for a judge to adopt this methodology for construing the Constitution's text. Disagreements primarily concern which sources scholars should consult when determining the fixed meaning of the Constitution. Originalists, however, generally agree that the Constitution's text had an "objectively identifiable" or public meaning at the time of the Founding that has not changed over time, and the task of judges and Justices (and other responsible interpreters) is to construct this original meaning. For many years, some prominent scholars (such as Robert Bork) argued that in interpreting the Constitution, one should look to the original intent of the people who drafted, proposed, adopted, or ratified the Constitution to determine what those people wanted to convey through the text. According to this view, original intent may be found in sources outside of the text, such as debates in the Constitutional Convention or the Federalist Papers. For example, in Myers v. United States , Chief Justice William Howard Taft, writing for the majority, held that the President did not need legislative approval to remove an executive branch official who was performing a purely executive function. The Court sought the original meaning of the President's removal power by looking at English common law, the records of the Constitutional Convention, and the actions of the first Congress, among other sources. Relying on these various sources, in his opinion for the Court, Chief Justice Taft wrote that " the debates in the Constitutional Convention indicated an intention to create a strong Executive." Notably, in Myers the Court did not look at sources that would likely indicate what ordinary citizens living at the time of the Founding thought about the President's removal power. Over the course of Justice Antonin Scalia's near thirty-year tenure on the Supreme Court, he and several prominent scholars explained that, as originalists, they were committed to seeking to understand original public meaning of the Constitution. This method considers the plain meaning of the Constitution's text as it would have been understood by the general public, or a reasonable person, who lived at the time the Constitution was ratified. This approach has much in common with textualism, but is not identical. The original public meaning approach to understanding the Constitution is not based solely on the text, but, rather, draws upon the original public meaning of the text as a broader guide to interpretation. Justice Scalia's majority opinion in District of Columbia v. Heller illustrates the use of original public meaning in constitutional interpretation. In that case, the Court held that the Second Amendment, as originally understood by ordinary citizens, protected an individual's right to possess firearms for private use unconnected with service in a militia. Justice Scalia's opinion examined various historical sources to determine original public meaning, including dictionaries in existence at the time of the Founding and comparable provisions in state constitutions. Those in favor of the use of original meaning as an interpretive approach point to its long historical pedigree and its adherence to the democratic will of the people who originally framed and ratified the Constitution. They point as well to the basic logic that a law, in order to function as law, has to have a fixed or settled meaning until it is formally amended or discarded. Proponents of originalism also argue that the approach limits judicial discretion, preventing judges from deciding cases in accordance with their own political views. Some originalists argue that changes to the Constitution's meaning should be left to further action by Congress and the states to amend the Constitution in accordance with Article V. Proponents also credit the approach with ensuring more certainty and predictability in judgments. Those who are skeptical of this mode of interpretation underscore the difficulty in establishing original meaning. Scholars cannot always agree on original meaning, and, perhaps, people living at the time of the Constitution's adoption may not have agreed on a particular meaning either. As such, critics argue, originalists will have merely constructed a meaning that had never actually been approved by the people who drafted or ratified the actual text being construed. Such a view may stem from the potentially wide variety of sources of such meaning; conflicting statements by these sources; conflicting understandings of statements in these sources; and gaps in historical sources. Thus, because of this lack of consensus on the original meaning of the Constitution, judges may simply choose the original view that supports their political beliefs. Opponents also argue that originalism requires judges to act as historians—a role for which they may not be well suited—as opposed to as decisionmakers. While Justice Elena Kagan, for example, has conceded that "we [the Justices] are all originalists," many critics question the extent to which originalism is a workable theory of constitutional interpretation. They argue that originalism is an inflexible, flawed method of constitutional interpretation, contending that the Constitution's contemporaries could not have conceived of some of the situations that would arise in modern times. They argue further that interpreting the Constitution based on original meaning may thus fail to protect minority rights because women and minorities did not have the same rights at the time of the Founding (or ratification of the Civil War Amendments) as they do today. In addition, some skeptics of originalism challenge the view that Article V should be the exclusive vehicle for constitutional change, as that article requires a two-thirds majority vote of the House of Representatives and Senate to propose an amendment, and ratification by three-fourths of the states for the amendment to become part of the Constitution. The high threshold the Constitution creates for formal amendment has prompted arguments that the Constitution's meaning should not be fixed in time, but, rather, should accommodate modern needs. Judicial Precedent The most commonly cited source of constitutional meaning is the Supreme Court's prior decisions on questions of constitutional law. For most, if not all Justices, judicial precedent provides possible principles, rules, or standards to govern judicial decisions in future cases with arguably similar facts. Although the Court routinely purports to rely upon precedent, it is difficult to say with much precision how often precedent has actually constrained the Court's decisions because the Justices plainly have latitude in how broadly or narrowly they choose to construe their prior decisions. In some cases, however, a single precedent may play a particularly prominent role in the Court's decisionmaking. For example, a plurality of Justices relied on Roe v. Wade as controlling precedent in their opinion in Planned Parenthood v. Casey . In that case, the plurality reaffirmed Roe 's holding that a woman has a protected liberty interest in terminating her pregnancy prior to fetal viability, stating that the essential holding of Roe "should be retained." Another example of the heightened role that precedent can play in constitutional interpretation is the Court's decision in Dickerson v. United States , which addressed the constitutionality of a federal statute governing the admissibility of statements made during police interrogation, a law that functionally would have overruled the 1966 case of Miranda v. Arizona . In striking down the statute, the majority declined to overrule Miranda , noting that the 1966 case had "become embedded in routine police practice to the point where the warnings have become part of our national culture." More often, the Court reasons from the logic of several precedents in rendering its decisions. An example is Arizona State Legislature v. Arizona Independent Redistricting Commission , which held that the voters of Arizona could remove from the state legislature the authority to redraw the boundaries for legislative districts and vest that authority in an independent commission. In so holding, the Court examined the Elections Clause, which states that the " Times, Places, and Manner of holding Elections for Senators and Representatives, shall be prescribed in each State by the Legislature thereof." The Court determined that the term "Legislature" encompassed the voters of a state making law through a referendum. In reaching this determination, the Court relied on three cases from the early twentieth century to support a more expansive view of the term "Legislature," including one case from 1916, Ohio ex rel. Davis v. Hildebrant , which the Court described as holding that a state referendum was "part of the legislative power" and could be "exercised by the people to disapprove the legislation creating congressional districts." Proponents of the primacy of precedent as a source of constitutional meaning point to the legitimacy of decisions that adhere to principles set forth in prior, well-reasoned written opinions. They contend that following the principle of stare decisis and rendering decisions grounded in earlier cases supports the Court's role as a neutral, impartial, and consistent decisionmaker. Reliance on precedent in constitutional interpretation is said to provide more predictability, consistency, and stability in the law for judges, legislators, lawyers, and political branches and institutions that rely on the Court's rulings; prevent the Court from overruling all but the most misguided decisions; and allow constitutional norms to evolve slowly over time. Some argue that judicial overreliance on precedent can be problematic. For one thing, certain precedents might have been wrongly decided, in which case relying on them merely perpetuates their erroneous construction of the Constitution. Indeed, critics argue that, if the Court strictly adheres to precedent, once a precedent has been established on a question of constitutional law, the only way to alter that ruling is to amend the Constitution. This inflexibility is particularly problematic when those outside the Court begin to disagree about general background principles underlying a precedent; as such, disagreements arguably cause that precedent to lose its authority. For example, when precedent offends basic moral principles (e.g., Plessy v. Ferguson ), the power of the Court's precedent may necessarily be weakened. Other commentators argue that "consistency," "predictability," "stability," and "neutrality" are not actually benefits of reliance on precedent, as judges may choose among precedents and, to some extent, interpret precedents in accordance with their own views in order to overrule them implicitly; to expand them; or to narrow them. In addition, some proponents of original meaning as a method of constitutional interpretation object to the use of judicial precedent that conflicts with original meaning, because it favors the views of the Court over the views of those who ratified the Constitution, thereby allowing mistaken interpretations of the Constitution to persist. Pragmatism In contrast to textualist and some originalist approaches to constitutional interpretation, which generally focus on the words of the Constitution as understood by a certain group of people, pragmatist approaches consider the likely practical consequences of particular interpretations of the Constitution. That is, pragmatist approaches often involve the Court weighing or balancing the probable practical consequences of one interpretation of the Constitution against other interpretations. One flavor of pragmatism weighs the future costs and benefits of an interpretation to society or the political branches, selecting the interpretation that may lead to the perceived best outcome. For example, in United States v. Leon , the majority held that the Fourth Amendment does not necessarily require a court to exclude evidence obtained as a result of the law enforcement's good faith reliance on an improperly issued search warrant. Justice Byron White's majority opinion in Leon took a pragmatic approach, determining that "the [exclusionary] rule's purposes will only rarely be served" by applying it in the context of a good faith violation of the Fourth Amendment. Notably, the Court determined that adoption of a broader exclusionary rule would result in significant societal costs by undermining the ability of the criminal justice system to obtain convictions of guilty defendants. Such costs, the Court held, outweighed the "marginal or nonexistent benefits." Another case in which the Supreme Court accorded weight to the likely practical consequences of a particular interpretation of the Constitution is United States v. Comstock. In Comstock , the Court considered whether Congress had the power under Article I, Section 8 of the Constitution to enact a civil commitment law authorizing the Department of Justice to cause to be detained indefinitely convicted sex offenders who had already served their criminal sentences but were deemed "mentally ill" and "sexually dangerous." Such a power is not among those specifically enumerated in Article I, Section 8 of the Constitution, but the Court held that Congress could enact the law under a combination of (1) its implied constitutional powers to, among other things, legislate criminal offenses, provide for the imprisonment of offenders, and regulate prisons and prisoners; and (2) Article I, Section 8, Clause 18 of the Constitution, which provides Congress the power to "make all Laws which shall be necessary and proper for carrying into Execution . . . all other Powers vested by this Constitution in the Government of the United States." Justice Stephen Breyer, writing for the Court, listed several factors that weighed in favor of the Court's determination that Congress possessed the authority to enact the civil commitment law. One of these factors rested primarily on pragmatic concerns about the potential detriment to society of releasing dangerous offenders into the community. The Court held that the civil commitment law represented a rational means of implementing Congress's implied criminal justice powers "in light of the Government's custodial interest in safeguarding the public from dangers posed by those in federal custody." Using another type of pragmatist approach, a court might consider the extent to which the judiciary could play a constructive role in deciding a question of constitutional law. According to this approach, a judge might observe the "passive virtues" by declining to rule on the constitutional issues in a case by adhering to certain doctrines, including those under which a judge will avoid ruling on political or constitutional questions. This may allow the Court to avoid becoming frequently embroiled in public controversies, preserving the Court's institutional capital for key cases and giving more space for the democratic branches to address the issue and reach accommodations on questions about the meaning of the Constitution. The Supreme Court's decision in Baker v. Carr illustrates the application of this second type of pragmatism. In that case, Justice William Brennan, writing for the majority, debated a dissenting Justice Felix Frankfurter about whether the Court was the proper actor to review the constitutionality of a state's apportionment of voters among legislative districts, or whether the plaintiffs should have sought remedies from the state legislature. Justice Brennan's majority opinion in Baker ultimately concluded that a state's apportionment decisions are properly justiciable matters, as an alternative holding would require those harmed by malapportionment to seek redress from a political process that was skewed against such plaintiffs. Those who support pragmatism in constitutional interpretation argue that such an approach takes into account the "political and economic circumstances" surrounding the legal issue before the Court and seeks to produce the optimal outcome. Such an approach may allow the Court to issue decisions reflecting contemporary values to the extent that the Court considers these values relevant to the costs and benefits of a particular interpretation. On this view, pragmatism posits a view of the Constitution that is adaptable to changing societal circumstances, or that at least reflects the proper role of the judiciary. Critics of pragmatism argue that consideration of costs and benefits unnecessarily injects politics into judicial decisionmaking. They argue that judges are not politicians. Rather, a judge's role is to say what the law is and not what it should be. In addition, some opponents of the pragmatic approach have argued that when the Court observes the "passive virtues" by dismissing a case on jurisdictional grounds, it fails to provide guidance to parties for the future and to fulfill the Court's duty to decide important questions about constitutional rights. Moral Reasoning Another approach to constitutional interpretation is based on moral or ethical reasoning—often broadly called the "ethos of the law." Under this approach, some constitutional text employs or makes reference to terms that are infused with (and informed by) certain moral concepts or ideals, such as "equal protection" or "due process of law." The moral or ethical arguments based on the text often pertain to the limits of government authority over the individual (i.e., individual rights). The Court has derived general moral principles from the broad language of the Fourteenth Amendment in cases involving state laws or actions affecting individual rights. For example, in Lawrence v. Texas , the Court struck down a Texas law that banned private, consensual same-sex sexual activity as violating the Due Process Clause of the Fourteenth Amendment. That clause provides, in relevant part, that states shall not "deprive any person of . . . liberty . . . without due process of law." The Court held that the concept of liberty "presumes an autonomy of self that includes freedom of thought, belief, expression, and certain intimate conduct." Notably, the text of the Fourteenth Amendment does not define "liberty," and the Court's holding in Lawrence is more broadly grounded in general views about the proper role of government in not punishing behavior that provides no discernible harm to the public at large. A particularly famous example of an argument based on the "ethos of the law" is contained in the Court's decision in Bolling v. Sharpe . The Court decided Bolling on the same day it decided Brown v. Board of Education , which held that a state, in segregating its public school systems by race, violated the Fourteenth Amendment. Specifically, the Court held that the practice of "separate but equal" as applied to schools violated the Equal Protection Clause, a provision that prohibits state governments from depriving their citizens of the equal protection of the law. Bolling , however, involved the District of Columbia school system, which was not subject to the Fourteenth Amendment because the District of Columbia is not a state, but rather a federal enclave. Furthermore, the Fifth Amendment, which applies to the actions of the federal government, provides that no person shall "be deprived of life, liberty, or property, without due process of law" but does not explicitly contain an Equal Protection Clause. Nevertheless, the Court struck down racial segregation in DC public schools as a violation of the Fifth Amendment's Due Process Clause, determining that due process guarantees implicitly include a guarantee of equal protection. The Court's reasoning was based on the Due Process Clause being derived "from our American ideal of fairness," ultimately holding that the Fifth Amendment prohibited the federal government from allowing segregation in public schools. Proponents of using moral or ethical reasoning as an approach for making sense of broad constitutional text, such as the Due Process Clause of the Fourteenth Amendment, argue that general moral principles underlie much of the text of the Constitution. Thus, arguments about what the Constitution means based on moral reasoning produce "more candid opinions," as judges often rely upon moral arguments but disguise them as textual arguments or arguments based on precedent. Some also argue that the Framers designed the Constitution as an instrument that would grow over time. Thus, supporters of moral reasoning in constitutional interpretation contend that its use appropriately leads to more flexibility for judges to incorporate contemporary values when deriving meaning from the Constitution. Ethical arguments can also fill in gaps in the text to address situations unforeseen at the time of the Founding, consistent with the understanding of the Bill of Rights as a starting point for individual rights. Critics of using moral reasoning in constitutional interpretation have argued that courts should not be "moral arbiters." They argue that ethical arguments are based on principles that are not objectively verifiable and may require a judge to choose between "competing moral conventions." Courts may thus be ill-equipped to discern established moral principles. Judges using this mode of constitutional interpretation may therefore decide cases according to their own policy views, and opponents believe that overturning acts of the political branches based on such considerations is undemocratic. Some opponents argue that moral considerations may be better left to the political branches. National Identity or "National Ethos" Another approach to interpretation that is closely related to but conceptually distinct from moral reasoning is judicial reasoning that relies on the concept of a "national ethos." This national ethos is defined as the unique character of American institutions, the American people's distinct national identity, and "the role within [the nation's public institutions] of the American people." An example of the "national ethos" approach to ethical reasoning is found in Moore v. City of East Cleveland , in which the Court struck down as unconstitutional a city zoning ordinance that prohibited a woman from living in a dwelling with her grandson. In its decision, the Court surveyed the history of the family as an institution in American life and stated, "Our decisions establish that the Constitution protects the sanctity of the family precisely because the institution of the family is deeply rooted in this Nation's history and tradition. It is through the family that we inculcate and pass down many of our most cherished values, moral and cultural." Thus, the Court struck down the zoning ordinance, at least in part, because it interfered with the American institution of the family by preventing a grandmother from living with her grandson. Another example of the Court's reliance on national ethos as a rationale is West Virginia State Board of Education v. Barnette . In that case, the Court held that the First Amendment prohibited a state from enacting a law compelling students to salute the American flag. Writing for the majority, Justice Robert Jackson noted that, in contrast to authoritarian regimes such as the Roman Empire, Spain, and Russia, the United States' unique form of constitutional government eschews the use of government coercion as a means of achieving national unity. The Court invoked the nation's character as reflected in the Constitution, writing that, "If there is any fixed star in our constitutional constellation, it is that no official, high or petty, can prescribe what shall be orthodox in politics, nationalism, religion, or other matters of opinion or force citizens to confess by word or act their faith therein ." Many of the arguments in the debate over reliance on the "national ethos" in constitutional interpretation share similarities with arguments made about the use of moral reasoning as a mode of interpretation. Some proponents of using the distinct character of the American national identity and the nation's institutions as a method for elaborating on the Constitution's meaning argue that the "national ethos" underlies the text of the Constitution, and that the use of this method allows more flexibility for judges to incorporate contemporary American values when deriving meaning from the Constitution. Moreover, unlike approaches that discern meaning from general moral or ethical principles, the "national ethos" approach arguably has added legitimacy as a mode of interpretation because it is specifically tied to the identity and values of the United States and those aspects of the Constitution that are distinctly American. As noted, ethical arguments can also fill in gaps in the text to address situations unforeseen at the time of the Founding. On the other hand, as with moral reasoning, critics of an approach to constitutional interpretation based on the "national ethos" have argued that such an approach involves unelected judges determining the meaning of the Constitution based on principles that are not objectively verifiable—determinations that critics argue should be made by the political branches. Structuralism One of the most common modes of constitutional interpretation is based on the structure of the Constitution. Indeed, drawing inferences from the design of the Constitution gives rise to some of the most important relationships that everyone agrees the Constitution establishes—the relationships among the three branches of the federal government (commonly called separation of powers or checks and balances); the relationship between the federal and state governments (known as federalism); and the relationship between the government and the people. Two basic approaches seek to make sense of these relationships. The first, known as formalism, posits that the Constitution sets forth all the ways in which federal power may be shared, allocated, or distributed. An example of the use of this form of structuralism as a mode of interpretation is found in Immigration and Naturalization Service v. Chadha . In that case, the Court held that one house of Congress could not by resolution unilaterally curtail the statutory authority of the executive branch to allow a deportable alien to remain in the United States. The Court examined the structure of the Constitution and noted that under the Bicameralism and Presentment Clauses in Article I, Sections 1 and 7, laws with subject matter that is "legislative in character or effect" require passage by a majority in both houses and presentment to the President for his signature or veto. Viewing the exercise of the one-house veto in Chadha to be of a legislative nature, the Court concluded that the structural relationships that the Constitution established between the legislative and executive branches forbid the "one-House legislative veto." An example of the Court's use of formalist structural reasoning in the context of federalism is U.S. Term Limits, Inc. v. Thornton . In that case, the Court considered whether the State of Arkansas could prohibit the names of otherwise-qualified candidates for congressional office from appearing on the state's general election ballot if the candidates had served three terms in the House of Representatives or two terms in the Senate. In striking down an amendment to the Arkansas State Constitution, the Court relied heavily on its view of the formal structural relationships that the Constitution established among the people of the United States, the states, and the federal government. In particular, the Court determined that the Founding Fathers established a single, national legislature representing "the people of the United States" rather than a "confederation of sovereign states." Thus, allowing states to adopt a patchwork of distinct qualifications for congressional service would "erode the structure envisioned by the Framers." Notably, the Court in Thornton adhered closely to its view of how the Constitution allocates power between the federal and state governments, and did not employ a balancing test to examine the degree to which the states' power to set qualifications for congressional office would interfere with the federal government's constitutional prerogatives. A second form of structural reasoning, known as functionalism, treats the Constitution's text as having firmly spelled out the relationship among the three federal branches only at their apexes, but otherwise left it to be worked out in practice how power may be distributed or shared below the apexes. Whereas formalism purports to hew closely to original meaning and regards historical practices as basically irrelevant or illegitimate, functionalism uses a balancing approach that weighs competing governmental interests as one of its principal methodologies. One early example of functionalism is McCulloch v. Maryland . In that case, the Court held that Congress had the power to create the Second Bank of the United States. While Congress's enumerated powers in Article I, Section 8 of the Constitution do not specifically include the power to create a central bank, the Court considered whether Congress had such authority under its enumerated powers when viewed in conjunction with Article I, Section 8, Clause 18, which provides Congress the power "To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States." The Court determined that Congress had an implied power to create the bank under the Necessary and Proper Clause in order to implement its express powers to tax and spend, concluding that the terms "necessary" and "proper" should not have a restrictive meaning on Congress's power. In so holding, the Court examined the structure of the Constitution's text, noting that the Constitution located the Necessary and Proper Clause in the section of the Constitution that grants powers to Congress (Article I, Section 8), instead of the section of the Constitution that restricts the powers of the federal government (Article I, Section 9). Moreover, the McCulloch Court noted that a more restrictive reading of Congress's powers would impair its ability to "perform[] its functions," as a narrow reading of the Necessary and Proper Clause would impose "some difficulty in sustaining the authority of Congress to pass other laws for the accomplishment of the same objects." As is evident, a threshold debate among structuralists is whether to use a formalist or functionalist approach when interpreting the Constitution. This debate is founded partly in concerns about which approach demonstrates greater fidelity to the Constitution, which is closest to the original meaning of the Constitution, and which best protects liberty in cases raising questions about the proper allocation of power between the branches of the federal government; federal government and states; government institutions; or citizens and government. Formalism focuses on the structural divisions in the Constitution with the idea that close adherence to these rules is required in order to achieve the preservation of liberty. An example is the Court's opinion in Chadha , which, as noted, held that structural relationships that the Constitution established between the legislative and executive branches forbid the "one-House legislative veto." The Court rested its holding in part on a close adherence to the structural divisions established in the Constitution, stating, "It emerges clearly that the prescription for legislative action in [Article I, Sections 1 and 7 of the Constitution] represents the Framers' decision that the legislative power of the Federal Government be exercised in accord with a single, finely wrought and exhaustively considered, procedure." As demonstrated in Chadha , a formalist approach to separation-of-powers questions rejects not only looking to postratification historical practices as a guide for determining constitutional meaning, but also eschews balancing tests that weigh the degree of interference with one branch's powers. By contrast, functionalism takes a more flexible approach, emphasizing the core functions of each of the branches, and asking whether an overlap in these functions upsets the equilibrium that the Framers sought to maintain. An example is the Court's opinion in Zivotofsky v. Kerry . In that case, the Court held that the President has the exclusive power to recognize formally a foreign sovereign and its territorial boundaries, and that Congress could not effectively require the State Department to issue a formal statement contradicting the President's policy on recognition. In so holding, the Court stated that the President should have such an exclusive power because the nation must have a "single policy" on which governments are legitimate, and that additional pronouncements from Congress on the issue could result in confusion. The Court thus adopted a functionalist approach by considering the practical consequences of allocating the power of recognition between the legislative and executive branches, ultimately concluding that the President alone should exercise that power. A further illustration of the distinction between formalism and functionalism in a separation-of-powers case is Morrison v. Olson . In Morrison , the Court upheld against constitutional challenge provisions in the Ethics in Government Act of 1978 that allowed for appointment of an "independent counsel to investigate and, if appropriate, prosecute certain high-ranking Government officials for violations of federal criminal laws." The Attorney General could remove the independent counsel only for "good cause," a legal standard that provided the special prosecutor with significant independence from the President and his officers. In a 7-1 decision, the Court employed a functionalist approach and held that the act did not violate constitutional separation-of-powers principles by sufficiently interfering with the President's executive authority under Article II. The Court determined the limited nature of the special prosecutor's jurisdiction and authority meant that the position did not "interfere impermissibly with [the President's] constitutional obligation to ensure the faithful execution of the laws." Justice Scalia, the sole dissenter, adopted a formalist approach, arguing that the majority failed to adhere to the strict allocations of power that the Constitution establishes among the branches of government. Justice Scalia wrote that the independent counsel provisions deprived the President of "exclusive control" over the exercise of "purely executive powers" (e.g., investigation and prosecution of crimes) by vesting them in the independent counsel, who was not removable at will by the President. Proponents of structuralism note that it is a method of interpretation that considers the entire text of the Constitution rather than a particular part of it. As a consequence, some proponents argue that structuralist methods produce clearer justifications for decisions that require interpretation of vague provisions of the Constitution and their application to particular factual circumstances than textualism alone. Some argue that structuralism provides a firmer basis for personal rights than other modes of interpretation like textualism or moral reasoning. For example, in Crandall v. Nevada , the Court struck down a state law imposing a tax on people leaving or passing through the state. The Court inferred an individual right to travel among the states from the structural relationship the Constitution establishes between citizens and the federal and state governments. While the Constitution does not specifically provide for a right to travel among the states, because citizens of the United States might need to travel among the states to exercise other constitutional rights, the Court inferred a right to travel from the Constitution viewed in its entirety. As a result, some structuralists argue that the method of interpretation provides a more firm basis to establish key constitutional rights, like the right to travel, than other modes of constitutional interpretation. Some scholars maintain, however, that structuralism does not always lead to a clear answer. More specifically, critics argue that it is more difficult for judges to apply and for citizens to understand interpretations based on structuralism than arguments based on other modes of interpretation. In addition, many believe that determinations about the proper structure established by the Constitution are often subjective. While the eminent Professor Charles Black argued that structure was the most important mode of constitutional interpretation, at least one other prominent commentator has argued that the approach provides "no firm basis for personal rights" because personal rights are considered to derive from the "structure of citizenship" and are therefore "vulnerable to the [government's] desire for power and its ability to manipulate the relation between citizen and state." Historical Practices Judicial precedents are not the only type of precedents that are arguably relevant to constitutional interpretation. Prior decisions of the political branches, particularly their long-established, historical practices, are an important source of constitutional meaning to many judges, academics, and lawyers. Indeed, courts have viewed historical practices as a source of the Constitution's meaning in cases involving questions about the separation of powers, federalism, and individual rights, particularly when the text provides no clear answer. An example of judicial reliance on historical practices—sometimes described as tradition—in constitutional interpretation is the Court's decision in National Labor Relations Board v. Canning . When determining, among other things, that the President lacked authority to make a recess appointment during a Senate recess of fewer than ten days, the Court cited long-settled historical practices showing an absence of a settled tradition of such recess appointments as being relevant to the resolution of a separation-of-powers question not squarely addressed by the Constitution. Another example of the influence of historical practices on constitutional interpretation is the Court's decision in Zivotofsky v. Kerry . As noted above, in that case the Court held that the President had the exclusive power to recognize formally a foreign sovereign and its territorial boundaries, and that Congress could not effectively require the State Department to issue a formal statement contradicting the President's policy on recognition. In deciding the case, the Court relied in part on the long-standing historical practice of the President in recognizing foreign sovereigns without congressional consent. An example of the use of historical practices as a method of constitutional interpretation in a case involving the limits of government power is Marsh v. Chambers . In Marsh , the Court considered whether the First Amendment's Establishment Clause, which prohibits laws "respecting an establishment of religion," forbade the State of Nebraska from paying a chaplain with public funds to open each legislative session with a prayer in the Judeo-Christian tradition. The Court held that the state's chaplaincy practice did not violate the Establishment Clause, attaching significance to the long-standing practices of Congress (including the Congress that adopted the First Amendment as part of the Bill of Rights) and some states in funding chaplains to open legislative sessions with a prayer. The Court wrote, "The opening of sessions of legislative and other deliberative public bodies with prayer is deeply embedded in the history and tradition of this country. From colonial times through the founding of the Republic and ever since, the practice of legislative prayer has coexisted with the principles of disestablishment and religious freedom." The debate over historical practices as a mode of interpretation echoes many of the elements of debates over original meaning, judicial precedent, and arguments based on a "national ethos." Functionalists, for example, attach considerable importance to historical practices as a source of constitutional meaning, while formalists generally regard them as irrelevant. Those employing this method often argue that, when the text of the Constitution is ambiguous, the use of historical practices has legitimacy as an interpretive tool. They also contend that such an approach provides an objective and neutral basis for decisionmaking, leading to more predictability and stability in the law upon which parties can rely. Moreover, according interpretive significance to historical practices in cases concerning the allocation of power among the branches of government may help to preserve settled expectations that have resulted from long-standing compromises among the branches regarding such allocations. Those opposing reliance on historical practices as a source of constitutional meaning argue that it may be difficult to establish definitively what the relevant historical practices are in order to interpret the Constitution properly. They suggest that not all practices are authorized by the written text and that historical sources may differ and thus might not be helpful in illuminating patterns in historical practices. They also warn that this methodology could allow judges to engage in a form of what is called "law office history"—simply choosing the sources that support the historical practices they wish to ratify or reject. Thus, it could be argued that historical practices may not lend themselves to easy or clear interpretation. Moreover, they can lead to results inconsistent with the original meaning of the Constitution. Another possible problem with reliance on historical practices in constitutional interpretation, according to its critics, is that courts could end up legitimizing long-standing historical practices, such as slavery or segregation, that offend modern moral principles. Indeed, giving historical practices special place in constitutional interpretation could lead courts to fail to protect minority rights or to preserve the basic structure of government established by the Constitution. At the same time, reliance on historical practices might undermine the political branches when they are attempting to be innovative or opt for novel solutions to old problems. Deriving the Constitution's meaning from long-established, historical practices of the political branches is one of several methods of constitutional interpretation the Court has relied upon when exercising the power of judicial review. In explaining the meaning of the provisions of the Constitution, courts and commentators often refer to these modes of interpretation. An understanding of these methods, which are not mutually exclusive, will aid congressional staff in understanding the development of the constitutional doctrines that guide the Justices, government officials, and other individuals when they interpret the Constitution.

When exercising its power to review the constitutionality of governmental action, the Supreme Court has relied on certain "methods" or "modes" of interpretation—that is, ways of figuring out a particular meaning of a provision within the Constitution. This report broadly describes the most common modes of constitutional interpretation; discusses examples of Supreme Court decisions that demonstrate the application of these methods; and provides a general overview of the various arguments in support of, and in opposition to, the use of such methods of constitutional interpretation. Textualism. Textualism is a mode of interpretation that focuses on the plain meaning of the text of a legal document. Textualism usually emphasizes how the terms in the Constitution would be understood by people at the time they were ratified, as well as the context in which those terms appear. Textualists usually believe there is an objective meaning of the text, and they do not typically inquire into questions regarding the intent of the drafters, adopters, or ratifiers of the Constitution and its amendments when deriving meaning from the text. Original Meaning. Whereas textualist approaches to constitutional interpretation focus solely on the text of the document, originalist approaches consider the meaning of the Constitution as understood by at least some segment of the populace at the time of the Founding. Originalists generally agree that the Constitution's text had an "objectively identifiable" or public meaning at the time of the Founding that has not changed over time, and the task of judges and Justices (and other responsible interpreters) is to construct this original meaning. Judicial Precedent. The most commonly cited source of constitutional meaning is the Supreme Court's prior decisions on questions of constitutional law. For most, if not all Justices, judicial precedent provides possible principles, rules, or standards to govern judicial decisions in future cases with arguably similar facts. Pragmatism. Pragmatist approaches often involve the Court weighing or balancing the probable practical consequences of one interpretation of the Constitution against other interpretations. One flavor of pragmatism weighs the future costs and benefits of an interpretation to society or the political branches, selecting the interpretation that may lead to the perceived best outcome. Under another type of pragmatist approach, a court might consider the extent to which the judiciary could play a constructive role in deciding a question of constitutional law. Moral Reasoning. This approach argues that certain moral concepts or ideals underlie some terms in the text of the Constitution (e.g., "equal protection" or "due process of law"), and that these concepts should inform judges' interpretations of the Constitution. National Identity (or "Ethos"). Judicial reasoning occasionally relies on the concept of a "national ethos," which draws upon the distinct character and values of the American national identity and the nation's institutions in order to elaborate on the Constitution's meaning. Structuralism. Another mode of constitutional interpretation draws inferences from the design of the Constitution: the relationships among the three branches of the federal government (commonly called separation of powers); the relationship between the federal and state governments (known as federalism); and the relationship between the government and the people. Historical Practices. Prior decisions of the political branches, particularly their long-established, historical practices, are an important source of constitutional meaning. Courts have viewed historical practices as a source of the Constitution's meaning in cases involving questions about the separation of powers, federalism, and individual rights, particularly when the text provides no clear answer.

Introduction Though North Korea has been a persistent U.S. foreign policy challenge for decades, during 2017 the situation evolved to become what many observers assess to be a potential direct security threat to the U.S. homeland. In July 2017, North Korea apparently successfully tested its first intercontinental ballistic missiles (ICBMs). Some observers assert that North Korea has, with these tests, demonstrated a capability of reaching the continental United States, although others contend that these tests have not yet in actuality proven that the DPRK has achieved intercontinental ranges with its missiles. Regardless, these developments, combined with the possibility that the regime in Pyongyang has miniaturized a nuclear weapon, suggest that North Korea could now be only one technical step—mastering reentry vehicle technology—away from being able to credibly threaten the continental United States with a nuclear weapon. Some estimates reportedly maintain that North Korea may be able to do so by sometime in 2018, suggesting that the window of opportunity for eliminating these capabilities without possible nuclear retaliation to the continental United States is closing. Combined with the long-standing use of aggressive rhetoric toward the United States by successive Kim regimes, these events appear to have fundamentally altered U.S. perceptions of the threat the Kim Jong-un regime poses, and have escalated the standoff on the Korean Peninsula to levels that have arguably not been seen since at least 1994. In the coming months, Congress may opt to play a greater role in shaping U.S. policy regarding North Korea, including consideration of the implications of possible U.S. actions to address it. The United States has long signaled its preference for resolving the situation with diplomacy, and has used economic pressure, in the form of unilateral and multinational economic sanctions, to create opportunities for those diplomatic efforts. Various Trump Administration statements suggest that a mixture of economic pressure and diplomacy remains the preferred policy tool. To a greater degree than their predecessors, however, Trump Administration officials have publicly emphasized that "all options are on the table," including the use of military force, to contend with the threat North Korea may pose to the United States and its allies. Consistent with the policies of prior Administrations, Trump Administration officials have also stated that the goal of their increased pressure campaign toward North Korea is denuclearization—the removal of nuclear weapons from the Korean Peninsula. If the Trump Administration chooses to pursue military options, key questions for Congress include whether, and how, to best employ the military to accomplish denuclearization, and whether using military force on its own or in combination with other tools might result in miscalculation on either side and lead to conflict escalation. Intended or inadvertent, reengaging in military hostilities in any form with North Korea is a proposition that involves military and political risk. Any move by the United States, South Korea, or North Korea could result in an unpredictable escalation of conflict and produce substantial casualty levels. A conflict itself, should it occur, would likely be significantly more complex and dangerous than any of the interventions the United States has undertaken since the end of the Cold War, including those in Iraq, Libya, and the Balkans. Some analysts contend, however, that the risk of allowing the Kim Jong-un regime to acquire a nuclear weapon capable of targeting the U.S. homeland is of even greater concern than the risks associated with the outbreak of war, especially given Pyongyang's long history of threats and aggressive action toward the United States and its allies and the regime's long-stated interest in unifying the Korean Peninsula on its terms. Some analysts assert that preemptive U.S. military action against North Korea should be taken when there is an "imminent launch" of a North Korean nuclear-armed ICBM aimed at the United States or its allies. Other analysts downplay the risk of North Korean nuclearization; few analysts believe that North Korea would launch an unprovoked attack on U.S. territory. Many students of the regional military balance contend that an overall advantage over North Korea rests with the United States and its ally, the Republic of Korea (or, ROK, commonly known as South Korea), and that U.S./ROK forces would likely prevail in any conflict within a matter of weeks. Those analyses, however, also generally assume that neither China nor Russia would become engaged in the conflict. Should China or Russia do so, the conflict would likely become significantly more complicated, costly, and lengthy. The toll of such a conflict could be immense, given that Seoul—with a population of approximately 23 million people, including American citizens—is within the range of North Korean artillery deployed near the demilitarized zone (DMZ) between the two Koreas. Should the DPRK use the nuclear, chemical, or biological weapons in its arsenal, according to some estimates casualty figures could number in the millions. Depending upon the nature of the conflict and the strategic objectives being advanced, U.S. military casualties could also be considerable. As a result, Congress may consider whether to support increased U.S. military activities—possibly including combat operations—to denuclearize the Korean peninsula, or whether instead to support efforts to contain and deter North Korean aggression primarily through other means. Any option would carry with it considerable risk to the United States, the region, and global order. As Congress considers these issues, key strategic-level questions include, but are not limited to, the following: Could the North Korean regime change its calculus, or collapse or otherwise transform, perhaps as a result of outside pressure, prior to its acquisition, or use, of credible nuclear-tipped ICBMs capable of holding targets in the continental United States at risk? What are the implications for U.S. relationships in the region if key allies are persuaded that the United States will no longer give the priority to regional security that it has thus far? What will be the cost implications, in terms of U.S. and allied financial resources, casualties, standing, and reputation, should hostilities break out, and how would those costs affect the ability of the United States to advance other critical national security objectives in other theaters? How do the risks associated with U.S. military action against North Korea compare with the risks of adopting other strategies, such as deterring and containing North Korea? Would a nuclear-armed Kim regime behave in a manner consistent with other nuclear powers? What would a nuclear-armed North Korea mean for longer-term national security decisions the United States faces? Background U.S. officials have been concerned about the threats North Korea poses to international order and regional alliances since Pyongyang's 1950 invasion of South Korea. The United Nations Security Council authorized a 16-nation Joint Command, of which the United States was a significant participant, to intervene on the Korean Peninsula to help repel North Korean forces. Shortly thereafter, when U.S. and allied forces pushed far into North Korean territory, China deployed its armed forces to assist the North. The parties eventually fought back to the 38 th parallel that originally divided the peninsula following World War II. Counts of the dead and wounded vary: according to the U.S. Department of Defense, more than 33,000 U.S. troops were killed and over 100,000 were wounded during the three-year-long Korean War; China lost upwards of 400,000 troops, with an additional 486,000 wounded; and North Korea's armed forces dead numbered around 215,000, with some 303,000 wounded. South Korea witnessed an estimated 138,000 armed forces and 374,000 civilians killed. Hostilities were formally suspended in 1953 with the signing of an armistice agreement rather than a peace treaty. Over the subsequent decades, the United States and its regional allies have largely contained the military threats to U.S. interests in Northeast Asia posed by North Korea. The United States and its ally South Korea have deterred three generations of the ruling Kim dynasty in Pyongyang from launching large-scale military operations. The U.S. security commitment to, and relationship with, the Republic of Korea has helped South Korea to emerge as one of the world's largest industrialized countries and, since the late 1980s, a flourishing democracy. South Korea today is one of the United States' most important economic and diplomatic partners in East Asia and globally. With respect to the Korean Peninsula itself, two key components of U.S. policy have been the U.S.-ROK Mutual Defense Treaty, along with the presence of some 28,500 U.S. troops in South Korea. Congress has supported the overall U.S. security approach to Northeast Asia, with the Senate approving defense treaties (and their revisions) with South Korea and Japan, and Congress providing funding for and oversight of the forward deployment of U.S. troops in both countries. U.S./ROK efforts, however, along with those of other countries, have to date failed to compel the DPRK to abandon its nuclear weapons and ICBM programs. Since Pyongyang began undertaking its weapons of mass destruction (WMD) acquisition programs in earnest in the 1980s, the United States and the international community writ large have employed a range of tools, including diplomacy, sanctions, strengthening of the capabilities of U.S. political and military alliances, and attempts to convince China to increase pressure on the DPRK to change its behavior. Around 90% of North Korea's trade is with China, which arguably gives Beijing significant leverage over Pyongyang. Some argue that these efforts have slowed but not stopped North Korea's drive toward developing a nuclear ICBM capability. Economic and Diplomatic Efforts to Compel Denuclearization23 The Trump Administration, as did the Obama Administration before it, places significant emphasis on expanding economic and diplomatic sanctions on North Korea and third-party entities that deal with North Korea. At the U.N. Security Council, the United States led efforts to pass eight sanctions resolutions, including the most recent, Resolution 2375, which was adopted in September 2017. For its part, Congress enacted the North Korea Sanctions and Policy Enhancement Act of 2016 (NKSPEA, P.L. 114-122 ; signed into law by President Obama in February 2016) and the Korean Interdiction and Modernization of Sanctions Act (KIMS Act, title III of P.L. 115-44 ; signed into law by President Trump in August 2017) to strengthen actions already taken by the executive branch to implement sanctions required by the Security Council and to expand those economic activities in which North Korea engages that could be subject to penalties—including trade and transactions with third countries (secondary sanctions). Further, since the George H. W. Bush Administration, the United States has imposed unilateral measures against North Korean entities, and entities in third countries, found to have been instrumental in North Korea's WMD programs. To implement the NKSPEA and KIMS Acts, the United States has also imposed economic sanctions on entities in China and Russia for activities that allegedly provide revenue to the North Korean government, provide the means to evade sanctions, or boost the regime's ability to advance its WMD capabilities. The United States also has worked to strengthen the military capabilities of South Korea and Japan. Two key diplomatic efforts have aimed to induce North Korea to abandon its nuclear weapons program: the Agreed Framework (1994-2002) and the Six-Party Talks (2005-2009). The Agreed Framework between the United States and North Korea followed a ratcheting up of tensions that nearly led to a U.S. military strike. The Six-Party Talks, which involved the DPRK, China, Japan, Russia, South Korea, and the United States, ran from 2003 to 2009, a period that included the first North Korean nuclear test in 2006. During both sets of negotiations, in exchange for specific economic and diplomatic gains, North Korea committed to eventual denuclearization, froze nuclear material production, and partially dismantled key facilities. Since withdrawing from the Six-Party Talks in 2009, North Korea has not agreed to return to its past denuclearization pledges. Subsequently, the United States has primarily concentrated its diplomatic efforts on convincing other nations to increase economic pressure to implement U.N. Security Council resolutions more fully. North Korea's Objectives North Korea watchers argue that the ruling elite's fundamental priority is the survival of the Kim regime. For this reason, few analysts believe that North Korea would launch an unprovoked attack on U.S. territory or U.S. overseas bases; the consequences for doing so could include a possible overwhelming U.S. military response that could result in the end of the Kim Jong-un regime, and possibly the end of the DPRK as a sovereign state. The National Intelligence Manager for East Asia responsible for integrating the intelligence community's analysis said in a June speech that We believe North Korea's strategic objective is the development of a credible nuclear deterrent. Kim Jong Un is committed to development of a long range nuclear armed missile capable of posing a direct threat to the continental United States to complement his existing ability to threaten the region. Kim views nuclear weapons as a key component of regime survival and a deterrent against outside threats. Kim probably judges that once he can strike the U.S. mainland, he can deter attacks on his regime and perhaps coerce Washington into policy decisions that benefit Pyongyang and upset regional alliances—possibly even to attempt to press for the removal of U.S. forces from the peninsula. North Korea has itself repeatedly emphasized the role of its nuclear weapons as an added deterrent to attack by the United States and/or South Korea. On October 20, 2017, North Korean Foreign Ministry official Choe Son Hui reiterated her government's past statements that its nuclear arsenal is meant to deter attack from the United States and that keeping its weapons is "a matter of life and death for us." She also said that "the current situation deepens our understanding that we need nuclear weapons to repel a potential attack." Under Kim Jong-un, North Korea pursues an official policy of byu ngjin —simultaneous development of its nuclear weapons and its economy. On April 1, 2013, North Korea's party congress adopted the "Law on Consolidating Position of Nuclear Weapons State." The official media (KCNA) summarized the law as saying that nuclear weapons "serve the purpose of deterring and repelling the aggression and attack of the enemy against the DPRK and dealing deadly retaliatory blows at the strongholds of aggression until the world is denuclearized." Many analysts are concerned that North Korea could launch an attack first, even with nuclear-armed missiles, if it perceived a U.S. attack as imminent. These voices emphasize the need for careful U.S. rhetoric and confidence-building measures to avoid miscalculation. The Director of National Intelligence said in early 2012 that "we also assess, albeit with low confidence, Pyongyang probably would not attempt to use nuclear weapons against US forces or territory, unless it perceived its regime to be on the verge of military defeat and risked an irretrievable loss of control." Possessing nuclear weapons and long-range missile capability could also help the Kim government achieve a number of additional long-standing objectives. In May 2017 testimony, Director of National Intelligence Dan Coats repeated the intelligence community's long-standing analysis that, "Pyongyang's nuclear capabilities are intended for deterrence, international prestige, and coercive diplomacy." Accordingly, Pyongyang may also see the acquisition of a nuclear-tipped ICBM capability as a way to increase its freedom of action, in the belief that the United States will be more constrained if North Korea can credibly threaten U.S. territories. The DPRK may believe that by acquiring nuclear-tipped ICBM capability, and thereby deterring the United States, it might have a greater chance of achieving its ultimate goal of reunifying the Korean Peninsula. Important steps in this process would include weakening the credibility of the U.S. commitment to defend South Korea and persuading the United States to remove sanctions and withdraw its troops from the Korean Peninsula. North Korea may also see recognition as a nuclear weapons state as a way to cement its legitimacy, both with its own populace and with the international community. U.S. Goals and Military Options Sanctions, diplomacy, interdiction, and military capacity-building efforts have arguably slowed—for instance, through raising the costs of procuring materials—although not halted, the advance of North Korea's WMD programs. As multinational sanctions have gained momentum during the past several years, however, DPRK progress in its missile programs has also significantly accelerated. As a result of this progress, the Trump Administration appears to have raised the issue of North Korea's nuclear and missile programs to a top U.S. foreign and national security policy priority. Describing its policy as "maximum pressure," or "strategic accountability," the Administration has adopted an approach of increasing pressure on Pyongyang in an effort to convince the North Korean regime "to de-escalate and return to the path of dialogue." In August 2017, Secretary of State Rex Tillerson and Secretary of Defense James Mattis outlined the U.S. policy objective and parameters for the Korean Peninsula: The object of our peaceful pressure campaign is the denuclearization of the Korean Peninsula. The U.S. has no interest in regime change or accelerated reunification of Korea. We do not seek an excuse to garrison U.S. troops north of the Demilitarized Zone. We have no desire to inflict harm on the long-suffering North Korean people, who are distinct from the hostile regime in Pyongyang. In their public remarks, Trump Administration officials have emphasized that, while diplomacy and pressure will continue, a full range of military options could be employed to resolve the crisis. Chairman of the Joint Chiefs of Staff General Joseph Dunford, for example, stated at the Aspen Security Forum in July 2017 that "it is not unimaginable to have military options to respond to North Korean nuclear capability. What's unimaginable to me is allowing a capability that would allow a nuclear weapon to land in Denver, Colorado. That's unimaginable to me. So my job will be to develop military options to make sure that doesn't happen." A key factor driving the Administration's actions and statements appears to be the assessment that sometime in 2018, North Korea is likely to acquire the capability of reaching the continental United States with a nuclear-tipped ICBM. This assessment implies that the time frame for conducting military action without the risk of a North Korean nuclear attack against U.S. territory is narrowing. Such an assessment may increase the urgency of efforts to restart multilateral diplomatic efforts with North Korea, efforts that some maintain could be strengthened and accelerated if both North Korea and China believe that a U.S. military strike on the Korean Peninsula is becoming more likely. Risk of Proliferation In addition to possible threats to the continental United States, allies, and U.S. Armed Forces in the region, concerns persist that should the goal of denuclearization remain unaccomplished, North Korea might continue to proliferate its missile and nuclear technology for a variety of reasons, including financial profit by selling materials and information to state and nonstate actors, joint exchange of data to develop its own systems with other states (Iran and Syria, most notably), or as part of a general provocative trend. DNI Dan Coats testified before Congress in May 2017 that "North Korea's export of ballistic missiles and associated materials to several countries, including Iran and Syria, and its assistance to Syria's construction of a nuclear reactor, destroyed in 2007, illustrate its willingness to proliferate dangerous technologies." In the wake of an earlier set of sanctions, former DNI Dennis Blair said in March 2016 that North Korea had "more motivation to increase their supply of hard currency any way they can," and selling nuclear materials was "certainly a possibility that has occurred to them." Efficacy of the Use of Force Some contend that the military is an inappropriate instrument for resolving the standoff between the DPRK and the international community. They argue, for example, that even the threat of military force actually strengthens the Kim regime domestically, as it feeds the DPRK narrative that it must be vigilant against an aggressive United States. These observers contend that, instead, the United States should focus its efforts on influence operations, in particular, to shape the perceptions of the Kim regime's mid-level leaders and the North Korean population. Doing so might, in turn, eventually foster the collapse of the Kim regime itself and possibly create a window for denuclearization of North Korea. Others, however, maintain that these kinds of influence operations are unlikely to affect North Korean society in a manner that might result in regime degradation or collapse. In addition, some observers argue that although denuclearization may be a long-term strategic goal of the United States, achieving this goal in the short term may be difficult, particularly due to the high risk of military escalation. Therefore, they maintain, other tactics, such as deterrence and containment, may be more appropriate than a preventive military strike. In addition, some see military pressure as well as sanctions as a way to raise the costs for North Korea of continuing on its current nuclear and missile development path, thereby persuading the DPRK to eventually agree to a halt or reversal in these programs. Overview of the Peninsular Military Capabilities57 Understanding the military dimensions of the current standoff, and the relative feasibility of different options to use force to resolve the crisis, requires an appreciation of the extant military capabilities on the Korean Peninsula. Estimating the military balance in the region, however, and how military forces might be employed during wartime, requires accounting for a variety of variables; therefore, such estimation is an inherently imprecise endeavor. As an overall approach to designing its military, the DPRK has emphasized quantity over quality, and has committed considerable resources to developing asymmetric capabilities such as weapons of mass destruction and Special Operations Forces. The Republic of Korea, by contrast, has emphasized quality over quantity and maintains a highly skilled, well-trained, and capable conventional force. In terms of cyber capabilities, the DPRK has been conducting increasingly aggressive cyber operations against the heavily networked ROK and other targets. Although the DPRK has limited Internet connectivity itself, components of its weapons programs may be vulnerable to cyberattacks. Appendix A analyzes in detail the capabilities of the key actors presently on the Korean Peninsula. DPRK Capabilities The Korean People's Army (KPA)—a large, ground force-centric organization comprising ground, air, naval, missile, and special operations forces (SOF)—has over 1 million soldiers in its ranks. Although it is the fourth-largest military in the world, it has some significant deficiencies, particularly with respect to training and aging (if not archaic) equipment. A number of analysts attribute that degradation of capability to food and fuel shortages, economic hardship, and an inability to replace aging equipment, because of international arms markets being closed to North Korea due to sanctions and international nonproliferation regimes, among other factors. To compensate, particularly in recent years, the DPRK appears to have heavily invested in asymmetric capabilities, both on the "high" (for example, weapons of mass destruction) and "low" (for example, SOF) ends of the capability spectrum. The presence of chemical and biological weapons that could reach South Korea and parts of Japan has long been confirmed; some observers believe that those systems would be immediately employed by the DPRK regime in the event of a conflict. Hardened facilities, particularly in forward locations, are thought to protect artillery and supplies and WMD capabilities, including chemical munitions. The DPRK also has missiles believed capable of reaching Guam, other U.S. bases, and allies in the immediate region, including Japan. With respect to the "low" end of the capability spectrum, estimates vary on the size of DPRK SOF, although U.S. and ROK intelligence and military sources reportedly maintain that its end strength may be as high as 200,000, including 140,000 light infantry and 60,000 in the 11 th Storm Corps. These "high" and "low" capabilities are in addition to the considerable DPRK inventory of long-range rockets, artillery, short-range ballistic missiles, and chemical weaponry aimed at targets in the Republic of Korea. U.S. military facilities and the Seoul region, the latter with a population of approximately 23 million, are within range of significant conventional artillery capabilities situated along the DMZ. Reports indicate that the DPRK has enhanced the mobility of its missile launchers and at least some of its artillery batteries, arguably making them more difficult to target. Reports also suggest that the DPRK has hardened many of its key facilities through an extensive network of underground tunnels, a further challenge to fully identifying the DPRK's military capabilities. ROK Capabilities While the DPRK has sought to balance its conventional deficiencies with asymmetric capabilities, the Republic of Korea has steadily improved its conventional forces, through increasing their lethality with improvements in command, control, and communications and advanced technology, as well as through incorporating battlefield lessons from its experience in Operation Iraqi Freedom. Still, the ROK's active duty military is approximately half the size of the DPRK's, leading some analysts to conclude that South Korea may not be able to amass enough force to meet a challenge from the North. ROK leaders have decided not to acquire nuclear weapons, but rely instead on U.S. security assurances (in particular, the U.S. extended deterrent nuclear umbrella). Toward that end, some in South Korea, in particular, the Liberty Korea Party, have called for the redeployment of U.S. tactical nuclear weapons in order to send a powerful deterrent message to the North and demonstrate a strong commitment to the South. ROK became a signatory to the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) in 1975 and is a state party to other related treaties and nonproliferation regimes, including those curtailing chemical and biological weapons and missile proliferation. U.S. Posture There are 28,500 U.S. troops and their families currently stationed in the Republic of Korea, primarily playing a deterrent role by acting as a tripwire in case of DPRK hostilities south of the DMZ. U.S. Armed Forces train with their ROK partners to better prepare them to participate in coalition operations. The United States reportedly also provides the ROK with several key enablers, including military intelligence. Since 2004, the U.S. Air Force has increased its presence in ROK through the regular rotation into South Korea of advanced strike aircraft. These rotations do not constitute a permanent presence, but the aircraft often remain in South Korea for weeks and sometimes months for training. Due to these conventional capabilities, as well as the U.S.-ROK Mutual Defense Treaty, the United States has extended its deterrent umbrella to South Korea, including nuclear deterrence. Under current U.S./ROK operational plans (OPLANS), the South Korean government has publicly stated that the United States would deploy units to reinforce the ROK in the event of military hostilities. In the event of wartime, and depending on those circumstances, official ROK sources note that up to 690,000 additional U.S. forces could be called upon to reinforce U.S./ROK positions, along with 160 naval vessels and 2,000 aircraft. Key Risks As one observer notes, due to the complexity of the situation and the different military capabilities of all sides, predictions regarding how hostilities might unfold on the Korean Peninsula are comparable to describing a "very complex game of three-dimensional chess in terms of tic-tac-toe." Accordingly, rather than analyzing possible DPRK countermoves or possible military campaign trajectories, this section briefly discusses some key risk considerations related to possible military action on the Korean Peninsula. North Korean Responses The Kim regime could respond to any kind of U.S./ROK military activity through a variety of conventional and unconventional means, any use of which could escalate into a full-scale war on the Korean Peninsula. Detailing specific possible responses is difficult, however, given the scarcity of relevant available literature. In the first instance, despite noted deficiencies in its overall conventional force structure, many observers expect the DPRK would employ its conventional artillery toward targets in South Korea and inflict considerable damage upon Seoul (as detailed in the next section). In terms of unconventional responses, the DPRK might employ its highly trained SOF to sabotage U.S./ROK targets south of the DMZ. The DPRK might also employ weapons of mass destruction during a conflict with the U.S./ROK. A possibility also exists that a conflict with DPRK could escalate into nuclear warfare, the result of which could be radioactive contamination that could affect all states in the immediate region, including China, Japan, and South Korea. As a consequence in this possible contingency, U.S. forces would likely be required to operate in WMD-contaminated zones, and the Korean Peninsula itself could face enormous devastation and loss of life. North Korea also could launch a cyberattack against the United States, South Korea, or other targets. Further, some observers contend that North Korea may already have the capability to launch a nuclear attack against the continental United States, possibly delivered covertly by smuggling, or even through using container ships as a means of delivery. Mass Casualties Figure 2 depicts population density on the Korean Peninsula. It suggests that an escalation of a military conflict on the peninsula could affect upwards of 25 million people on either side of the border, including at least 100,000 U.S. citizens (some estimates range as high as 500,000). Even if the DPRK uses only its conventional munitions (which most analysts believe would be unlikely given North Korea's arsenal of WMD capabilities), some estimates range from between 30,000 and 300,000 dead in the first days of fighting, given that DPRK artillery is thought by some to be capable of firing 10,000 rounds per minute at Seoul. Casualties would likely be significantly higher should nonconventional munitions or capabilities be used. This wide range of casualty estimates is due to the fact that a wide variety of variables (including campaign length, weaponry used, the effectiveness of noncombatant evacuation operations, whether China or Russia might become militarily involved and so on) would likely have significant bearing on the actual numbers of casualties on all sides. Responding to congressional inquiries, the Joint Staff released a letter on October 27, 2017, noting the difficulty of accounting for these variables when projecting civilian casualties in the event of a resumption of hostilities on the Korean peninsula . Still, as one observer states Estimates are that hundreds of thousands of South Koreans would die in the first few hours of combat—from artillery, from rockets, from short range missiles—and if this war would escalate to the nuclear level, then you are looking at tens of millions of casualties and the destruction of the eleventh largest economy in the world. Pyongyang could also escalate to attacking Japan with ballistic missiles. Japan is densely populated, with heavy concentrations of civilians in cities: the greater Tokyo area alone has a population of about 38 million. The regime might see such an attack as justified by its historic hostility toward Japan based on Japan's annexation of the Korean Peninsula from 1910 to 1945, or it could launch missiles in an attempt to knock out U.S. military assets stationed on the archipelago. A further planning consideration is that North Korea might also strike U.S. bases in Japan (or South Korea) first, possibly with nuclear weapons, to deter military action by U.S./ROK forces. When discussing the possibility of renewed hostilities on the Korean Peninsula, Secretary of Defense James Mattis stated that although the United States would likely prevail in a military campaign against the DPRK, it "would be probably the worst kind of fighting in most people's lifetimes." The possibly extraordinary loss of life presents other complicating factors to the prosecution of military operations on the Korean Peninsula. Evacuating surviving American noncombatants (noncombatant evacuation operations, or NEOs), including families of U.S. military stationed there, could place a further strain on U.S. military capabilities in theater, and could complicate the flow of additional reinforcements from the continental United States. Medical facilities could be overwhelmed handling civilian casualties—which, as noted above, might involve treating exposure to chemical if not biological or nuclear weapons—making it more difficult to treat military casualties. Economic Impacts The impact of renewed hostilities on the South Korean, regional, and global economies, especially should hostilities escalate into a full-scale war, would likely be substantial. According to one rough estimate by a 2010 RAND study, the costs of a conventional war could amount to 60%-70% of South Korea's annual GDP, which in 2016 was $1.4 trillion. The study estimated that if North Korea detonated a 10 kt nuclear weapon in Seoul, the financial costs would be more than 10% of South Korea's GDP over the ensuing 10 years. These figures should be treated as a rough order of magnitude rather than a precise costing estimate. Given the DPRK's impoverished state, ROK reconstruction costs might also be affected by the costs of rehabilitating the North Korean economy. China's Reaction A significant factor likely affecting policymakers' deliberations regarding the use of military force on the Korean Peninsula is the question of whether a military conflict between the DPRK and the U.S./ROK runs the risk of a direct military clash with China, as occurred during the 1950-1953 Korean War. China has declared itself "firmly opposed to war and turmoil on the Peninsula," and "committed to a denuclearized, peaceful and stable Korean Peninsula and a settlement of relevant issues through dialogue and consultation." If the United States were to undertake preventive or preemptive strikes against North Korea, it could risk a major rupture in its relationship with China, which is the United States' top trading partner and holds upwards of $1.15 trillion in U.S. bonds as of June 2017. In August 2017, the Global Times , a nonauthoritative tabloid affiliated with the authoritative Chinese Communist Party publication The People's Daily , wrote in a much-discussed editorial that China should also make clear that if North Korea launches missiles that threaten U.S. soil first and the U.S. retaliates, China will stay neutral.... If the U.S. and South Korea carry out strikes and try to overthrow the North Korean regime and change the political pattern of the Korean peninsula, China will prevent them from doing so. China's leadership has been known to use the Global Times to test policy proposals and messages while taking advantage of the deniability offered by the paper's nonauthoritative status. Whether this editorial was a test message from China's leadership, or generated independently by the Global Times , is unclear. China increasingly has supported the U.S. and South Korea-led pressure campaign against Pyongyang since Kim Jong-un succeeded his father as DPRK leader in 2011. Yet, many if not most analysts believe that stability on the Korean Peninsula, rather than denuclearization, is the paramount priority of Chinese leaders with respect to the peninsula. Among other developments, the outbreak of war on the peninsula could lead to a massive flow of refugees into northeastern China, where large numbers of ethnic Koreans reside. For years, the United States and South Korea have sought to hold discussions with China about various contingencies involving military conflict with and/or instability in North Korea, in part to reduce the chances of a China-U.S./ROK military clash. Chinese officials generally have resisted engaging in these discussions. Some observers believe this might be in part to avoid appearing to countenance U.S./ROK military action to denuclearize the peninsula. Independent of such discussions, Chinese statements could complicate matters for the United States, as the possible articulation of Beijing's red lines could encourage the DPRK to continue taking aggressive action that falls just short of Chinese parameters for its rejection of Pyongyang's activities. Implications for East Asia The use of U.S. military force on the Korean Peninsula would likely have far-reaching implications for U.S. alliances and partnerships in the region, for great power politics and rivalries, and for the overall security landscape in the Asia-Pacific, and perhaps more broadly. An outbreak of war on the peninsula could potentially upend two U.S. overarching priorities in East Asia: preserving U.S. interests and maintaining stability in the region. This section examines some of the possible impacts for regional powers and U.S. interests in East Asia. China Perhaps the most significant geopolitical question arising from a military conflict on the peninsula would be the effect on the U.S.-China relationship. Much would depend on China's involvement in the conflict, which could vary from hostile (challenging U.S./ROK forces in combat) to cooperative (working, for example, with the operation to secure the DPRK nuclear arsenal in the event of a regime collapse). During or after a military campaign, the Korean/Chinese border could become a geopolitically sensitive area, necessitating additional security forces. Regardless of the outcome, Washington and Beijing would likely be navigating new waters in the bilateral relationship. If Beijing remained officially "neutral," China may look to establishing its leadership in a changing East Asian order. It could decide to be more assertive in claiming maritime territory, particularly in the South China Sea, if U.S. forces were consumed in Northeast Asia. It might also seek to change the terms of its relationship, peaceably or by force, with Taiwan, either because U.S. attention and resources are deployed elsewhere, or as part of a deal with Washington for its cooperation on the Korean Peninsula. In such a case, U.S. commitments related to Taiwan's security would likely face existential questions, and the U.S.-China relationship would face a fundamental realignment. In postconflict reconstruction, China would likely play a major role, given its experience in building infrastructure, proximity to the area, and availability of foreign currency reserves to finance reconstruction. China's establishment in recent years of the Asian Infrastructure Investment Bank and its Belt and Road Initiative to boost economic connectivity within and across continents positions China well to perform such a role, and would heighten its influence. Even if the United States successfully executed a military campaign, China's capabilities would give Beijing considerable leverage in negotiations over the future of the peninsula, likely including discussions over whether a U.S. military presence would remain were the Korean Peninsula to be reunified. Alliances with South Korea and Japan For U.S. bilateral alliances—most prominently with South Korea and Japan—U.S. willingness to use military force against North Korea could reinforce the credibility of U.S. commitment to its allies. The credibility of the U.S. mutual defense treaties could also be strengthened, although controversial issues such as the degree of consultation leading up to any strike could create fissures. If a military action were judged by Seoul and/or Tokyo to be Washington's choice alone—and particularly if the conflict resulted in mass casualties of their citizens—the alliances could be deeply shaken, or even abandoned. Despite years of preparation, the security partnerships could confront the inevitable challenges of operating in a wartime theater: (1) the strength of alliance planning, through decades of exercises and cooperation, would be tested; (2) issues such as operational control of the U.S./ROK forces would face immediate real-time challenges; (3) the logistical complexity of deploying troops and supplies to the theater from bases in Japan could encounter unanticipated obstacles; and (4) the ability of the Japanese Self Defense Forces to offer support for U.S./ROK military operations could pose difficult political questions for leaders in Seoul and Tokyo, given the distrust that seems to persist in Japan-South Korea relations. In the aftermath of a military operation, the alliances could face additional questions about U.S. commitment and obligation to its allies. If the use of U.S. military force successfully erases U.S. homeland vulnerability to a DPRK attack, allies might ask what responsibility the United States would have in assisting South Korea or Japan if military operations have damaged their countries (for more, see " Economic Impacts "). If the regime in Pyongyang falls, the process of reunification—even under the most optimistic conditions—faces daunting challenges given the stark differences between the two populations in terms of education, culture, societal organization, and familiarity with democratic or free market practices. The duration and extent of reconstruction efforts could also become a major area of contention. The two alliances could also face questions about their durability if the threat from North Korea is removed. The U.S.-ROK alliance in particular is based on defending the South from aggression from the DPRK; without the threat from North Korea, would Seoul feel the need to ally itself closely with the United States, or vice-versa, and would either party feel the need for a continued U.S. military presence? What other factors—especially pressure from Beijing—might sway Korean leaders? Russia Russia's future role in the region is uncertain, even moreso in the event of a U.S. intervention. With Moscow thousands of miles away and with a relatively short border with the DPRK, Russia's security concerns are less immediate. However, Russia still maintains massive military capabilities that could be deployed to its Far East and complicate U.S./ROK operations. In addition, some maintain that the Kremlin has a strong interest in asserting itself in any emerging geopolitical order, and may seek to take advantage of a shake-up in the region. Some analysts argue that if the United States and its allies moved more aggressively to alter the situation on the Peninsula, or if the regime in Pyongyang collapsed on its own accord, Moscow and Beijing may find common cause in supporting North Korea. Both Russia and China share a strong desire to prevent a shift in the regional balance that a reunified peninsula under U.S. influence might produce. Possible Military Options For illustrative purposes only, this section outlines potential options related to the possible use of military capabilities and their implications, along with attendant risks. Not all of these options are mutually exclusive, nor do they represent a complete list of possible options, implications, and risks. The following discussion is based entirely on open-source materials. CRS cannot verify whether any of these potential options are currently being considered by U.S. and ROK leaders. This list is intended to help elucidate the variety of ways that the military can be utilized in furtherance of foreign policy or national security objectives, and the different kinds of risks associated with different policy choices. As such, these notional options are intended to help Congress appreciate the different possible ways force might be employed to accomplish the goal of denuclearizing of the Korean Peninsula, or how the United States might respond to an initiation of hostilities by North Korea. The discussion of these options assumes no Chinese or Russian military intervention. Should either of those parties choose to become meaningfully involved, the strategic calculus would undoubtedly change in unpredictable and likely highly consequential ways. The design of a military campaign depends on the policy goals that leaders are seeking to accomplish. In August 2017, Secretary of State Tillerson and Secretary of Defense Mattis articulated the U.S. policy objective and parameters for the Korean Peninsula as the denuclearization of the Korean Peninsula.... [No] interest in regime change or accelerated reunification of Korea. We do not seek an excuse to garrison U.S. troops north of the Demilitarized Zone... [No] desire to inflict harm on the long-suffering North Korean people. If the U.S. objective is the denuclearization of the Korean Peninsula, U.S. and ROK leaders can seek to achieve this goal in a variety of ways. These range from increasing U.S. presence and posture on the Korean Peninsula, to communicating to Pyongyang—and possibly Beijing—that continuing along the current policy trajectory of nuclearization is counterproductive, or eliminating DPRK's nuclear and ICBM production capabilities and deployed systems, which would likely require intensive military manpower. The Trump Administration has not publicly detailed how it intends to advance toward the objective of denuclearization or, in particular, how the military might fit into such a campaign. Maintain the Military Status Quo From 2009 to 2016, Seoul and Washington tightly coordinated their respective North Korea policies, following a joint approach—often called "strategic patience"—that emphasized pressuring the regime to return to denuclearization talks through expanded multilateral and unilateral sanctions, attempting to persuade China to apply more pressure on Pyongyang, and boosting the capabilities of the U.S.-South Korea and U.S.-Japanese alliances. Despite the Trump Administration's casting of its "maximum pressure" approach as a departure from the Obama Administration's "strategic patience," numerous elements of their respective policies are similar: expanding U.S. and international sanctions, emphasizing China's ability to pressure North Korea, and coordinating policy with U.S. allies. Key changes from the Obama Administration's approach appear to be that the Trump Administration has raised the priority level of the North Korean threat, and Administration officials are openly discussing the possibility of a preventive military strike against North Korea. Maintenance of the military status quo would amount to a de facto continuation of the U.S. policy of inexorably increasing unilateral and multinational pressure through economic and diplomatic means to compel North Korea to change its behavior while simultaneously deterring DPRK aggression on the Korean Peninsula. Supporters of this course of action could argue that, of all the options available, it would be least likely to escalate the crisis on the Korean Peninsula for the immediate future, and that it provides time for international sanctions, which in their strictest forms began in 2016, to have an effect on North Korea. Other pressures, like increasing inflows of information perceived to be damaging to the regime into the DPRK, would also have more time to have an impact on the civilian population. Opponents of this course of action might argue that the policy of "strategic patience" failed to compel the DPRK to abandon its nuclear weapons and ICBM capabilities, and that North Korea is unlikely to abandon its WMD capabilities unless the Kim regime concludes that retaining them puts its survival at stake. Opponents might also argue that maintaining the status quo may create time for sanctions to work, but also creates time for North Korea to develop a nuclear-tipped ICBM capable of reaching the U.S. homeland and for North Korea to expand the size of that capability. In addition, some analysts are particularly concerned that South Korea and Japan may reassess their commitment not to build their own nuclear deterrent if North Korea is able to hold the United States at risk. Many analysts fear that Japan and South Korea "going nuclear" could set off a new arms race in Asia that would raise the risk of accidents or miscalculations in the region. Enhanced Containment and Deterrence This option is somewhat more robust than merely maintaining the status quo, with greater emphasis on using U.S. military presence and posture to deter and contain North Korea. Statements by the DPRK indicate that the U.S. presence on the Korean Peninsula has long been unpalatable to Pyongyang. Taking that into account, in addition to diplomatic and economic measures, U.S. leaders might seek to use the U.S. military presence to underscore the costs of DPRK nuclearization through enhancing its forward presence on the Korean Peninsula and in the region (on bases in Japan and Guam, for example). This could be done through prepositioning equipment, enhancing defensive capabilities, building up troop levels, and/or boosting trilateral cooperation among the United States, South Korea, and Japan. Underscoring the costs of DPRK nuclearization, such actions could also enhance deterrence of possible conflict while ensuring that critical systems and units are nearby in the event of hostilities. Recent dispatches of a U.S. carrier strike group and a Terminal High Altitude Area Defense (THAAD) missile defense deployment to South Korea are examples of this approach. The U.S. military has a wide array of prepositioned equipment, both at shore locations and afloat, that could be sent to South Korea or elsewhere within the region. Deploying additional ground troops to South Korea or elsewhere in the region is also an option. Redeploying U.S. tactical nuclear weapons onto the Korean Peninsula, as has been called for by the Liberty Korea Party, is another such option. Some observers further argue that a combination of enhanced missile defenses, cyber defenses, U.S./ROK military exercises, and monitoring and interdiction of shipments to prevent North Korean WMD proliferation will sufficiently contain the DPRK until peaceful denuclearization can occur. Skeptics could argue that such moves could be construed by Pyongyang as a prelude to a ground attack on the DPRK. They could also argue that U.S. presence might have little impact on the decisionmaking calculus of the Kim regime, since the current U.S. posture and rhetorical threats of the use of military force previously in the region have failed to dissuade the DPRK from acquiring nuclear capabilities and delivery systems thus far. In addition, there are political and diplomatic challenges to increasing military presence in places like Okinawa or achieving more effective trilateral U.S.-ROK-Japan security cooperation. Deny DPRK Acquisition of Delivery Systems Capable of Threatening the United States Pursuing this option may mean deemphasizing, at least for the immediate future, the denuclearization of the Korean Peninsula and instead focusing on mitigating, or even negating, the means of delivery of nuclear devices, in particular nuclear-tipped ICBMs. Without sufficient testing, however, an ICBM's reliability and effectiveness could remain unknown. It may therefore be more difficult to threaten the U.S. homeland credibly with such a capability in the absence of further test launches, which North Korea is likely to pursue in the near term. The United States could attempt to shoot down every medium- and long-range missile and space launch with its ballistic missile defense (BMD) capabilities, such as the Aegis BMD, which is designed to intercept theater-range ballistic missiles, but not ICBMs. Supporters could argue that a course of action along these lines has several advantages, including the possible disruption of DPRK acquisition of a reliable nuclear ICBM without sending additional forces into the region, which, as discussed above, might arguably be seen as provocative by DPRK and other actors. It could also minimize risk to U.S. troops and their families in the region. Further, all North Korean missile tests are specifically prohibited by U.N. Security Council resolutions, which some proponents use as justification for such a course of action. Skeptics could argue that keeping one or more Aegis BMD ships in a relatively small geographic area for weeks or months on end could prevent the ships from performing other missions. In addition, two Aegis BMD ships in the 7 th Fleet continue to be out of service for months or longer. A major risk is the possibility that an intercept of a DPRK ballistic missile test launch might fail, thereby undermining that deterrent capability in an evolving crisis, with implications perhaps extending beyond the region. Finally, there are risks involved with shooting down a missile that could spread debris over land, air, or ocean areas that have not been cleared through various advance aviation and maritime warnings. Skeptics could also argue that the Kim regime could still respond militarily, which could escalate the conflict. North Korea would also still possess its nuclear weapons and could therefore proliferate either its nuclear material or weapons to other countries. Such a strategy also would not preclude Pyongyang from continuing to hold U.S. forces and installations—as well as U.S. allies including the ROK and Japan—at risk.  Eliminate ICBM Facilities and Launch Pads This course of action would mean focusing less on North Korea's voluntary denuclearization and more on eliminating, possibly through limited air strikes, DPRK's long-range ballistic missiles and associated facilities. Although the majority of the DPRK's missiles have been launched from fixed sites, efforts are reportedly underway in North Korea to develop solid-fuel mobile missiles that can be deployed more rapidly than liquid-fueled missiles before their launch and are harder to detect than missiles fired from known fixed sites. Reportedly, many DPRK ballistic missile development and production facilities are located in hardened sites in North Korea's northeastern mountainous regions near the Chinese border, adding an additional element of risk of Chinese intervention if these facilities are attacked. The DPRK is also believed to operate a single Sinpo-class diesel-electric submarine that may be able to launch a submarine-launched ballistic missile (SLBM); this submarine was used to test the DPRK's KN-11 SLBM. Diesel-electric submarines can be difficult to detect and therefore challenging to target in the event of a limited strike, especially if they are submerged and not moving much, perhaps even for U.S. anti-submarine warfare (ASW) capabilities. Under this option the United States could attack DPRK nuclear and ICBM facilities through airstrikes and cruise missile attacks. It is also possible that U.S. and ROK Special Operations forces could conduct direct action missions on the ground. These operations are considered to be high-risk—and could incur significant military casualties—compared with attacking targets with aerial assets. Advantages to this course of action may include the disruption of critical components of the DPRK's ICBM infrastructure, while signaling to Pyongyang that continuing its nuclear program is unacceptable, which could possibly bring the Kim regime back to the negotiating table. Skeptics could argue that this course of action might escalate, rather than deescalate, the conflict. Further, they could maintain that it might degrade, but not eliminate, North Korea's ICBM capabilities, perpetuating the crisis and possibly spurring the DPRK to pursue its ICBM and nuclear weapons capabilities even more aggressively and in a manner less conducive to such disruption. Eliminate DPRK Nuclear Facilities This option would be a more expansive military effort than the previous option, as it would involve targeting a greater number of facilities. Possible targets in a limited strike scenario include nuclear production infrastructure, nuclear devices and missile warheads, and associated delivery vehicles. Production infrastructure includes reactor complexes, uranium mines and enrichment facilities, plutonium extraction facilities, related research and development facilities, and explosive test facilities. Similar to the previous option, these targets could be attacked by air assets and cruise missiles. Ground attacks by SOF might also be an option. Proponents might argue that this option is most likely to eliminate the DPRK's nuclear program to the greatest extent without undertaking regime change. Skeptics, however, could argue that a distinct possibility exists that the DPRK would escalate the conflict rather than return to denuclearization negotiations. Given limited intelligence and extensive use of hardened underground facilities by North Korea, some experts believe U.S. strikes would not fully eliminate the country's nuclear weapons program, and "at best, they'll set the program back several years." They could also argue that striking nuclear device/weapon sites or facilities could result in widespread radioactive contamination in the event they are damaged or destroyed. Further, if North Korea's nuclear weapons program cannot be destroyed by U.S. strikes, any residual capability including significant conventional military forces—even if nuclear-capable missiles, submarines, or aircraft are eliminated—could be employed against South Korean and U.S. military and civilian targets, or other allied forces. Skeptics could also argue that there appears to be little information about the numbers, types, and whereabouts of DPRK nuclear devices and missile warheads, and that many of these facilities are believed to be underground in hardened facilities. Accordingly, finding and then eliminating these facilities would likely require highly manpower-intensive operations, and might therefore put considerable numbers of U.S./ROK forces at risk, possibly resulting in significant casualties. DPRK Regime Change Although the Tillerson/Mattis op-ed specifically states that the United States has no interest in regime change on the Korean Peninsula, it remains a potential (if unlikely) option, particularly should the Kim regime behave in an aggressive manner toward the United States or its allies. A more comprehensive operation that might make regime survival untenable could involve strikes against not only nuclear infrastructure but command and control facilities, key leaders, artillery and missile units, chemical and biological weapons facilities, airfields, ports, and other targets deemed critical to regime survival. This operation would be tantamount to pursuing full-scale war on the Korean Peninsula, and risk conflict elsewhere in the region. Advocates of this argument might maintain that the root of the security challenge on the Korean peninsula is the Kim Jong-un regime itself, and that its elimination has the highest degree of likelihood of promoting regional and global security. Skeptics, however, could argue that eliminating the Kim regime involves a high degree of military and political risk, and that preparations for such a large-scale operation could be easily detected, possibly resulting in preemptive strikes by the DPRK against military and civilian targets. If an attack is suspected, they could argue, the DPRK could begin to disperse and hide units, making them more difficult to attack. Such a large-scale attack, opponents of pursuing regime change may say, could result in an escalation to a full-scale war if North Korea believes the operation is intended to decapitate the regime. A regime change operation, they could also argue, would likely require significant ground force involvement and would require a build-up of U.S. forces before it could be undertaken. In addition to possible participation in ground combat, they could argue, U.S. ground forces could be required for postconflict stabilization operations that could last years. With ongoing U.S. troop commitments in Iraq, Syria, and Afghanistan, such a substantial long-term presence on the Korean Peninsula could have significant ramifications for the availability and readiness of U.S. ground forces or, over the long term, for the required size of the U.S. military. Withdraw U.S. Forces124 Some observers contend that the only reason the DPRK views the United States as a risk is because U.S. troops are stationed in South Korea and Japan. One analyst states No one should expect a kinder, gentler Kim to emerge. But his "byungjin" policy of pursuing both nuclear weapons and economic growth faces a severe challenge, especially since sanctions continue to limit the DPRK's development. With the United States far away he would have more reason to listen to China, which long has advised more reforms and fewer nukes. He also might be more amenable to negotiate limits on his missile and nuclear activities, if not give up the capabilities entirely. Since nothing else has worked, an American withdrawal would be a useful change in strategy. Adherents to this view could maintain that withdrawing U.S. troops in exchange for DPRK denuclearization might eliminate or greatly alleviate any possibility of North Korean military action against the United States, and might even create greater latitude for internal political reform. Withdrawing U.S. Armed Forces from the Korean Peninsula, however, would not necessarily be accompanied by major changes in, let alone the termination of, the U.S.-ROK alliance; U.S. forces positioned elsewhere in the Asia-Pacific might be able to reinforce South Korea in the event of a crisis. Skeptics of this option could argue that given the history of North Korea not fully complying with agreements related to its nuclear capabilities, it is by no means certain that Pyongyang would follow through on such a deal over the long term. This could leave the United States in a worse position relative to a nuclear DPRK than it maintains at present. If not accompanied by a total verifiable dismantling and disposal of its nuclear and ballistic missile programs, North Korea could continue to threaten or coerce other countries in the region, and could continue its illicit materials trade with rogue states or nonstate actors. Furthermore, any degradation of the U.S. security relationship with South Korea—and a possible perceived abandonment of that long-standing ally—could erode the importance of military presence as a U.S. foreign policy tool elsewhere. The absence of a U.S. presence in South Korea might also encourage the DPRK to renew hostilities in order to unify the Korean Peninsula, a long-stated objective of successive Kim regimes, particularly as such a repositioning of U.S. Armed Forces, however, could make later reinforcement difficult to execute. In the event that the United States is believed to be either unreliable, not present, or both, South Korea—and possibly Japan—might deem it necessary to develop their own nuclear weapons. Possible Issues for Congress The situation on the Korean peninsula may prompt Congress to assess its role in any decisions regarding whether to commit U.S. forces to potential hostilities. The U.S. Constitution divides authority between Congress and the President on matters of war and the use of military force, and Congress may use its war powers to authorize, circumscribe, and in some situations prohibit U.S. forces from participating in hostilities. In assessing whether to exercise authority in this context, Congress might consider, among other things, the following: Does the President require prior authorization from Congress before initiating hostilities on the Korean Peninsula? If so, what actions, under what circumstances, ought to be covered by such an authorization? The Kim regime may continue to take aggressive action short of directly threatening the United States and its territories while it continues its path to acquire a nuclear ICBM capable of striking the United States. What might be the international legal ramifications for undertaking a preventive or preemptive strike without a U.N. Security Council mandate? How are these issues affected, if at all, by the fact that the Korean War was conducted under U.N. authority and that the armistice suspended hostilities but did not formally end the state of war between the DPRK and United Nations forces, which included U.S. forces? If the executive branch were to initiate and then sustain hostilities against North Korea—a nuclear-armed country—without congressional authorization, what are the implications for the preservation of Congress's role, relative to that of the executive branch, in the war powers function? How, in turn, might the disposition of the war powers issue in connection with the situation with North Korea affect the broader question of Congress's status as an equal branch of government, including the preservation and use of other congressional powers and prerogatives? Does the President require prior authorization from Congress before initiating hostilities on the Korean Peninsula? If so, what actions, under what circumstances, ought to be covered by such an authorization? The Kim regime may continue to take aggressive action short of directly threatening the United States and its territories while it continues its path to acquire a nuclear ICBM capable of reaching the United States. What might be the international legal ramifications for undertaking a preventive or preemptive strike without a U.N. Security Council mandate? Resource Implications of Military Operations128 Without a more detailed articulation of how the military might be employed to accomplish U.S. objectives on the Korean Peninsula, and a reasonable level of confidence about how the conflict might proceed, it is difficult to assess with any precision the likely fiscal costs of a military campaign, or even just heightened presence. Still, with the possible exception of full withdrawal, any other course of action listed in this report is likely to inc ur significant additional costs. Factors that might influence the level of expenditure required to conduct operations include, but are not limited to, the following: T he number of additional forces, and associated equipment, deployed to the Korean Peninsula or the Asia-Pacific theater more broadly. In particular, deploying forces and equipment from the continental United States (if required) would likely add to the costs of such an operation due to the logistical requirements of moving troops and materiel across the Pacific. T he mission set that U.S. fo rces are required to prosecute and its associated intensity . For example, those options leading to an increase of the U.S. posture on or around the Korean Peninsula for deterrence or containment purposes might require upgrading existing facilities or new construction of facilities and installations. By contrast, those options that require the prosecution of combat operations would likely result in significant supplemental and/or overseas contingency operations requests, particularly if U.S. forces are involved in WMD eradication or cleanup missions, or postconflict stabilization operations. The time required to accomplish U.S. objectives . As demonstrated by operations in Iraq and Afghanistan, the period of anticipated involvement in a contingency is a critical basis for any cost analysis. On one hand, a large stabilizing or occupying ground force to perform stabilization and reconstruction operations, for example, would likely require the expenditure of significant U.S. resources. On the other hand, a limited strike that does not result in conflict escalation would likely be relatively less expensive to the United States. Postconflict Reconstruction The aftermath of a full-scale war on the Korean Peninsula could generate significant manpower requirements for U.S. forces. Department of Defense Instruction (DODI) 3000.0 Stability Operations specifies that the U.S. military has a critical role to play in "maintaining or reestablishing a safe and secure environment, providing essential government services, emergency infrastructure reconstruction, and humanitarian relief." U.S. forces have also provided logistical and communications support to affected governments in the wake of past humanitarian crises, such as the 2005 Pakistan earthquake and the 2004 Asian tsunami. Applied to a postconflict situation on the Korean Peninsula, the United States military might have to respond to a number of issues in both North and South Korea. North of the Demilitarized Zone, as many as 25 million North Koreans could be affected by a conflict, which could reduce already-scarce food and other essential supplies available to the general public. Further, approximately 80,000 to 120,000 prisoners in prison camps could be released and may need immediate attention. South of the DMZ, the Republic of Korea could need significant assistance recovering and reconstructing key infrastructure, such as fuel and electricity services, contending with casualties, delivering emergency supplies, and much more. Depending on the circumstances, U.S. forces might be asked to assist their ROK counterparts in disarming and demobilizing North Korea's military. Some analysts suggest that the ROK might also have to prepare for and counter sabotage and attempts to foment insurgency by any remaining North Korean SOF. Should the DPRK target other U.S. allies in the region, or U.S. installations in Japan or Guam, U.S. forces could be required to assist with postconflict reconstruction in those locations as well. An additional factor that could affect both sides of the DMZ would be the use of weapons of mass destruction, including chemical, biological, and nuclear weapons. Beyond the costs involved, decontaminating affected areas would likely require significant manpower and medical support. Given the possible spread of WMD contamination in the atmosphere, assistance with cleanup might be required in other countries as well. In addition to performing cleanup operations, which could require significant manpower, U.S. personnel might be directed to help locate and eliminate DPRK WMD stockpiles north of the DMZ. Coalition Support Another factor affecting the possible costs of operations—before, during, and after a conflict—is the willingness and availability of other states, such as Japan or even China, to contribute financial or military resources toward prosecuting a war and stabilizing the Korean Peninsula. Such contributions could bring international legitimacy to U.S./ROK military efforts, especially if some states in the international community advance the view that any U.S. action, intended or inadvertent, was preventive rather than preemptive in nature. Another dynamic worth considering is the role of Beijing in postconflict stabilization and/or eradicating DPRK weapons of mass destruction programs. Such activities, as mentioned earlier, would likely require significant troop deployments north of the DMZ. Assuming China chooses not to become involved militarily in a conflict on the peninsula, and given that China has indicated its strong preference to maintain a buffer state and existing political structures in North Korea, China may consider deploying forces across its border to stabilize the DPRK. Alternatively, China may also consider assisting U.S. military operations. However, it is not known whether China possesses the capability to eliminate WMD facilities, particularly those that might be underground. These factors, and others, would likely face Congress should the President submit a request for additional monies to support increased military activity on or around the Korean Peninsula. With that in mind, Congress could consider the following: The potential costs of heightened U.S. operations on the Korean Peninsula, particularly if they lead to full-scale war and significant postconflict operations. The need for the United States to reconstitute its forces and capabilities, particularly in the aftermath of a catastrophic conflict. The impact of the costs of war and postconflict reconstruction on U.S. deficits and government spending. The costs of a conflict on the Korean Peninsula to the global economy. The extent to which regional allies, and the international community more broadly, might contribute forces or resources to a military campaign or its aftermath. Availability of Forces for Other Contingencies Particularly should hostilities escalate into a full-scale war between the DPRK and the U.S./ROK, the force for conducting such a military campaign and then managing its aftermath could be considerable. Given ongoing U.S. military commitments elsewhere, conducting these conflict and postconflict operations could cause significant strain on U.S. forces. It might be difficult to redirect forces from the Korean theater to other contingencies such as Iraq, Syria, Eastern Europe, or elsewhere, should they arise. Other key inventories, such as missile defenses, might need to be regenerated. Separate but related is the matter of multiple efforts that would need to be conducted and resourced simultaneously on the Korean Peninsula alone. For example, noncombatant evacuation operations—for upwards of 500,000 U.S. citizens—might need to be conducted alongside logistic operations to flow additional forces into theater. Should these two competing requirements result in a higher demand for naval and other capabilities than supply permits, difficult tradeoffs in terms of global force management might need to be made. Congress might consider, among others, the following questions: What might be the order of priority for U.S. operations in the event of a conflict? What might be the priority of combat operations relative to other critical missions that might tax U.S. military capabilities, such as noncombatant evacuation operations? What, if any, impact has the Budget Control Act had on the readiness of U.S. forces to engage in hostilities on the Korean Peninsula? How might force requirements for a Korean scenario be balanced against those for other pressing national security concerns in other theaters? Does DOD have sufficient force structure to adequately fulfill responsibilities elsewhere while conducting expanded operations in Korea? Is the Department of Defense making appropriate planning and force structure decisions to be able to respond to multiple contingencies if necessary? Does DOD need to adjust its force planning construct? Prospectus Few analysts believe that North Korea would launch an unprovoked attack on U.S. territory. Nonetheless, as the crisis on the Korean peninsula continues to evolve, Congress could confront significant questions regarding its role in shaping U.S. policy in the region. Ultimately, Congress may have face two determinations. First, whether or not it believes the United States could or should manage and deter a nuclear-armed North Korea if it becomes capable of attacking the U.S. homeland. Second, whether taking decisive action to prevent the emergence of such a DPRK capability, including the use of military forces, might be necessary. Such determinations potentially carry considerable risks for the United States, its allies, regional stability, and global order. Particularly given emerging questions about the U.S. role in the world, how the United States chooses to contend with the DPRK nuclear weapons and ICBM programs also raises broader strategic questions with which Congress may grapple: How would any particular course of action impact U.S. interests, both regionally and globally? How would allies and partners perceive U.S. efforts to accomplish denuclearization, and would that affect their willingness to accept the United States as a global leader? What might be the economic, international political, and strategic effects of an erosion of U.S. standing in the global order, if any? What impacts would U.S. action regarding North Korea have on alliances around the world, such as those the United States maintains with Australia and NATO? What effects would the outbreak of war on the Korean peninsula have upon the U.S. economy? What implications would U.S. Korean policy choices have for existing nuclear, chemical, and biological weapons nonproliferation regimes? Appendix A. In Detail: The Military Balance on the Korean Peninsula Estimating the military balance in the region, and how military forces might be employed during wartime, requires accounting for numerous variables and as such is an inherently imprecise endeavor. As an overall strategic approach, the DPRK has emphasized quantity over quality, as well as asymmetric capabilities including weapons of mass destruction and special operations forces, in building and maintaining its military. The Republic of Korea, by contrast, has emphasized quality over quantity, and maintains a highly skilled, well-trained, and capable conventional force. Not counted in this assessment are the capabilities of China, Russia, or other regional U.S. allies (such as Japan or Australia) who could play a role in a conflict on the Korean Peninsula or its aftermath. An Overview of DPRK Military Capabilities Although the Korean People's Army (KPA)—a large, ground force-centric organization comprising ground, air, naval, missile, and SOF—has over 1 million soldiers in its ranks, making it the fourth-largest military in the world, it has some significant deficiencies, particularly with respect to training and aging (if not archaic) equipment. A number of analysts attribute that degradation of capability to food and fuel shortages, economic hardship, and an inability to replace aging equipment, among other factors. As such, particularly in recent years, the KPA appears to have invested heavily in asymmetric capabilities, both on the high and low end of the capability spectrum. These high and low capabilities are in addition to the considerable DPRK inventory of long-range rockets, artillery, short-range ballistic missiles, and chemical weaponry aimed at targets in the Republic of Korea. U.S. military facilities and the Seoul region, with a population of approximately 23 million, are within range of DPRK conventional artillery situated along the border. Reports indicate that the DPRK has made mobile its missile launchers and at least some of its artillery batteries, arguably making them more difficult to target. Further, reports suggest the DPRK has hardened many of its key facilities through an extensive network of underground tunnels, a further challenge to fully understanding the DPRK's military capabilities. Conventional Forces Of North Korea's 24 million people, 4% to 5% serve on active duty, and another 25% to 30% are assigned to a reserve or paramilitary unit and would be subject to wartime mobilization. Conscripts are required to serve for 10 years. With approximately 70% of its ground forces and 50% of its air and naval forces deployed within 100 kilometers of the DMZ, the KPA poses a continuous threat to the ROK and U.S. forces stationed there. The KPA primarily fields legacy equipment, either produced in or based on designs from the Soviet Union and China dating back to the 1950s, 1960s, and 1970s. Although a few of its weapons systems are based on modern technology, the KPA in general has not kept pace with regional military capability developments. The KPA has not acquired new fighter aircraft in decades, relies on older air defense systems, and lacks ballistic missile defense. Its Navy does not train for blue water operations, but the KPA does conduct regular military exercises. Analysts question whether its conventional force training scenarios are sufficiently realistic, especially since the KPA has not been combat tested in over six decades. Taken together, some question whether the conventional component of the KPA would be able to translate its quantitative supremacy into meaningful military advantage. Component-Specific Capabilities Ground. The KPA's ground forces are predominantly regular and light-infantry units, supported by armor and mechanized units and heavy concentrations of artillery. These forces are forward-deployed, fortified in several thousand underground facilities, and include long-range cannon and rocket artillery forces capable of reaching targets in Seoul from their garrisons. The ground forces possess numerous light and medium tanks, and many armored personnel carriers. The KPA's large artillery force includes long-range 170 mm guns and 240 mm multiple rocket launchers (MRL), many deployed along the DMZ, posing a constant threat to northern parts of the ROK. In recent years, North Korea has unveiled other new ground force equipment, including tanks, artillery, armored vehicles, and infantry weapons. Air and Air Defense. The North Korean Air Force (NKAF), a fleet of more than 1,300 aircraft—mostly legacy Soviet models—is primarily responsible for defending North Korean air space. Its other missions include SOF insertion, transportation and logistics support, reconnaissance, and tactical air support for KPA ground forces. However, because of the technological inferiority of most of its aircraft fleet and rigid air defense command and control structure, much of North Korea's air defense is provided by surface-to-air missiles (SAMs) and anti-aircraft artillery (AAA). The NKAF's most capable combat aircraft are its MiG-29 FULCRUMs, procured from the Soviet Union in the late 1980s; its MiG-23 FLOGGERs; and its SU-25 ground-attack FROGFOOT aircraft. However, the majority of its aircraft are less capable MiG-15s, MiG-17s, MiG-19s (F-6s), and MiG-21s. The NKAF operates a large fleet of An-2 COLT aircraft, which are 1940s vintage single-engine, 10-passenger biplanes, likely tasked with inserting SOF into the ROK. The Air Force is rounded out with several hundred helicopters, which would be used for troop transport and ground attack, including predominantly Mi-2/HOPLITE and some U.S.-made MD-500 helicopters obtained by circumventing U.S. export controls in 1985. North Korea possesses a dense, overlapping air defense system of SA-2, SA-3, and SA-5 SAM sites, mobile SA-13 SAMs, mobile and fixed AAA, and numerous man-portable air-defense systems like the SA-7. As the NKAF's aircraft continue to age, it increasingly relies on its ground-based air defenses and on hiding or hardening assets to counter air attacks. To help make up for these deficiencies in its air forces, the DPRK has acquired drones that are thought to be capable of delivering chemical and biological payloads, as well as performing reconnaissance missions. Naval . The North Korean Navy (NKN) is the smallest of the KPA's three main services. This coastal force is composed primarily of numerous, though aging, small patrol craft that carry a variety of anti-ship cruise missiles, torpedoes, and guns. The NKN maintains one of the world's numerically largest submarine forces, with around 70 attack-, coastal-, and midget-type submarines. In addition, the NKN operates a large fleet of air-cushioned hovercraft and conventional landing craft to support amphibious operations and SOF insertion. The force is divided into East and West Coast Fleets, which each operate a variety of patrol craft, guided-missile patrol boats, submarines, and landing craft. North Korean Nuclear Capabilities North Korea has recently made considerable strides toward acquiring strategic nuclear capabilities. North Korea has tested six nuclear devices—one in 2006, one in 2009, one in 2013, two in 2016, and one in 2017—and has declared itself to be a nuclear-armed state. Since the Six-Party nuclear talks broke down in 2009, North Korea has restarted its plutonium-production reactor and has openly built a uranium enrichment plant (and may have clandestine enrichment facilities). Some nongovernmental experts estimate that North Korea could have potentially produced enough material for 13-21 nuclear weapons, and could now produce enough nuclear material for an additional seven warheads per year. A Washington Post report from August 2017 quotes one component of the intelligence community, the U.S. Defense Intelligence Agency (DIA), as assessing that North Korea had achieved this step. The same report said the DIA had asserted that North Korea may have a stockpile of up to 60 nuclear warheads, much higher than most open-source estimates. North Korea has also threatened to use its nuclear weapons in an electromagnetic pulse (EMP) attack, which involves detonating a nuclear warhead above the earth's atmosphere, potentially disrupting and damaging critical infrastructure. Ballistic Missile Technology Over the past 20 years, North Korea attempted six satellite launches using long-range ballistic missile technology. There is reported evidence that each held a small satellite payload. The first four launches failed, but the latest two (in 2012 and 2016) placed satellites in orbit. The U.S. intelligence community has assessed that DPRK space launch capabilities share many of the same technologies that could be used in an ICBM program. In addition, Pyongyang tested both medium-range (estimated 3,000-kilometer range) "Musudan" missiles and a submarine-launched ballistic missile in 2016. Improvements in medium-range missiles suggest that North Korea could credibly threaten large U.S. bases and population centers in Japan and South Korea. See Figure 2 and Appendix C for the population centers and military bases that could be within range of these missiles in Korea, Japan, and Guam. In July 2017, North Korea test-launched two long-range ballistic missiles that some observers characterized as having intercontinental range, achieving a capability milestone years earlier than predicted. The liquid-fueled missiles flew in a lofted or very high trajectory, demonstrating a theoretical range that could include Hawaii, Alaska, Guam, or even the continental United States. Figure A-4 illustrates the areas within potential reach of these missile tests had they not been lofted, according to a range of observers. It is not known what payload was used, but the actual range of those missiles using a nuclear warhead would likely be significantly shorter (because of the weight of an actual warhead). Regardless, almost all observers agree that North Korea appears intent on deploying an operational nuclear ICBM capability. Few analysts believe that North Korea would launch an unprovoked attack on U.S. territory. Some, such as Russia, argue that this test was more accurately a medium-range ballistic missile with potential range of 3,500-5,500 km. Other technical experts have pointed out a fairly clear Soviet/Russian technology heritage in the major missile components used in these tests, as well as smaller components that observers believe were acquired illicitly through a range of Chinese entities. Such cooperation among these countries on ballistic missile development goes back decades. Unconventional Warfare Capabilities Pyongyang has also invested in its special operations forces, which some believe could be employed against U.S./ROK targets—particularly to conduct sabotage, launch terrorist attacks, and wage unconventional warfare—in the event of an outbreak of hostilities on the Korean Peninsula. North Korean SOF are considered among the most highly trained, well-equipped, best-fed, and highly motivated forces in the KPA. As North Korea's conventional capabilities decline relative to the ROK and United States, North Korea appears increasingly to regard SOF capabilities as essential for asymmetric coercion. Estimates vary on the size of DPRK SOF, although U.S. and ROK intelligence and military sources maintain that its end strength may be as high as 200,000, including 140,000 light infantry and 60,000 in the 11 th Storm Corps. The latter is primarily focused on training and undertaking special and unconventional warfare. According to the Department of Defense SOF units dispersed across North Korea appear designed for rapid offensive operations, internal defense against foreign attacks, or limited attacks against vulnerable targets in the ROK as part of a coercive diplomacy effort. They operate in specialized units, including reconnaissance, airborne and seaborne insertion, commandos, and other specialties. All emphasize speed of movement and surprise attack to accomplish their missions. SOF may be airlifted by AN-2 COLT aircraft or helicopters (and possibly Civil Air Administration transports), moved by maritime insertion platforms, or travel on foot over land or via suspected underground, cross-DMZ tunnels to attack high-value targets like command and control nodes or air bases in the ROK. Some also believe that SOF sleeper agents have been planted in South Korea. Cyber Capabilities Among governments that pose cyber threats to the United States, some analysts consider the North Korean threat to be exceeded only by those posed by China, Russia, and Iran. North Korea appears to be engaging in increasingly hostile cyber activities, including theft, website vandalism, and denial of service attacks. Whether North Korea has the capability to go beyond mere nuisance to more destructive cyberattacks on critical infrastructure is a matter of debate. Some reports suggest that North Korea has a sophisticated and burgeoning offensive cyber capability. Others assess North Korea as lacking the infrastructure and native technical skill necessary to undertake destructive cyberattacks. Still others note that some of the attacks ascribed to North Korea appear relatively unsophisticated and enabled by the targets' poor network security. In 2014, General Curtis M. Scaparrotti, then-Commander, United Nations Command and the Republic of Korea Combined Forces, offered the following assessment: North Korea employs computer hackers capable of conducting open-source intelligence collection, cyber-espionage, and disruptive cyber-attacks. Several attacks on South Korea's banking institutions over the past few years have been attributed to North Korea. Cyber warfare is an important asymmetric dimension of conflict that North Korea will probably continue to emphasize—in part because of its deniability and low relative costs. Relying on Korean and English resources, the Center for Strategic and International Studies concluded in a 2015 report: Left unchecked and barring any unpredictable power shift, North Korea is likely to continue to place strategic value in its cyber capabilities. Future North Korean cyberattacks are likely to fall along a spectrum, with one end being continued low intensity attacks and the other end characterized by high intensity attacks from an emboldened North Korea. Concurrently, the DPRK will likely deepen the integration of its cyber elements into its conventional military forces. Some observers suggest that, because there is little visibility into North Korea's activities, the possible threats from North Korean cyber activities are often inflated. An assessment released by the Korea Economic Institute found that the international community's "fears of the unknown increase the risk of threat inflation dramatically." These analysts contend that although North Korea may have the capability to undertake global cyber nuisance or theft-motivated activities, the nation lacks the ability to undertake operations that are "complex or as devastating as the Stuxnet attack, a computer virus that disrupted Iran's nuclear program." In November 2014, Sony Pictures Entertainment experienced a cyberattack that disabled its information technology systems, destroyed data, and accessed internal emails and other documents that were then leaked to the public. Hackers then sent emails, threatening "9/11-style" terrorist attacks on theaters scheduled to show the film The Interview . The Federal Bureau of Investigation (FBI) publicly attributed the 2014 hacking of Sony Pictures Entertainment to the North Korean government. Starting in 2009, North Korea is alleged to have conducted multiple cyberattacks on South Korean financial institutions and media outlets. The Department of Homeland Security issued a bulletin in June 2017 suggesting that North Korea is targeting the media, aerospace, financial, and critical infrastructure sectors in the United States. An Overview of ROK Military Capabilities The Republic of Korea has steadily improved its conventional forces, increasing their lethality through improvements in command, control and communications, advanced technology, and by incorporating lessons from its experience in Operation Iraqi Freedom. Still, the size of the ROK active duty military is approximately half that of the DPRK's, leading some analysts to conclude that South Korea may not be able to mass enough force to meet its needs. To date the ROK has decided not to acquire its own nuclear weapons, due to its reliance on U.S. security assurances, including in particular the American extended deterrent nuclear umbrella. There have been recent calls to redeploy U.S. tactical nuclear weapons to South Korea. Component-Specific Capabilities Ground Forces . The ROK Army (ROKA) has primary responsibility for defending the Republic of Korea, and it has an end strength of approximately 490,000, and an active reserve force of 600,000. ROKA consists of the Army Headquarters; two Field Army Commands, tasked with defense of their respective areas of responsibility, which includes terrain up to the South Korean border of the Demilitarized Zone; the Second Operations Command, with the role of maintaining rear-area stability and war-sustaining capabilities; the Capital Defense Command, which is responsible for the protection of key facilities and infrastructure in Seoul; and other commands, which are responsible for Special Operations, aviation operations, personnel and logistics support, and education and training. Naval Forces . The ROK Navy, which is organized under the Navy headquarters, has an approximate end strength of 70,000, including 29,000 in its Marine Corps. It comprises the Naval Operations Command, which has command authority over naval operations overall, including anti-surface operations, anti-submarine operations, mine and counter-mine operations, and amphibious operations. The ROK's three Fleet Commands, which are subordinate to the Naval Operations Command, conduct defensive missions by deploying surface combatants such as destroyers, frigates, patrol vessels, and patrol craft. Submarine Force Command, also subordinate to Naval Operations Command, carries out operations involving submarine use. ROK's Marine Corps Headquarters, which operates ROK's Quick Task Forces and Quick Reaction Forces, is in charge of amphibious operations and has a mission set that includes defense operations in assigned areas, including coastal islands. Finally, the Northwest Islands Defense Command is responsible for the defense of the northwestern islands and provides logistics and training support to the Navy. Air Forces. Organized under the Headquarters, the ROK Air Force comprises approximately 65,000 personnel and has three primary commands: Operations Command, Logistics Command, and Evaluation and Training Command. Air Force Operations Command has command authority over all air operations, including counter-air, air interdiction, and close-air support operations, and has four subordinate commands: (1) Air Combat Command; (2) Air Mobility and Reconnaissance Command; (3) Air Defense Missile Command, which carries out air defense missions against airborne attacks by enemy aircraft and missile attacks; and (4) Air Defense Control Command, which is responsible for air control in the Korean Peninsula theater, air surveillance, aircraft identification, and air support. ROK Missile Defenses Since 2010, the United States has engaged its allies in the Asia-Pacific, specifically Japan, South Korea, and Australia, to develop and implement an integrated regional BMD capability to deter and counter North Korea ballistic missile threats. Over the past 15 years, the United States has learned how its own BMD capabilities are significantly enhanced by integrating them into a much larger global BMD System (BMDS). The U.S. contribution to NATO's territorial defense against possible ballistic missile threats from Iran, for example, has led to a phased capability to deploy THAAD radar, sea-based Aegis BMD, and Aegis Ashore capabilities in Europe, and to fully integrate those with the current and prospective range of NATO European BMD capabilities. The concerted effort to develop a similar capability in Northeast Asia has not been as successful, primarily because of outstanding historical and political issues between South Korea and Japan. The inability to fully integrate regional BMD systems among U.S., Korean, and Japanese BMD systems results in an unrealized potential that could prove significant if conflict erupts. Aegis Ballistic Missile Defense (BMD) . The South Korean Navy has three Aegis destroyers that are similar to U.S. Navy Arleigh Burke (DDG-51)-class Aegis destroyers. The ships, which entered service in 2008, 2010, and 2012, are known as the Sejon Daewang (KDX-3) class. Three additional KDX-3 ships are planned and may enter service in 2023-2027, according to the 2016-2017 edition of IHS Jane's Fighting Ships . The three additional ships, according to this source, may be built with a BMD-capable version of the Aegis system. The three existing ships are equipped with a version of the Aegis system that is not BMD capable. The Aegis system on the three existing ships can be modified to become BMD sensor-capable, and South Korea reportedly has plans to do this, but that modification is to be done in the future. The three existing Aegis destroyers have participated in U.S.-South Korean-Japanese military exercises. Given their current lack of BMD capability, their potential contribution to any near-term BMD mission would be an indirect one—they could help defend U.S. and Japanese BMD-capable ships from North Korean submarines, surface ships, aircraft, and anti-ship cruise missiles. Terminal High Altitude Air Defense (THAAD) . South Korea agreed to host a U.S. THAAD battery in 2016. That battery was deployed earlier this year in south central South Korea with four of the eight intended launchers. Until recently, the remaining four launchers had been held up due to outstanding political and environmental challenges. The operational status of the battery is classified, but observers believe the battery is already fully operational, with its eight launchers and its 48 interceptors. THAAD is widely considered to be highly effective against short-range ballistic missiles (SRBM) and medium-range ballistic missile (MRBM) threats based on its operational test performance over the past many years. THAAD has not been used in conflict, so its wartime performance is untested. THAAD is designed to protect larger areas, such as parts of South Korea including Camp Humphreys and other military assets, for example. It is unclear, however, whether THAAD could counter ballistic missiles targeted against Seoul, because that city lies just outside the unclassified operational effectiveness range from where this THAAD battery is located. Patriot . South Korea currently has a Patriot Advanced Capability-2 missile defense system at the Osan military base in Seoul. South Korea is in the process of receiving upgrades to Patriot Advanced Capability-3, which then-U.S. Army Secretary Eric Fanning said in 2016 would be completed by 2018. The Patriot PAC-2 has demonstrated limited wartime capability against SRBM threats, and while the PAC-3 system has performed well in operational tests according to DOD, it has not been used in conflict. South Korea has been developing an indigenous BMD capability against SRBMs called Korean Air and Missile Defense (KAMD). In 2016, Korea Defense Minister Han Min-Koo stated that the PAC-3 capability would be deployed in 2020 and 2022 as a part of the KAMD system. In April 2017, the Ministry of National Defense released the 2018-2022 Mid-Term National Defense Plan. This plan includes KAMD as part of a "three-axis system," which also includes a "kill chain" for a preemptive strike in response to signs of an imminent North Korean missile attack and a Korean Massive Punishment and Retaliation (KMPR) system for retaliating directly against the North Korean leadership in the event of a nuclear attack. As a part of efforts to move up development of these capabilities, the South Korean military is working to hasten performance improvements in its medium-range surface-to-air missile (M-SAM) system. These capabilities are currently not available in the near term. Cyber Capabilities The Republic of Korea is one of the world's most wired countries, making it potentially vulnerable to cyberattacks. In contrast, North Korea has one of the smallest Internet presences in the world and lacks the same widespread dependence on networked technologies. The Republic of Korea has been seeking to develop its own offensive cyber capabilities since 2014, moving from a doctrine of more defensive cyber measures. According to Yonhap News Agency, an anonymous military source stated that "[To date] the military had focused on monitoring-based operations to deter enemies' hacking attempts, but now we will proactively detect hosts of such attacks online and launch preemptive strikes to prevent them from victimizing us from the outset." The Defense Ministry also announced plans to bring its total cyber force to approximately 1,000 troops, operating under the South Korean Ministry of Defense's Cyber Command created in 2010. In 2016, it was reported that the South Korean Cyber Command was hacked by North Korea. In April 2015, then-U.S. Secretary of Defense Ashton Carter and Korean Defense Minister Han held a press conference in which they noted the achievements of close ROK-U.S. coordination on the cyberattacks on Sony, and the intent to reinforce this cooperation in response to North Korean and international cyber threats. U.S.-ROK cyber defense coordination predates the Sony attacks (discussed above). In 2014, a new facility for cybersecurity was created to allow U.S. Forces Korea to coordinate efforts with other U.S. commands as well as Republic of Korea civilian government and military forces. The U.S. Forces Korea Joint Cyber Center serves as the focal point for increasing international cooperation between U.S. and Korean forces in their defensive measures against increasing cyber aggression from North Korea. Also in 2014, Korean and U.S. forces held the first bilateral cyber tabletop exercise. U.S. Support to the Republic of Korea There are 28,500 U.S. troops and their families currently stationed in the Republic of Korea, primarily playing a deterrent role by acting as a tripwire in case of DPRK hostilities south of the DMZ. U.S. forces also train with their ROK partners to better prepare them to participate in coalition operations in other theaters. The United States reportedly also provides the ROK with several key enablers, including military intelligence. Since 2004, the U.S. Air Force has increased its presence in ROK through the regular rotation into South Korea of advanced strike aircraft. These rotations do not constitute a permanent presence, but the aircraft often remain in South Korea for weeks and sometimes months for training. Due to these conventional capabilities, as well as the U.S.-ROK Mutual Defense Treaty, the United States has extended its deterrent umbrella to South Korea, including nuclear deterrence. Under current U.S./ROK operational plans (OPLANS), the United States plans to deploy units to reinforce the ROK in the event of military hostilities. In the event of wartime and depending on those circumstances, up to 690,000 additional U.S. forces could be called upon to reinforce U.S./ROK positions, along with 160 naval vessels and 2,000 aircraft. These units and their estimated arrival date in theater are listed in the Time-Phased Force Deployment List (TPFDL). These units include both Active and Reserve Component units from all services and arrival dates can range from days to weeks or months, depending on (1) the operational need for the unit, (2) the readiness status of the unit, and (3) the availability of strategic air and sealift. Furthermore, according to reports, since 2015 the U.S. and ROK militaries have prepared and exercised new war plans to strike North Korean WMD facilities and top leadership in an emergency situation. 56 According to the Ministry of Defense of the Republic of Korea, augmentation forces are to be increased progressively based on how the crisis situation develops, in two different modes: namely, the Flexible Deterrence Options (FDO) and the Time Phased Force Deployment Data (TPFDD). The FDO are enacted during the initial stages of a conflict when the level of crisis rises in the Korean peninsula, to deter war and mitigate the crisis situation by deploying designated forces. If the attempt to deter war fails, combat and support forces, as pre-planned under the TPFDD, will be deployed to execute the ROK-US combined operations plan. Should activating the Reserve Component units become necessary, some form of mobilization would be required, involving Congress, the President, the Secretary of Defense, or military department Secretaries, depending on the specific mobilization category. Also, most Reserve Component units (as well as some Active units) could require additional personnel, equipment, and training before being certified ready for deployment, and these considerations are factored into the TPFDL as well. U.S. Posture on the Korean Peninsula The U.S. military is in the process of relocating its forces farther south from bases near the border with North Korea, with South Korea paying $9.7 billion for construction of new military facilities. The realignment plan reflects the shift toward a supporting role for U.S. Forces Korea (USFK) and a desire to resolve the issues arising from the location of the large U.S. Yongsan base in downtown Seoul. Some observers contend that another initial rationale for the move, which was discussed as early as 2003, was to remove U.S. forces from DPRK artillery range. Others, including the DPRK, contend that the consolidation of the U.S. footprint has actually made American forces more vulnerable, as larger massed locations are easier to target than smaller, dispersed installations. The USFK base relocation plan has two elements. The first involves transferring a large percentage of the 9,000 U.S. military personnel at the Yongsan base to U.S. Army Garrison (USAG) Humphreys, which is located near the city of Pyeongtaek some 40 miles south of Seoul. The second element involves relocating about 10,000 troops of the Second Infantry Division from the Demilitarized Zone to areas south of the Han River (which runs through Seoul). The end result would be that USFK sites decline to 96, from 174 in 2002. The bulk of U.S. forces are to be clustered in the two primary "hubs" of Osan Air Base/USAG Humphreys and USAG Daegu that contain five "enduring sites" (Osan Air Base, USAG Humphreys, USAG Daegu, Chinhae Naval Base, and Kunsan Air Base). U.S. counter-fires (counter-artillery) forces stationed near the DMZ are the exception to this overall relocation. The United States and South Korea agreed that those U.S. units would not relocate to USAG Humphreys until the South Korean counter-fires reinforcement plan is completed around 2020. 81 The city of Dongducheon, where those soldiers are based, has protested this decision and withdrawn some cooperation with the U.S. Army. 82 United States Pacific Command (USPACOM) USPACOM was established on January 1, 1947, and is the oldest of the United States' unified combatant commands. Its Area of Responsibility (AOR) consists of 36 nations and contains some of the world's busiest international sea lanes. USPACOM is commanded by Admiral Harry Harris, USN. USPACOM's headquarters is supported by a number of component and subunified commands, including U.S. Forces Korea, U.S. Forces Japan, U.S. Special Operations Command Pacific, U.S. Pacific Fleet, U.S. Marine Forces Pacific, U.S. Pacific Air Forces, and U.S. Army Pacific. Approximately 375,000 U.S. military and civilian personnel are assigned to USPACOM and its different components across the Indo-Asia-Pacific region. According to USPACOM, those assignments are broken out as follows: U.S. Pacific Fleet consists of approximately 200 ships (including five aircraft carrier strike groups), nearly 1,100 aircraft, and more than 130,000 sailors and civilians. Marine Corps Forces, Pacific includes two Marine Expeditionary Forces and about 86,000 personnel and 640 aircraft. U.S. Pacific Air Forces comprises approximately 46,000 airmen and civilians and more than 420 aircraft. U.S. Army Pacific has approximately 106,000 personnel from one corps and two divisions, plus over 300 aircraft assigned throughout the AOR. These component command personnel figures also include more than 1,200 Special Operations personnel. Department of Defense civilian employees in the Pacific Command AOR number about 38,000. Of note, approximately 28,500 U.S. servicemembers and their families are stationed in the Republic of Korea, while U.S. Forces Japan consists of approximately 54,000 military personnel and their dependents. As of September 2016, approximately 5,000 servicemembers and their families were stationed in Guam. Command and Control Established on November 7, 1978, the ROK/U.S. Combined Forces Command (CFC) is the warfighting headquarters. Its role is to deter, or defeat if necessary, outside aggression against the ROK. To accomplish that mission, the CFC has operational control over more than 600,000 active-duty military personnel of all services, of both countries. In wartime, augmentation could include some 3.5 million ROK reservists as well as additional U.S. forces deployed from outside the ROK. If North Korea attacked, the CFC would provide a coordinated defense through its Air, Ground, Naval, and Combined Marine Forces Component Commands and the Combined Unconventional Warfare Task Force. In-country and augmentation U.S. forces would be provided to the CFC for employment by the respective combat component. The CFC is commanded by a four-star U.S. general, with a four-star ROK Army general as deputy commander. The United States has agreed to turn over the wartime command of Korean troops to South Korea, but the two sides have postponed this transfer for several years. Under the current command arrangement, which is a legacy of U.S. leadership of the U.N. coalition in the 1950-1953 Korean War, South Korean soldiers would be under the command of U.S. forces if there were a war on the peninsula. The plan to transfer wartime operational control recognizes South Korea's advances in economic and military strength since the Korean War and is seen by many Koreans as important for South Korean sovereignty. Progressive parties in South Korea generally support hastening the transition, arguing that the U.S. presence influences North Korea to accelerate its military buildup. Under a 2007 agreement, the CFC, which has been headed by the U.S. commander in Korea, is to be replaced with separate U.S. and ROK military commands; the provisional name of the new U.S. command is Korea Command (KORCOM). When the U.S. and ROK militaries operate as a combined force under the new command structure, U.S. forces may be under the operational command of a Korean general officer, but U.S. general officers are to be in charge of U.S. subcomponents. A bilateral Military Cooperation Center would be responsible for planning military operations, military exercises, logistics support, and intelligence exchanges, and assisting in the operation of the communication, command, control, and computer systems. It is unclear what role the U.N. Command, which the USFK Commander also holds, will have in the future arrangement. In 2014, South Korea's Minister of Defense reportedly announced that the goal was to transfer operational control (Opcon) in 2023, stressing the completion of the Korean Air and Missile Defense System (KAMD) by 2020 as an important step in the transfer process. To that effect, the Ministry of Defense announced that $1.36 billion would be invested in the KAMD system in 2017. In 2010, the Opcon transfer was postponed to 2015 after a series of provocations from North Korea and amid concerns about whether South Korean forces were adequately prepared to assume responsibility. As the new deadline of 2015 grew closer, concerns again emerged about the timing. Reportedly, South Korean officials worried that their military was not fully prepared to cope with North Korean threats and that Pyongyang might interpret the Opcon transfer as a weakening of the alliance's deterrence. Some military experts expressed concern that turning over control would lead to the United States reducing its overall commitment to South Korean security. Questions have also arisen over whether the ROK ground-centric military can effectively lead in a joint and coalition warfighting environment. In October 2014, the United States and South Korea announced in a joint statement that the allies would take a "conditions-based approach" to the Opcon transfer and determine the appropriate timing based on South Korean military capabilities and the security environment on the Korean Peninsula. The decisions to delay the Opcon transfer could be interpreted either as flexible adjustments to changed circumstances on the Korean Peninsula or as emblematic of problems with following through on difficult alliance decisions. In testimony to Congress in April 2015, then-USFK Commander General Curtis Scaparrotti explained the three general conditions for Opcon transfer: South Korea must develop the command and control capacity to lead a combined and multinational force in high-intensity conflict, South Korea must improve its capabilities to respond to the growing nuclear and missile threat in North Korea, and the Opcon transition should take place at a time that is conducive to a transition. Scaparrotti stated that main areas of attention for improving South Korea's capabilities will be C4 (command, control, computers, and communication systems), BMD, munitions, and ISR (intelligence, surveillance, and reconnaissance) assets. As a result, reportedly the Opcon transfer may not occur until 2020 or later. South Korea's Ministry of National Defense (MND) 2016 White Paper says that the MND will do its utmost to fulfill all necessary requirements to facilitate Opcon transfer by the mid-2020s by making progress toward being able to lead alliance military drills and organizing the potential future headquarters for CFC after the transfer is complete. Appendix B. DPRK, ROK, and U.S. Military Capabilities Complementing the narrative in Appendix A , the table below illustrates some of the differences in force structure between the DPRK and the U.S./Republic of Korea. Appendix C. U.S. Posture in the Pacific Theater

North Korea's apparently successful July 2017 tests of its intercontinental ballistic missile capabilities, along with the possibility that North Korea (DPRK) may have successfully miniaturized a nuclear warhead, have led analysts and policymakers to conclude that the window for preventing the DPRK from acquiring a nuclear missile capable of reaching the United States is closing. These events appear to have fundamentally altered U.S. perceptions of the threat the Kim Jong-un regime poses to the continental United States and the international community, and escalated the standoff on the Korean Peninsula to levels that have arguably not been seen since 1994. A key issue is whether or not the United States could manage and deter a nuclear-armed North Korea if it were to become capable of attacking targets in the U.S. homeland, and whether taking decisive military action to prevent the emergence of such a DPRK capability might be necessary. Either choice would bring with it considerable risk for the United States, its allies, regional stability, and global order. Trump Administration officials have stated that "all options are on the table," to include the use of military force to "denuclearize"—generally interpreted to mean eliminating nuclear weapons and related capabilities from that area. One potential question for Congress is whether, and how, to employ the U.S. military to accomplish denuclearization, and whether using the military might result in miscalculation on either side, or perhaps even conflict escalation. Questions also exist as to whether denuclearization is the right strategic goal for the United States. This is perhaps because eliminating DPRK nuclear or intercontinental ballistic missile (ICBM) capabilities outside of voluntary denuclearization, and employing military forces and assets to do so, would likely entail significant risks. In particular, any move involving military forces by either the United States/Republic of Korea (U.S./ROK) or the DPRK might provoke an escalation of conflict that could have catastrophic consequences for the Korean Peninsula, Japan, and the East Asia region. In this report, CRS identifies seven possible options, with their implications and attendant risks, for the employment of the military to denuclearize North Korea. These options are maintaining the military status quo, enhanced containment and deterrence, denying DPRK acquisition of delivery systems capable of threatening the United States, eliminating ICBM facilities and launch pads, eliminating DPRK nuclear facilities, DPRK regime change, and withdrawing U.S. military forces. These options are based entirely on open-source materials, and do not represent a complete list of possibilities. CRS cannot verify whether any of these potential options are currently being considered by U.S. and ROK leaders. CRS does not advocate for or against a military response to the current situation. Conservative estimates anticipate that in the first hours of a renewed military conflict, North Korean conventional artillery situated along the Demilitarized Zone (DMZ) could cause tens of thousands of casualties in South Korea, where at least 100,000 (and possibly as many as 500,000) U.S. soldiers and citizens reside. A protracted conflict—particularly one in which North Korea uses its nuclear, biological, or chemical weapons—could cause enormous casualties on a greater scale, and might expand to include Japan and U.S. territories in the region. Such a conflict could also involve a massive mobilization of U.S. forces onto the Korean Peninsula, and high military casualty rates. Complicating matters, should China choose to join the conflict, those casualty rates could grow further, and could potentially lead to military conflict beyond the peninsula. Some analysts contend, however, that the risk of allowing the Kim Jong-un regime to acquire a nuclear weapon capable of targeting the U.S. homeland is of even greater concern than the risks associated with the outbreak of regional war, especially given Pyongyang's long history of bombastic threats and aggressive action toward the United States and its allies and the regime's long-stated interest in unifying the Korean Peninsula on its terms. Estimating the military balance on the peninsula, and how military forces might be employed during wartime, requires accounting for a variety of variables and, as such, is an inherently imprecise endeavor. As an overall approach to building and maintaining its forces, the DPRK has emphasized quantity over quality, and asymmetric capabilities including weapons of mass destruction and its special operations forces. The Republic of Korea, by contrast, has emphasized quality over quantity, and maintains a highly skilled, well-trained, and capable conventional force. Most students of the regional military balance contend that overall advantage is with the U.S./ROK, assuming that neither China nor Russia become involved militarily. Should they do so, the conflict would likely become exponentially more complicated. As the situation on the Korean Peninsula continues to evolve, Congress may consider whether, and if so under what circumstances, it might support U.S. military action. Congress could also consider the risks associated with the possible employment of military force on the Korean Peninsula against North Korea; the efficacy of the use of force to accomplish the Trump Administration's strategic goals; whether and when a statutory authorization for the use of U.S. forces might be necessary, and whether to support such an authorization; what the costs might be of conducting military operations and postconflict reconstruction operations, particularly should a conflict on the Korean Peninsula escalate significantly; the consequences for regional security, regional alliances, and U.S. security presence in the region more broadly; and the impact that renewed hostilities on the Korean Peninsula might have for the availability of forces for other theaters and contingencies.

Related Legislation in the 110th Congress A number of bills have been introduced that support comparative clinical effectiveness research, including several in the 110 th Congress. S. 3 , the Medicare Part D price negotiation bill sponsored by Senate Finance Committee Majority Leader Max Baucus, would require the Director of Health and Human Services (HHS) to develop a prioritized list of comparative effectiveness research studies. Representatives Tom Allen (D-ME) and Jo Ann Emerson (R-MO) co-sponsored H.R. 2184 , which would establish a public-private funding mechanism for comparative clinical effectiveness research, overseen by an independent advisory board. The Act would establish a trust fund for the research that would receive $100 million in FY2008, $200 million in FY2009, and $900 million per year for FY2010-FY2012. Similarly, H.R. 3162 , the Children's Health and Medicare Protection (CHAMP) Act of 2007, would establish a public-private funding mechanism for comparative clinical effectiveness research, overseen by an independent commission, and a trust fund that would be appropriated at least $90 million in FY2008, $100 million in FY2009, $110 million in 2010, and no more than $90 million in years thereafter. CBO has stated that the information produced by the comparative effectiveness portion of the CHAMP Act would reduce total spending by public and private purchasers by $0.5 billion over 5 years and $6 billion over 10 years. Direct spending by the federal government was estimated to be reduced by $0.1 billion over 5 years and $1.3 billion over 10 years. Thus, the majority of the savings from the research would be realized by private purchasers rather than by the federal government. The net federal expenditures from the comparative effectiveness portion of the CHAMP Act were estimated to be $0.5 billion over 5 years and $1.1 billion over 10 years. CBO assumed the savings would primarily be realized through changes in physicians' practice patterns and, to a lesser extent, changes in coverage rules. The Healthy Americans Act, S. 334 and H.R. 3163 , includes tax deduction, patent extension, and market exclusivity incentives for pharmaceutical and medical device manufacturers to conduct comparative clinical effectiveness research. The Josephine Butler United States Health Service Act, H.R. 3000 , would create a National Health Board that includes a new institute—the National Institute of Evaluative Clinical Research. Among the Institute's responsibilities would be to identify the most effective methods of prevention, diagnosis, and treatment and assist the National Health Board in establishing clinical practice guidelines. More details about these bills and others in the 109 th and 110 th Congress are included in the Appendix . To help inform the discussion surrounding comparative clinical effectiveness research, this report provides an overview and discusses past and current comparative clinical effectiveness research and other forms of technology assessment in the United States. This report also briefly discusses the use of technology assessment in the U.S. and other countries, and the potential role of a new comparative effectiveness research entity. What Is Comparative Effectiveness Research? Comparative effectiveness research is a term that has been defined by people in many different ways. All agree that comparative effectiveness research compares the effectiveness of two or more health care services or treatments, and is one form of health technology assessment. It compares outcomes resulting from different treatments or services, and provides information about the relative effectiveness of treatments. Additional specifics about the research and its definition are sources of contention. In particular: Effectiveness—How should effectiveness be measured? Should the research compare only the effectiveness (the effect in routine clinical practice) or also the efficacy (the effect under optimal conditions) of treatments or services? Costs—Should costs be included in the research? Should the costs be reported separately from the effectiveness results? Or should a cost-effectiveness ratio be the ultimate goal? Effectiveness: How Should It Be Measured? Effectiveness Is Complicated to Measure Measuring the benefit or effectiveness is not a straightforward matter; which factors are included and how they are counted can greatly affect the results. Quantifying benefits and effectiveness often requires assumptions about the population benefitting from the treatment. For example, to what extent will the benefits from the treatment vary across the country and in different settings? More specifically, how should the benefits observed in a clinical trial be extrapolated to the rest of the population? Researchers have debated such questions over the years, resulting in an expert consensus concerning best research methods. These suggested methods include the practice of conducting sensitivity analyses to assess how study results would change if parameters, such as effectiveness, were measured differently. Effectiveness Differs from Efficacy A treatment's efficacy is the effect of the treatment under optimal conditions. A treatment's effectiveness is the effect of the treatment in routine clinical practice. For example, randomized clinical trials conducted for Food and Drug Administration (FDA) marketing approval typically aim to assess the relative safety and efficacy of a treatment so as to best determine the sole effect of the treatment, absent any other influential factors. Clinical trials for FDA approval also typically compare the efficacy of an investigational treatment to a placebo, rather than another treatment. Effectiveness research relaxes the strict exclusionary criteria that are typically required in such trials, in order to assess the treatment in the wide range of patients and environments in which the product is actually used. Efficacy and effectiveness research results may differ because often in clinical practice, patients may have more than one illness, doses may vary, methods of administering the treatment may vary, and patients may simultaneously take treatments for multiple illnesses. Moreover, large segments of the potential patient population are often excluded from efficacy trials in order to achieve a more uniform study population. An often cited example is that many patients with high blood pressure also have diabetes; yet, efficacy clinical trials for high blood pressure treatments may not include patients with diabetes. As a result, any interaction between blood pressure and diabetes medications may not be known until the treatment is approved by the FDA and used in clinical practice. Also, different patients may respond to treatments differently due to physiologic differences, such as different metabolic rates of drugs and safety of anesthesia in surgical options. Although conducted after FDA approval, post-marketing (also known as phase IV) studies are not necessarily effectiveness studies, and only rarely could be classified as comparative effectiveness studies. Post-marketing studies most often assess any ongoing safety concerns of one drug or device rather than the effectiveness of a product. Moreover, the few studies that compare two or more treatments often only assess the equivalence or superiority of the study sponsor's product, rather than the relative effectiveness of competing products. Costs: Should They Be Included? Costs Are Complicated to Measure Costs are not always easy to define or measure. The total treatment costs may differ, sometimes dramatically, depending upon which perspective (e.g., patient, government payer, private insurer, society) is taken in the analysis, and which costs are included. As with the measurement of effectiveness, researchers have tried to resolve these issues through expert consensus of best research methods and the practice of conducting sensitivity analyses. Inclusion Depends on Role in Health Care Decision Making Much of the controversy surrounding whether costs should be included in comparative effectiveness research lies in the questions: when, how, and by whom will the research results be used to make decisions? The issue is most controversial if results that include costs are used to make insurance reimbursement, pricing, or coverage decisions. The inclusion of costs in research tends to not be as controversial when the results are not directly linked to medical and health policy decision making. One reason for the controversy is that policymakers may disagree about the way costs are measured or which costs are included in a research study. Cost-effectiveness and Cost-benefit: Two Ways to Include Costs Cost-effectiveness and cost-benefit analysis are two frequently used techniques of incorporating costs in the results of health technology assessments. The techniques compare the costs to the health benefits received from services or treatments. Both methods are used to help determine whether the additional health benefits of a service or treatment can justify the additional costs. Cost-effectiveness and cost-benefit differ in how the health benefits are measured. In cost-benefit analysis, the health benefits are monetarized, and the results are stated either in the form of a ratio or monetary difference between costs and benefits. In cost-effectiveness analyses, the health benefits are commonly measured in non-monetary units, such as life years (i.e., the additional years of life gained) or life years adjusted for quality (i.e., quality-adjusted life years—QALYs), and the end product is usually a ratio of the costs and benefits (e.g., dollars/QALY). Also, cost-effectiveness analysis always compares one or more alternatives, while cost-benefit analysis can be used to assess a single option (i.e., assessing whether the benefits are greater than the costs) or more than one option. What Research Is Needed? Past and Current Research Efforts In order to determine whether and what type of comparative effectiveness research is needed, the scope and scale of current comparative effectiveness research efforts must be understood. A survey of the published medical literature and a review of the historical and current research initiatives provide a limited summary of the scale and scope of the comparative effectiveness research that has been funded and conducted. This section provides such a survey of the literature and reviews health technology research initiatives in the U.S. The section also discusses how comparative effectiveness research has been used in the U.S. and other countries and the potential role of a new comparative effectiveness entity. Research in the Published Medical Literature The published medical literature is one source of information that may help assess the extent to which various types of entities are currently conducting comparative clinical effectiveness research. We conducted a search of the published medical literature which included all studies published in PubMed journals that compared the effectiveness of at least two treatments or services between January 2004 and August 2007. The search was not intended to be an exhaustive search of all comparative clinical effectiveness studies, but rather was intended to summarize the information available from one large source of recently completed studies. It did not include studies that compared a treatment or service to a placebo. Studies conducted through initiatives discussed later in this report were excluded from this literature search. Each study was categorized by the type of research entity that conducted the study, which was determined by the affiliation of the study's contact author. The categories of types of research entities were academic, private institute, pharmaceutical companies, and government. A private institute was defined in this search as a for-profit or non-profit research group that was not based at a university or pharmaceutical company. Examples of private institutes include hospitals and private practices not affiliated with universities, such as the Kaiser Permanente Medical Center and the Black Hills Regional Eye Institute. Research conducted at Veterans Affairs (VA) hospitals was categorized as government research. The relative share of studies published by different types of entities is shown in Figure 1 . The kinds of studies published by each type of entity are shown in Table 1 . The published studies primarily focused on treatments for mental health disorders and cardiovascular disease. Most comparative clinical effectiveness studies in the medical literature were produced by academic researchers. Researchers affiliated with pharmaceutical companies and the government have published relatively few comparative clinical effectiveness studies in the medical literature. Few studies focused on the comparative effectiveness of treatments in sub-populations, which was defined as populations other than white middle-age males (or females for diseases, such as ovarian cancer, that only occur in females). Sub-populations, such as children, elderly, and non-white races, may respond to treatments differently due to physiologic differences, such as different metabolic rates of drugs and safety of anesthesia in surgical options; thus research including sub-populations may help inform clinical practice. Also, few studies included patients with more than one disease (i.e., comorbidities ). Since nearly 60% of hospitalizations have at least one comorbidity (i.e., two diseases) and over 33% have two or more (i.e., at least three diseases), this type of research is generally held to help inform clinical decisions. Federal Funding of Technology Assessments Health technology assessment, including comparative clinical effectiveness, cost-effectiveness, and cost-benefit analysis, has been conducted for decades in the United States through both public and private initiatives. Some of these initiatives in the United States are ongoing, while others were terminated because of lack of funding. Further details about the initiatives can be found in the Appendix . The initiatives' timing and scale are summarized in Table 2 . The Agency for Healthcare Research and Quality (AHRQ) and the National Institutes of Health (NIH) are currently the largest federal funders of extramural health technology assessments. Rather than conducting the research at the agency, these executive-branch agencies within the Department of Health and Human Services (HHS) primarily provide funding for academic and private sector researchers. AHRQ in particular has several ongoing programs for health technology assessments, including the Centers for Education and Research on Therapeutics (CERTs), the Developing Evidence to Inform Decisions about Effectiveness (DEcIDE) Program, Evidence-based Practice Centers (EPCs), and the Research Initiative in Clinical Economics (RICE). These centers and programs conduct technology assessments, comparative effectiveness research, pharmaceutical outcomes research, and economic valuations of health care services and treatments. Although some Institutes at the NIH provide some funding for health technology assessments, unlike AHRQ, the NIH has not organized the research into centers or programs. Each of the AHRQ programs differ in their clinical focus, purpose, and types of technology assessments funded. For example, the EPCs are academic and private sector research centers that have five-year research contracts with AHRQ while funding from RICE is primarily allocated through competitive research grants. Unlike AHRQ and the NIH, the Veterans Health Administration's (VHA) Pharmacy Benefits Management Strategic Healthcare Group (PBMSHG) and the Department of Defense (DOD) PharmacoEconomic Center (PEC) do not out-source their health technology assessments. Rather, the assessments are funded, conducted, and used by the respective agency to make formulary and pricing decisions. Moreover, the research funded by AHRQ and NIH is intended to be a public good and to aid all health care decision makers, while the research from VHA and DOD centers is intended to aid decision makers at the respective agencies. AHRQ previously sponsored research through its Medical Treatment Effectiveness Program (MEDTEP). Among other projects the program funded the Patient Outcomes Research Teams (PORTs). Funding for this program was terminated in 1995 for many reasons, including criticisms over the quality of the PORT guidelines. The Congressional Office of Technology Assessment (OTA) also previously funded and conducted technology assessments. The OTA was a nonpartisan congressional agency that conducted health and non-health technology assessments for Congress. The agency would use in-house researchers as well as experts outside of the agency. It was disbanded in 1995 partly due to controversy over its technology assessments, and partly for other reasons discussed in the Appendix . Effect of Research on U.S. Policy and Practice Health technology assessments can be used for many purposes, including aiding decisions by insurers for coverage, drug formulary placement, and pricing of technologies; health care providers (e.g., physicians, nurses) for improving clinical practice; and consumers for making informed decisions. Use of Technology Assessments in the United States Over the past two decades, many organizations have tried to use existing technology assessments for health care decisions. Some organizations that have used these assessments include the Academy of Managed Care Pharmacy (AMCP), Consumer Reports' Best Buy Drugs project, the DOD PEC, for-profit firms (including consulting firms, private insurers, and pharmaceutical manufacturers), the Centers for Medicare and Medicaid Services (CMS), the Oregon Health Plan, and the VHA PBMSHG. The organizations' timing, target audience, and purpose are summarized in Table 3 . With the exception of Consumer Reports' Best Buy Drugs, these organizations have used technology assessments for insurers' coverage, formulary, and pricing decisions. The AMCP promulgated guidelines for pharmaceutical companies' submissions for formulary assessments by private health insurers. The guidelines suggest comparisons to other products and a model that predicts the costs and health outcomes with the product in the health insurance plan. Research suggests that many pharmaceutical companies have adopted the guidelines; a survey found that managed care organizations had dossiers for 40% of drugs under review for coverage. Best Buy Drugs is a non-profit project of Consumer Reports that combines comparative effectiveness information with drug pricing information to select their "Best Buy picks" for health care consumers and providers. The DOD PEC monitors drugs' use, cost, and pharmacoeconomics within the Military Health System. The PEC has been credited by the DOD with improving patient safety and decreasing costs. Both the Medicare program and the Oregon Health Plan encountered opposition when the programs tried to incorporate cost-effectiveness analyses into policy decisions. In response, the Oregon Health Plan modified their program so that coverage was not based strictly on cost-effectiveness and, since January 2006, Medicare has explicitly excluded treatment costs from its national coverage determinations. The VHA PBMSHG compares the effectiveness of drugs to produce clinical practice guidelines and drug monographs, and to establish the VA formulary, drug pricing, and contracts. Further details about the initiatives can be found in the Appendix . Translating Research into Clinical Practice Depending on many factors, new information about treatments' safety or effectiveness may or may not change physicians' clinical practice. For example, one study suggested that simply the wording of a study's results may significantly influence whether physicians change which drugs they prescribe. Another study found that dissemination of educational materials alone was ineffective in changing physicians' prescribing habits. More active (and costly) methods, such as one-to-one educational outreach, multifaceted interventions, and participatory clinical guideline development were found to be more effective. Other more difficult factors to change, such as the management structure of the private insurer employing the physician, were also found to influence prescribing habits. Researchers and policy makers have tested many methods for changing clinical practice, and optimal strategies have evolved over the years. Overall, changing clinical practice is not a simple or inexpensive process, and requires more than disseminating information and expecting individuals to comb-through research studies and find ways to translate the findings into action. Use of Technology Assessments by Other Governments Comparative and cost-effectiveness analysis are given explicit roles in some other countries. In a 2001 survey of 11 OECD member countries that use technology assessment, such as comparative effectiveness or cost-effectiveness, three countries (Belgium, Italy, and the Netherlands) reported that the goal of using technology assesssment was cost containment, three (Belgium, the Netherlands, and Portugal) indicated global budgeting, and five (Australia, the Netherlands, Portugal, Sweden, and the U.K.) reported value-for money. Ten of the countries reported that a federal agency is responsible for either processing or conducting the assessments. Three of the countries (Australia, Belgium, and France) would only appoint consultants with no links to pharmaceutical manufacturers, while three other countries (the Netherlands, Portugal, and Switzerland) would only appoint consultants with no links to the manufacturer of the drug under review. Three of the countries (Japan, Belgium and the U.K.) noted that the assessment may be completed by the payer, while the other countries indicated that the assessment would only be completed by the product manufacturer. Belgium was the only country that reported that technology assessments reduced total drug expenditures. Italy and Portugal noted that it reduced unnecessary drug use, while Australia, Belgium, and Portugal indicated that it improved the cost-effectiveness of drug prescribing. None of the countries reported that lack of co-operation from pharmaceutical companies was an obstacle to obtaining improved results from technology assessment. Three countries that are often as examples of governments using health technology assessments are the U.K., Australia, and Canada. Use of health technology assessments in these countries is summarized in Table 4 . Further details about how these three countries use technology assessments can be found in the Appendix . The Potential Contribution of a New Research Entity The multitude of current comparative effectiveness research entities in the U.S. introduces the question: why would a new entity be needed to conduct more comparative clinical effectiveness research? Many entities are currently conducting comparative effectiveness research, but the results are not centralized nor are they necessarily in a format that is easy for health care decision makers to use. Thus, one possible reason that could be offered in support of a new research entity might be increased efficiency and coordination of research. The entity could also arguably improve researchers' independence and scientific integrity, or spawn the genesis of research not currently being conducted on drugs, other health technologies, or services. Factors that May Influence Its Success Many factors might influence whether the aforementioned potential gains from a new entity could be realized. Some of these influential factors might be determined when the entity is established. The ideal structure, funding source, mission, and authority of the entity may depend upon the intended use of the research. For example, if the entity aims to influence insurers' decisions, then input from these stakeholders may help achieve this goal. If the entity aims to change clinical practice, then decision makers may wish to plan how the new research will help achieve this goal. Additionally, if, like the OTA, the audience is Congress, then there may be some benefit to establishing the entity as a congressional agency. There may also be some efficiency gains to having the agency work with existing agencies in the executive branch, such as AHRQ or NIH. Other factors influential to the entity's success would more likely be determined by the entity's administration, including: Which treatments would be studied? Would different types of treatment options, such as drugs and surgery, be compared to each other? Would the research methods include systematic reviews, decision models, and observational studies, as well as randomized trials? Who would oversee and review the studies' methods, timing, and clinical endpoints? Which researchers and what expertise would be required to conduct the studies? How would the results be presented and used? How would the political support for the entity be maintained? The answers to these questions could have repercussions on many interested parties including physicians, patients, payers, manufacturers, researchers, and federal agencies. For example, the timing of the research could influence the impact of the research, since the amount of information that is known about a treatment differs at different time periods. The issue is that conclusions may need to be modified when more information becomes available in a particular research area. On the one hand, waiting for perfect information on a treatment before conducting any analyses would help curb modifications, but any resulting conclusions may have a limited impact on improving clinical decision making. On the other hand, analyzing areas with imperfect information would be more likely to have a large impact on clinical decision making, but the conclusions may change once more information becomes available. A middle, but imperfect, option would be to re-evaluate conclusions as more information becomes available; while this option would allow all information to be incorporated into decisions in a timely manner, it would also increase the overall costs of technology assessments. A new entity might need to grapple with these types of decisions. Appendix. Description of U.S. and Non-U.S. Comparative Effectiveness Initiatives and Legislation in the 109th and 110th Congresses U.S. Initiatives Academy of Managed Care Pharmacy In 2001, Academy of Managed Care Pharmacy (AMCP) promulgated guidelines, known as the AMCP Format for Formulary Submissions, for conducting formulary assessments, including economic evaluations. The purpose of the guidelines was to help ensure that any increased utilization of pharmaceuticals and vaccines was based on good scientific evidence and value. The guidelines encouraged pharmaceutical manufacturers to submit a dossier with clinical and economic data from published and unpublished studies, along with an economic model that predicts the costs and health outcomes with the product in the health plan. The dossier also includes a section on the comparative pharmacokinetic and pharmacologic data for other agents commonly used to treat the condition. The dossiers have become an industry standard, and are used by pharmacy and therapeutics (P&T) committees of managed care organizations and health insurers. A recent survey found that managed care organizations had dossiers for 40% of drugs under review for coverage. Fifty-three percent of the dossiers received included budget-impact models and 39.3% included cost-effectiveness or cost-benefit analyses. Less than half of the economic models were deemed adequate by the P&T committees. Nearly two-thirds of survey respondents indicated that P&T committees modified the economic model on the dossier because pharmaceutical manufacturers did not make models directly applicable to the health plan's population. Agency for Healthcare Research and Quality The agency, formerly known as the Agency Health Care Policy and Research (AHCPR), was established in 1989 as an agency within the Department of HHS. The agency's statutory responsibilities included outcomes research and clinical practice guidelines development. The Medical Treatment Effectiveness Program (MEDTEP) was established in 1989 as part of AHCPR. MEDTEP funded effectiveness research, guideline development, database development, and methods of disseminating information. In 1992, Congress directed the AHCPR to incorporate cost-effectiveness information in its technology assessments and clinical practice guidelines. The use of cost-effectiveness and the development of the clinical practice guidelines generated controversy and criticisms. The criticism included critiques from IOM committees, the Government Accountability Office (GAO), the Physician Payment Review Commission (PPRC), the Congressional Office of Technology Assessment (OTA), and an influential lobbyist group of orthopedic surgeons. The agency was also criticized for its role in the Clinton health care reform plan. In 1995, partially in response to the criticism and concerns, Congress sharply decreased the FY1997 budget for AHCPR by 20%, thereby ending the funding for MEDTEP. From 1995 to 1999, AHCPR received operating funds through annual appropriations. The agency was reauthorized and renamed the Agency for Healthcare Research and Quality (AHRQ) in 1999, and now has many centers and programs that conduct inter-related research on health care treatments. These include the Centers for Education and Research on Therapeutics (CERTs), the Developing Evidence to Inform Decisions about Effectiveness (DEcIDE) Program, the Evidence-based Practice Centers (EPCs), and the Research Initiative in Clinical Economics (RICE), which conduct technology assessments, comparative effectiveness research, pharmaceutical outcomes research, and economic valuations of health care services and treatments, respectively. Centers for Education and Research on Therapeutics. AHRQ funds pharmaceutical outcomes research through the CERTs, which is a national demonstration program for education and research on the optimal use of drugs, biologicals, and medical devices. AHRQ was given the responsibility of administering the program in 1997 as part of the Food and Drug Administration Modernization Act (FDAMA; P.L. 105-115 ), and the first centers were funded in 1999. The program is administered as a cooperative agreement by AHRQ in consultation with the FDA. Some of the research is also conducted in partnership with private corporations, such as insurers or pharmaceutical manufacturers. The research compares the health risks, benefits, cost-effectiveness, economic implications, and interactions of treatments. Some of the research also examines the cost-effectiveness of treatments. Currently, 10 of the 11 centers are affiliated with academic institutions. Developing Evidence to Inform Decisions about Effectiveness Program. Section 1013 of the MMA authorizes AHRQ to conduct and support research on outcomes, comparative clinical effectiveness, and appropriateness of pharmaceuticals, devices, and health care services. The section prohibits the Administrator of CMS from using the data produced under the section to withhold coverage of a prescription drug. Although the section authorized $50 million to be appropriated for the research in 2004, AHRQ has been appropriated $15 million each year for carrying out the research. AHRQ created the DEcIDE program to tackle the responsibilities described in section 1013. Like the EPCs, the DEcIDE centers are primarily based at universities. Unlike the EPCs, the DEcIDE centers do not examine the cost-effectiveness of technologies, but rather focus on health outcomes and comparative clinical effectiveness. As of August 2007, the agency has funded 15 projects that evaluate the comparative effectiveness of health care treatments. Evidence-based Practice Centers Program. The purpose of the EPC program is to improve the quality, effectiveness, and appropriateness of health care through technology assessments, evidence reports, and research on the methods for systematic reviews. The reports inform public and private insurers' coverage decisions, and are used to develop quality measures, educational materials, guidelines, and research agendas. Cost-effectiveness analysis has been used as a research tool in some of the reports. Topics for technology assessments are nominated by AHRQ's non-federal partners and assessments tend to be completed in approximately 15 months. Thirteen EPCs were awarded five-year contracts with AHRQ in 2002. Three of the Centers (Duke University, ECRI, and Tufts University-New England Medical Center) specialize in technology assessments for CMS to inform national coverage decisions for the Medicare program and provide information to Medicare carriers. One center (Oregon Health & Science University), supports the work of the U.S. Preventive Services Task Force. Ten of the centers are affiliated with academic institutions and the remainder are private institutions. Ten are based in the U.S., and the other three are based in Canada. As of August 2007, 155 evidence reports had been published by the EPC program. Research Initiative in Clinical Economics. Begun in 2001, RICE funds research on the cost-effectiveness, cost-benefit, and methods for estimating the value of health care interventions. Although focused on cost-effectiveness, this research has not sparked controversy. Unlike other initiatives, this research has not been used for clinical practice guidelines or coverage decisions, and thus has not been explicitly connected to policy recommendations or implementation. Blue Cross Blue Shield Technology Evaluation Center The Technology Evaluation Center (TEC) of the BlueCross BlueShield (BCBS) Association has been assessing the relative effectiveness and appropriateness of different technologies since 1985. AHRQ designated and funded the TEC as one of its first Evidence-based Practice Centers (EPCs) in 1997, and renewed the designation for an additional five years in 2002. The TEC relies upon medical and research employees to conduct the evaluations, under the guidance of their Medical Advisory Panel of clinical experts. The Center produced 17 evaluations in 2005, 14 in 2006, and 4 between January and August 2007. The Center's evaluations focus on the relative effectiveness of technologies, particularly with regard to the effect upon health outcomes, such as length of life, quality of life, and functional abilities. The TEC compares the effectiveness of pharmaceuticals, medical devices, and health services. Cost-effectiveness analyses are mentioned by the TEC as a potential type of special technology assessment the Center may undertake; however, since 2005, none of the publicly available assessments have analyzed the cost-effectiveness of technologies. All evaluations use the same criteria, approach for reviewing the evidence, and format for reporting the results. The evaluations are intended to be for informational purposes only and are not characterized as recommendations or guidelines. All completed evaluations are available for free on the center's website, along with the list of technology evaluations in process. Consumer Reports' Best Buy Drugs Project Consumer Reports' Best Buy Drugs is a non-profit project of Consumer Reports that is primarily supported by educational grants. The project synthesizes DERP findings in order to provide comparative effectiveness information about drugs to health care consumers and providers, and selects "Best Buy picks" within drug classes; the most influential factor in the selection process is the drug's effectiveness. The summaries include information on effectiveness, safety, and price. The drug prices are national average cash prices. The summaries are available for free on the project's website, and are updated as new information becomes available. DOD PharmacoEconomic Center The Department of Defense (DOD) PharmacoEconomic Center (PEC) was established in 1992 in response to rising DOD pharmaceutical expenditures. Its mission is to "improve the clinical, economic, and humanistic outcomes of drug therapy in support of the readiness and managed healthcare missions of the Military Health System." The center performs cost-effectiveness analyses, works with the DOD P&T committee to establish the Tri-Service Drug Formulary list and the National Mail Order Pharmacy formulary list, provides drug treatment guidelines with the VHA, and monitors drugs' use, cost, and pharmacoeconomics within the Military Health System. Some of the evaluations by the PEC are publicly available. The PEC publishes a monthly newsletter called the PEC Update "to educate health care providers and other pharmacy benefit stakeholders about cost-effective drug therapy." PEC analyses have shown that the center has improved patient safety and decreased costs for the Military Health System. Drug Effectiveness Review Project In 2001, the Oregon state legislature began commissioning, through the Oregon Medicaid program, the Oregon Health Science University (OHSU) to assess the comparative clinical effectiveness and safety of drugs in clinical practice. The initiative was named the Drug Effectiveness Review Project (DERP). OHSU was a logical location for the initiative since, at the time, it was an AHRQ funded EPC; as such, it completed systematic literature reviews to produce evidence reports and technology assessments. The reviews were viewed as a way to equalize buyers' and sellers' information about heterogeneous products. Credibility and transparency of the research were viewed as crucial to the success of the project, and DERP's conflict of interest policy forbids its reviewers from having financial ties with the companies whose products they are evaluating. Currently, a team of researchers at OHSU coordinate the reviews with experts in the clinical area. The reviews incorporate a scientific literature review as well as assessments of the evidence on the effectiveness, safety and adverse effects of the drugs nationwide, as well as in sub-populations. Cost information is explicitly excluded from the reviews. The reviews only compare drugs within a class, and do not compare the effectiveness of medical devices or health services. The primary audience for the DERP reviews is the state Medicaid programs, which use them to help inform Medicaid drug coverage decisions. Topics are chosen at biannual public meetings with the state pharmacy directors and medical directors from the funding Medicaid programs; the selection is based upon Medicaid expenditures, the potential usefulness of a review, and availability of data. Once a drug class is chosen, a solicitation for information is sent to all pharmaceutical manufacturers with products in the class of interest. Any information provided to DERP by manufacturers is disclosed on request to any interested party. DERP also draws upon information from the published and unpublished scientific literature. DERP does not conduct new comparative effectiveness studies and only uses existing information. The possible outcomes of a DERP report are (1) no evidence of differences between drugs, (2) some differences under some circumstances, (3) unclear whether drugs differ, and (4) significant differences between drugs. The final reports do not make coverage, payment, or formulary recommendations. Rather, state decision making groups in the funding Medicaid programs use the DERP reports to help reach conclusions about coverage, payment, and formulary status; notably, states may not necessarily reach the same conclusion after reviewing the same DERP report. All DERP reports are available for free on the website. As of August 2007, 13 states (plus the Canadian Agency for Drugs and Technologies in Health) were participating in and financially supporting DERP, which has produced more than 30 reports since October 1, 2003. ECRI Institute Some non-profit organizations, such as ECRI Institute, also perform health care technology assessments and comparative effectiveness analyses. The clients of these organizations may range from private insurers to government agencies. For example, ECRI is one of AHRQ's EPCs and provides health technology assessments to the DOD TRICARE program, but also counts the World Health Organization, hospitals and private insurers as clients. For-Profit Firms Many for-profit firms also perform technology assessments, including comparative effectiveness, cost-effectiveness, or pharmaceutical outcomes research, for their clients, such as pharmaceutical manufacturers and health insurers. Examples of such firms are Hayes Inc., and United Biosource Corporation (formerly known as MEDTAP). Other firms, such as McKesson's InterQual, produce clinical guidelines and decision support criteria for clients. Many pharmaceutical and private health insurance plans also perform technology assessments in-house. Much of the information produced by such firms may be considered confidential client information and would not be available to the public. Medicare As dictated by statute, Medicare pays for medically needed and necessary services provided to elderly and disabled individuals. Fundamental questions concern what constitutes medically reasonable and necessary care and under what circumstances should the care be covered by the program? These determinations happen through two mechanisms: national coverage determinations (NCDs) and local coverage determinations (LCDs). As the terms imply, NCDs are coverage determinations that are made by CMS and applied across the nation, whereas LCDs are coverage determinations made by local contractors for the Medicare program and applied to limited geographic areas. Medicare has had an uneven history of incorporating the cost-effectiveness of treatments when establishing coverage determinations. In 1989, the Health Care Financing Administration (HCFA), the predecessor to CMS, issued a Federal Register notice proposing that cost-effectiveness information be included as a component of Medicare coverage decisions. This was the first time that HCFA had ever proposed to include cost-effectiveness as a factor in coverage decisions. The 1989 proposal met substantial opposition by professional and industry groups, and as a result was never implemented and instead was withdrawn in 1999. In 2000, Medicare issued new guidelines for determination of coverage that included demonstrable medical benefit and "added value." The medical benefit was to be determined using "evidence-based medicine," which weighs the risks and benefits of a treatment by considering the reliability of the source of the evidence. Evidence could include experimental studies, expert opinion, informal studies, logical reasoning from biological knowledge, or clinical guidelines. The term "added value" was defined as adding greater benefit; if two technologies provided equal benefit, then only the lower cost technology would be covered. Due to opposition to the notion of "added value," the 2000 notice of intent for determination of coverage was withdrawn in 2003 and never implemented. Since January 2006, CMS has explicitly excluded treatment costs from its NCDs. In a 2006 coverage guidance, CMS stated "cost effectiveness is not a factor CMS considers in making national coverage determinations." On the same day, CMS issued a guidance on technology assessments that included the statement "cost is not a factor in our review or determination to cover a particular technology." In June 2006, a chapter in the MedPAC report explored the methodological advantages and disadvantages of using cost-effectiveness analysis in Medicare. The chapter notes that the results (and conclusions) of cost-effectiveness studies may vary due to differences in studies' methods, differences in the clinical characteristics of patients, and the timing of the study. Moreover, the report noted that some studies' methods were opaque. The report states that considering the clinical and cost-effectiveness of treatments might increase the return on society's investment in health care, but doing so will be most useful when results are comparable across studies and treatments. CMS continues to use the "evidence-based medicine" approach to evaluate a treatment's health benefit, and studies from AHRQ's EPCs may be included as evidence. CMS also is gathering information about the effectiveness of treatments through its Coverage with Evidence Development (CED) program. Under CED, CMS may cover a treatment with the condition that providers and patients who use the treatment allow data to be collected about the patient, treatment, and health outcomes. This information would then be evaluated to ensure that the medical care is reasonable and necessary. CED may be required for treatments that (1) are in new drug classes with new mechanisms; (2) may be effective only for subpopulations; (3) may provide clinical benefit for off-label uses; or (4) may have substantial consequences for treating the wrong patients. In contrast to NCDs, CMS believes their contractors have the authority to use cost and cost-effectiveness for LCDs, specifically with regard to "least costly alternative" policies. Least costly alternative policies state that a Medicare contractor will not pay the additional cost of a more expensive item if a clinically comparable item costs less. Such policies have been proposed for nebulizers used for respiratory conditions such as asthma, emphysema, and chronic bronchitis, and implemented for Lupron and Zoladex, treatments for advanced prostate cancer. Office of Technology Assessment Although charged with being a nonpartisan source of information about scientific and technical issues for the legislative branch, the analyses of the Congressional Office of Technology Assessment (OTA) were, at times, controversial. Part of the reason for the controversy was its explicit inclusion of costs and cost-effectiveness in health technology assessments. Another part of the reason for controversy was the work was perceived by some as not timely enough, duplicative of other agencies, and not necessarily useful to public programs. As a result of the controversy, the agency was disbanded in 1995, 23 years after its inception, as part of budget reductions in the 104 th Congress. Prior to its disbandment, the OTA was the smallest Congressional agency, with less than 200 employees and an annual budget of $22 million. The agency released approximately 50 reports each year. In creating the agency, great care had been taken to ensure and protect the agency's nonpartisanship and scientific integrity. The OTA was governed by the Technology Assessment Board (TAB), which was composed of six Senators and six Representatives with equal representation from each party. The TAB appointed the Director of OTA, for a six-year term, as well as an advisory council of 10 experts, including the Comptroller General and the Director of the Congressional Research Service, to advise the Agency. The TAB also reviewed all proposed studies as well as the final reports prior to release. The agency's studies did not recommend a single policy option, but rather laid out different options and projected the possible consequences of each. The Chairman of any congressional committee, the TAB, and the Director of OTA had the authority to request any technology assessment from OTA; the assessments generally took 1-2 years to complete. Relevant stakeholders and experts were consulted on the reports to provide a diversity of viewpoints and to help shape and critique interim reports. Once they were approved by TAB, the final reports were publicly released. Oregon Health Plan An objective of the Oregon Basic Health Services Act of 1989 was to expand the population covered by Medicaid, to all Oregonians with incomes below 100% of the federal poverty level. The additional costs would be managed by covering fewer services. In order to expand the program in this manner, the Oregon Medicaid program was required to receive a federal waiver of Medicaid statutes. Even though increasing the income limits for Medicaid eligibility in this manner is credited with helping to reduce the percentage of uninsured in Oregon from 18% in 1992 to 11% in 1996, controversy surrounded the Oregon Medicaid program's process of selecting which services to cover. The Oregon Health Plan was the first large-scale public attempt to apply cost-effectiveness analysis to set priorities for medical services. The struggles of the program had ripple effects on the use of cost-effectiveness analysis in other settings. The Act created the Oregon Health Services Commission and charged it with developing a list that ranked medical services by priority. The program initially used cost-effectiveness analysis to develop the prioritized list. The value of the health benefits was determined by assessing (1) Oregonians' community values of different treatments in town meetings; (2) Oregonians' ratings of the desirability of health states (i.e., health-related quality of life); and (3) medical professionals' judgment of the efficacy of different treatments. The resulting cost-effectiveness ratios were criticized by some as not being reflective of societal values. Critics noted that capping teeth would have been ranked as a higher priority than life-saving surgery for appendicitis. Some researchers concluded that cost should not be considered in determining treatment priorities, while others blamed what they saw as counterintuitive rankings on the methods for measuring benefits. As a result of the controversy, the Oregon health commissioners' re-ranked the treatments, which resulted in rankings that were not necessarily related to treatments' relative costs and benefits, and were perceived to be more subjective. The revised list included 709 disease-treatment combinations, and the state Medicaid budget allowed the program to cover the costs of combinations 1 through 587. In August 1992, the Department of HHS rejected Oregon's waiver application due to concerns about possible discrimination against disabled people through the use of Oregonians' ratings of the desirability of health states; these concerns were supported by an analysis by the Congressional Office of Technology Assessment (OTA). In November 1992, the Oregon Medicaid program submitted a new list that did not use ratings of health states. As a result, the new list was not based on cost-effectiveness ratios and instead was perceived by some observers to be more the result of pressure from advocacy groups and the commissioners' judgments. The revised plan was approved in March 1993 and implemented in 1994. The Oregon program's analysis was very different from many other cost-benefit, cost-effectiveness, and comparative effectiveness analyses because treatments for each disease were compared to treatments for entirely different diseases. Most other cost-benefit and cost-effectiveness analyses compare like-to-like—that is, only treatments for the same disease are compared to each other. For example, the costs and benefits of a treatment for colorectal cancer would not typically be compared to a treatment for heart disease, but the Oregon program explicitly compared treatments in this manner. U.S. Preventive Services Task Force The U.S. Preventive Services Task Force (USPSTF) was established in 1984 as an independent federal advisory committee, under the U.S. Public Health Service, and given the responsibility of developing clinical practice guidelines for primary care physicians. The USPSTF took what was perceived to be a novel approach at the time by basing the guidelines upon quality and strength of clinical evidence, rather than simply "expert consensus." The task force published its first set of guidelines in 1989, and was reconvened in 1990 and 1998, the latter of which incorporated cost-effectiveness analysis in its reviews and was financially supported by AHRQ. The USPSTF has also sponsored some cost-effectiveness studies to better inform the USPSTF clinical practice guidelines. The guidelines, in general, focus on the prevention of diseases, and compare the preventative methods. They do not explicitly compare different drugs or technologies, but rather they compare screening to taking preventative medications to surgical options for a disease. Veterans Health Administration The Pharmacy Benefits Management Strategic Healthcare Group (PBMSHG) was established within the Veterans Health Administration (VHA) in 1995 to improve the health status of veterans by encouraging the appropriate use of medications. To this end, the group compares and publishes analyses of the effectiveness of drugs in the same class, produces clinical practice guidelines, and drug monographs, in addition to establishing the Department of Veterans Affairs' (VA) formulary, drug pricing, and contracts. Twenty-five drug class reviews were available on the group's website. However, the group does not publish the guidelines that are used in the internally generated economic assessments. Other Governments' Initiatives Australia The Pharmaceutical Benefits Scheme (PBS) is the Australian health care system's program of subsidizing the cost of outpatient prescription medicines for all Australian citizens who are residents. The objective of the PBS is "to provide timely access to medicines that Australians need, at a cost individuals and the community can afford." Approximately 80% of all prescription medicines in Australia are subsidized under the PBS and more than 90% of outpatient drugs. Drugs may be sold in Australia if they pass the Australian regulatory review, which is similar to the FDA, but patients pay the full cost of the drugs unless they are listed on the PBS. The PBS has more than 650 drugs (more than 2500 items) on the formulary, which includes at least one drug for most medical conditions for which drug therapy is appropriate. To be included in the formulary, a drug must be evaluated by the Pharmaceutical Benefits Advisory Committee (PBAC), which is an independent panel of experts that recommends to the Minister of Health and Ageing whether a drug should be included. The Pharmaceutical Benefits Pricing Authority (PBPA) then provides advice to the Minister on negotiating an appropriate price for formulary drugs. The PBAC is required to consider the comparative clinical effectiveness, and comparative cost-effectiveness of a drug relative to the therapy most likely to be replaced in practice, which may be another drug and non-drug therapy. The existence of one drug on the formulary does not preclude the addition of a similar drug to the formulary; the number of drugs available to treat a particular condition is not limited. A positive recommendation from PBAC is a necessary but not a sufficient condition for inclusion on the formulary. In other words, the Minister can only add drugs to the formulary that have received a positive recommendation but not all drugs that receive a positive recommendation are automatically added. The only circumstance in which a Minister has exercised the right to not add a positively recommended drug occurred in 2002 when the Minister elected to not include Viagra. This decision was reportedly made due to concern about the impact of erectile dysfunction treatments on the PBS budget. Accordingly, the Minister simultaneously removed Caverject, the only drug at the time that was included on the PBS for the treatment of impotence. To make a submission to the PBAC, sponsors (usually pharmaceutical manufacturers) are required to undertake a literature review, identify relevant trials, assess the quality of the trials, and aggregate the trial data. They are also required to perform a cost-minimization or cost-effectiveness analysis (which may include modeled analyses), the selection of which would follow PBAC's guidelines. The sponsor selects the initial price of their drug for the economic analysis and nominates a comparator drug. If PBAC does not agree that the nominated comparator is appropriate, then it may instruct the sponsor to use a different comparator drug. The submitted trials may evaluate either the efficacy or effectiveness of the drug. Head-to-head randomized clinical trials, while preferred, are not mandatory. If such direct comparisons are not available, sponsors may submit two sets of randomized trials, or even non-randomized trials, that use the same reference drug. However, the guidelines note that non-randomized studies often over-estimate the benefit of an intervention, and "claims about the comparative clinical performance that are based solely on data from such sources will be treated with some scepticism." Applicant sponsors are required to demonstrate that differences between the comparison treatments are statistically significant as well as clinically important. If a drug does not receive a positive recommendation by the PBAC, then the manufacturer may resubmit the application and provide additional data for the committee's consideration. If no additional data are available, the sponsor may seek an independent review. The independent review may only consider specific issues in dispute and cannot review the PBAC's overall recommendation. Canada The Canadian Agency for Drugs and Technologies in Health (CADTH) provides assessments of the effectiveness and efficiency of drugs and health technologies to Canadian health decision makers. It is a non-profit organization that was established by the Canadian government on a trial-basis in 1990; it became a permanent entity in 1993. The agency is funded on an annual basis by the Canadian government. One of CADTH's programs is the Canadian Expert Drug Advisory Committee (CEDAC), which makes recommendations to participating publicly financed drug insurance plans regarding inclusion of a new drug in formularies. CEDAC is an independent advisory committee that is accountable to the CADTH Board of Directors. Its recommendations are informed by drug evaluations from the Common Drug Review (CDR), which is an intergovernmental body established in 2003 to evaluate new chemical entities (NCEs) and drug combinations. A CDR evaluation includes the safety, clinical efficacy, therapeutic advantages and disadvantages, and the relative cost-effectiveness of a drug; it does not consider the net cost or budgetary impact of the drug. Another of CADTH's programs is the Canadian Optimal Medication Prescribing and Utilization Service (COMPUS), which was launched in 2004 and is charged with identifying and promoting best clinical practices. COMPUS does not create new guidelines, but rather critiques and rates the evidence of guidelines produced by others. The most influential factors in determining COMPUS's research priorities are variations in practice, affected patient population size, availability of data on outcomes, and approval by Canadian deputy ministers of health. United Kingdom The National Institute for Clinical Excellence (NICE) was established in April 1999 and expanded its responsibilities, to include guidance on the prevention of ill health and the promotion of good health, and became the National Institute for Health and Clinical Excellence (NICE) in April 2005. Its mission is to advise health care providers in England and Wales on how to use resources effectively and deliver the highest quality of care to National Health Service (NHS) patients. NICE is an independent organization that is funded by the Department of Health in England (with contributions from Wales, Scotland, and Northern Ireland), and accountable to the British Parliament. It was established as one of several "arm's-length bodies" within the NHS so as to politically insulate the organization and help to produce intellectually honest, high quality guidance. The total CY2007 budget was £31 million for recurring programs, £4 million for non-recurring programs, and a separate £3.5 million for guidance on technologies. Among other types of guidelines, NICE produces guidance on new and existing technology and treatments based on their clinical and cost-effectiveness, the latter of which is required to be included. The cost, utilization, uncertainty, and variation in use of the product are considered to be critical factors in selecting topics for the guidelines. As of May 2007, NICE had published 119 guidelines for new and existing technologies and 46 for treatments. The guidelines play a large role in drug cost reimbursement by the NHS, and as such are important to pharmaceutical manufacturers. For example, some manufacturers have recently cut the price of their products due to concern about potentially negative NICE guidelines. Investors and Wall Street analysts also tend to be concerned about negative NICE guidelines because of their potential impact on NHS coverage and manufacturers' revenues. NICE does not fund new primary research. Rather, the analysis is produced by academics who use existing research, gathered through systematic literature reviews, and statistical modeling to answer the questions poised by NICE. These academics are affiliated with either universities or professional organizations (Royal Colleges). Multidiscliplinary committees review the technology and clinical assessments and consult with relevant stakeholders to produce determinations, guidelines, and public health guidance. Determinations can be appealed before NICE releases its final determination guidance directly to the NHS. The process and methods are publicly available and accessible, and all guidance is subject to public consultation. Draft recommendations are subject to public appeals from stakeholders. The evidence on which the recommendations are made is publicly available, with the exception of companies' confidential information. NHS managers are expected to fund the mandatory implementation of technology appraisals no later than three months after the guidance is issued. It is recognized that the implementation of other types of guidelines may take longer than three months due to their greater scope. The cost-effectiveness analysis includes only the costs from the perspective of the public decision maker, and the comparison treatment is the most commonly used alternative treatment. The analyses segment the patient populations by the value and clinical benefit added by the drug. As a result, the majority of the guidelines state whether a technology or treatment is effective, and specify the population in which the product is most cost-effective. NICE does not account for the budget impact or affordability of a new technology. Some researchers disagree with this separation and feel that NICE should prioritize its guidance within a fixed budget, or use some other method that helps contain NHS costs. Researchers and policymakers have also disagreed about the role cost-effectiveness should play in the NICE appraisal process.

Comparative clinical effectiveness research has been discussed as a source of information for health care decision makers that may aid them in reaching evidence-based decisions. The premise that "what is newest is not always the best" is the core of the rationale behind comparative effectiveness research. Diverse governmental and non-governmental organizations have publicly expressed their support and reservations about comparative effectiveness research. Many bills have been introduced in the 110th Congress that support comparative effectiveness research, including S. 3, H.R. 2184, H.R. 3162 (CHAMP Act), and the Healthy Americans Act (S. 334 and H.R. 3163). Although publicly supported by many governmental and non-governmental entities in the abstract, controversy about comparative clinical effectiveness research lies in its practice and implementation. Health technology assessment tools (e.g., comparative clinical effectiveness, cost-effectiveness, and cost-benefit analysis) have been used for decades in the United States. To determine whether and what type of research is needed, the scope and scale of current comparative effectiveness research efforts must be understood. This report summarizes research efforts that have been funded and conducted. Both the Agency for Healthcare Research and Quality (AHRQ) and the National Institutes of Health (NIH) provide extramural research funding for health technology assessments. AHRQ's ongoing health technology assessment program includes the Centers for Education and Research on Therapeutics (CERTs), the Developing Evidence to Inform Decisions about Effectiveness (DEcIDE) Program, Evidence-based Practice Centers (EPCs), and the Research Initiative in Clinical Economics (RICE). The Veterans Health Administration (VHA) and the Department of Defense (DOD) also have centers that conduct health technology assessments to help the agencies make formulary and pricing decisions. Health technology assessments by AHRQ's Medical Treatment Effectiveness Program (MEDTEP) and the Congressional Office of Technology Assessment (OTA) were terminated in 1995. Some organizations that have used these assessments include the Academy of Managed Care Pharmacy (AMCP), Consumer Reports' Best Buy Drugs project, the DOD, for-profit firms (including consulting firms, private insurers, and pharmaceutical manufacturers), the Centers for Medicare and Medicaid Services (CMS), the Oregon Health Plan, and the VHA. Some other countries have given comparative clinical effectiveness and cost-effectiveness more explicit roles in their health care systems. Proponents maintain that a new comparative clinical effectiveness research entity in the United States could have the potential to increase the efficiency and coordination of research, boost the perceived independence and scientific integrity of the research, or generate research not currently being conducted. Realizing such anticipated gains could depend on many factors. This report will be updated upon legislative activity.